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The Maynard Doctrine: Time to abolish Payment By Results

Health economist Professor Alan Maynard suggests that PbR has outlived its usefulness, and that management has failed to act meaningfully on variation.

The initial purpose of PbR was sensible. Is the system now past its sell-by date?


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The virtue of PbR is that it makes purchasers and providers more conscious of their costs in relation to the average and now-squeezed PbR tariffs of the system. For a healthcare system obsessed by expenditure control and usually ignorant of costs and quality data, let alone trade-offs between costs and quality, this was a valuable development.

However the creation of Foundation Trusts and the long-delayed development of quantitative management are now providing decision-makers with data about activity. We have Hospital Episode Statistics (HES); outcome data - e.g. mortality data, readmission data from HES; and patient-reported outcome measures (PROMs) and costs as trusts implement patient level costing of clinical activity.

Two questions …
In principle, what this means for NHS managers who have an instinct for survival and efficient management is that they can commune with clinical directors and ask two questions:

i) Why have you got outliers and what are you doing about it?
ii) What interventions do you have in place to improve your performance and push us nearer the top of the national distribution of hospital performance - i.e. increase activity, improve outcomes and reduce costs compared to your competitors?

The amount of communication about these issues still appears to be modest, and is a clear sign that Boards are failing in their duty to protect patients and taxpayers.

… which still aren’t being asked
The recent BMJ paper showing variations in readmissions after cancer bowel surgery (Burns et al, BMJ, August 20th, 2011) is indicative of the fact that this sort of questioning remains largely academic when it should be routine NHS practice.

Sadly, many NHS managers seem to be clueless about the value of research and the fact that their efficiency is dependent on them being research-literate.

For all the blah about “leadership” and skills investment, most clinical and non-clinical managers seem to be miles away from the routine provision, discussion and control of available, basic data about relative costs, activity and outcomes and their use in PCT and hospital level negotiations.

KISS my orthopod
Instead of the usual management waffle about ‘values’ and ‘respect of peers’ it would, as ever, be useful to ‘keep it simple stupid’ and invest in routine quantitative management of these core issues.

This would facilitate, for example, understanding of the extent of ripping off of the NHS by groups such as orthopaedic and ophthalmic surgeons.

The management of orthopods has been pathetic. Casual scrutiny of theatre lists (advocated 20 years ago by John Yates, for which his determined advocacy led to him being sacked by a pathetic Secretary of State) often shows that these admirably skilful carpenters spend rather a lot of time outside the NHS when in receipt of full consultant salaries.

A deviant minority cancel NHS operating slots at short notice, and are not held to account by their peers or management. Why is this outlier behaviour tolerated by management and the profession during such austere times?

Awfully expensive wet AMD drugs
Ophthalmic surgeons also seem to be playing naughty games. Take the issue of age-related macular degeneration, which is the most common cause of blindness in the UK. Most NHS patients are treated with Lucentis (trade name Ranibizumab and provided by Novartis under license from Genetec). NICE guidance recommends 14 injections at public expense, after which Novartis pays. This cost the NHS £138 million in 2010.

A recent trial (CATT research group, New England Journal of Medicine, 2011) has showed that a rival product (bevacizumab, also licensed by Genentech) produced equivalence in visual outcome for patients. Bevacizumab costs $385 per patient year compared to a cost of $13,800 per patient year for Ranibizumab.

Why does the NHS use the more expensive product, you may ask? The answer is that there is no product licence for the use of the cheaper product for age-related macular degeneration (it is licensed only for use in the treatment of metastatic colorectal cancer). And of course Novartis and Genentech want to maintain this nice cash-cow.

The DH might quietly encourage local PCTs to use the cheaper product, which system-wide could save hundreds of millions of NHS funds (see Jackson and Kirkpatrick, BMJ letter, September 3rd, 2011). However in doing this, it would risk an expensive judicial review as the drug dealers seek to protect their loot.

What has all this to do with deviant ophthalmic surgeons? Well, rumour has it that they use the expensive option in the NHS - and then trot across the road to private facilities where they use the cheaper product!

Might we not expect this group of “professionals” to make a stand against the drug dealers? But as ever, they and their College tacitly condone the exploitation of taxpayers. This situation has lasted for at least 5 years; as it was discussed by the Select Committee on Health during their investigation of NICE some years ago.

A farewell to PbR
But back to PbR: is it worth the transactions costs it imposes on managers? Or indeed has it facilitated the erosion of clinical ‘deviance’ mentioned in the preceding paragraphs? Evidence of such benefits is thin.

Scrutiny of local budget bargaining usually shows that annual horse-trading about funding consists of negotiation about the level of investment for the year (de facto a global budget) with agreements that if the hospital stays within this budget and activity level, any misdemeanours on CQUIN and other regulations will be overlooked as far as applying financial penalties are concerned.

It is this type of budget horse-trading which predominates but is rarely discussed outside tension-filled rooms when annual funding levels are fixed. It is the system that the clinical commissioning groups will inherit: a nice learning curve for the keen but rather naïve GPs whose survival will depend on their ability to play these well-established PCT-Trust games!

So is it time to abandon PbR, revert to global budgets and use the savings to invest in sensible and simple management of cost, activity and outcome outliers and improving the mean performance of each?

Reducing outliers and improving average activity, cost and outcomes is essential if The Nicholson Challenge is to be achieved. Squeezing PbR tariffs seems a crude and expensive method of achieving such efficiency gains.