Payment by results enters adult social care field

The method of funding NHS hospitals may be extended to adult care. Gordon Carson examines payment by results’ prospects

(Illustration: health secretary Andrew Lansley is intent on rolling out payment by results to services, potentially including social care. Credit: Jake Abrams)

What is payment by results?

Payment by results refers to a system in which public service commissioners pay providers according to how much work they do or the outcomes they achieve, rather than a fixed sum agreed at the start of a contract. It is intended to incentivise improved performance from providers and to ensure commissioners use resources more efficiently.

In the NHS, primary care trusts pay hospitals according to their activity – the number of treatments or tests they do for patients. Payments are based on nationally set prices, known as tariffs, for particular treatments and activity. In welfare-to-work, providers have been paid for their success in getting people into employment.

Under the Work Choice programme, introduced last October, to help people with disabilities find and retain work, providers receive a monthly service fee equivalent to 70% of the contract’s value. The remaining 30% is tied to results against a series of performance indicators.


Payment by results (PbR) has determined the funding of hospitals in England for 10 years, but health secretary Andrew Lansley is now intent on rolling it out to other services including, potentially, adult social care.

Ministers believe that paying providers according to what they achieve will offer incentives for improvement.

But there may be greater challenges involved in implementing payment by results in areas where service outcomes are not always as clear-cut as, for example, carrying out a hip replacement.

Recent strategies on drugs and rehabilitating offenders included plans to pay providers for helping people become drug free and for reducing reoffending.

Longstanding plans to roll out PbR to mental health will be implemented in April 2012, after a preparatory year.

The government is proceeding more gingerly on adults’ services. The strategy for performance management in adult social care, published in November, states that the government wants to work with councils to consider whether payment by results can be implemented in the sector to improve performance by providers.

Across all areas there are concerns that payment by results could have negative effects, including encouraging providers to focus on people most likely to achieve their targets, while ignoring those with the most intractable problems.

Drugs services have raised concerns about what will constitute a “result” under the system due to be tested in that sector in pilots from September 2011, given the propensity of users to relapse after recovery.

Personal budgets

Another obstacle could be linking PbR to personal budgets. “If someone used a personal budget of £3,000 to look for a job, would they get their money back if they didn’t get one after 12 months?” asks Huw Davies, chief executive of the British Association for Supported Employment.

Davies does, however, broadly support the PbR model, and the way it has been implemented in the supported employment sector (see Pluss case study, right).

He says it is crucial to strike the right balance between the proportion of funding allocated to providers up-front and that which is delivered if results are met, to avoid smaller providers receiving insufficient funding to meet running costs.

The model proposed for mental health places service users into “clusters”, based on their care needs and the expected costs of treating them.

From 2012-13, providers, whether in the NHS or independent sector, will be paid according to the number of patients they treat in each cluster over a given period, on the basis of locally agreed prices. Clusters should cover care provided by social care staff in integrated mental health teams.

But one social worker in an older people’s community mental health team is unconvinced by the way policy is being developed. Lisa (not her real name) is concerned about the impact of PbR on the care management and co-ordination process as data collected by practitioners will be directly related to money received by providers. This would “go against basic social work principles related to working to a social model of disability and illness”.

She also highlights difficulties in measuring results when people are suffering from degenerative conditions, such as dementia.

The PbR concept does have support in the mental health sector, though. Steve Shrubb, director of the NHS Confederation’s Mental Health Network, says it would mean providers are “paid for what’s happening and not for what should be happening”.

In fact, Shrubb is concerned that PbR has not gone far enough in mental health. Unlike acute hospitals, which are paid according to a nationally set tariff, prices for mental health providers will be determined locally for at least the next two years, making them more vulnerable to cuts, he says.

Adult social care

Payment by results is a more distant prospect in adult social care.

Richard Humphries, senior fellow at the King’s Fund, believes it will be “enormously difficult” to implement.

“I could see how it would work if it’s for a very specific range of service like drug rehabilitation,” he says. “But it’s more difficult when we get into broad services where people’s needs change.”

For Jeff Jerome, the national director for social care transformation, PbR could be a mechanism to improve choice and quality, as long as users purchasing care can access accurate information about the cost and range of services available.

“The payment-by-results concept moves things much more towards a market position, and it would be people’s choices that drive the process,” he says. “It would be logical that providers would get more business if they are doing things people want.”

Jerome says the PbR process should not be too complicated for individual service users to negotiate. “They would have to be absolutely clear about pricing,” he adds. “The issue is getting the right price for the nature of the service.”

Des Kelly, executive director of the National Care Forum, which represents not-for-profit providers, says PbR is worth considering if it ushers in a new relationship between commissioners and providers.

“At the moment, contracts are typically very short, there’s a lack of trust from commissioners, and price is really the only driver,” he says. “I’m not against talking about payment by results if it provides a way of breaking out of that.”

Case study: Payment by results a big Pluss in South West

Martin Davies says providers can successfully adjust to payment by results, as long as staff are clear about the values of the service they are offering.

Davies is managing director of Pluss, which is owned by Devon, Plymouth, Somerset and Torbay councils and offers employment and training for people with disabilities.

“If we didn’t have appropriate values then payment by results would result in problems,” he says. “We avoid that by ensuring our values are embedded in everything we do: in every communication we enter into, every meeting we have with staff teams, and in every performance management meeting with staff.”

The firm won two of the 28 contracts for delivering Work Choice, the government’s employment support programme for disabled people, launched last October.

Under this, providers are paid 70% of their contract fee without strings, with the remaining 30% delivered on the basis of results.

To ensure staff do not ignore clients with the most significant needs, Pluss has developed a statistical tool to measure the social value of its work. Service users from groups that are most under-represented in the labour market, such as people with mental health problems, are assigned a higher-than-average score to ensure they are given priority by staff.

PbR plans for mental health

PbR plans for drugs

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