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Independents' Day

Unbundling tariffs: All you need to know

Dr Donal Hynes explains how unbundling tariffs will help drive the move to shift care closer to home

Dr Donal Hynes explains how unbundling tariffs will help drive the move to shift care closer to home.

When we look back over the old system of resource allocation in the NHS, it is apparent it was not fit for purpose.

Applying block contracts to acute hospitals did nothing to encourage efficiency or increase throughput. Indeed, the reality was that the longer a waiting list, the more money was given to the provider to cut the waiting list.

So the Payment by Results (PbR) system was introduced in 2003/4 and has expanded since then. This mechanism of remuneration is aimed at rewarding providers for the work they undertake.

The more efficient the throughput of activity, the greater the resource that is allocated to that provider.

In 2006/7, 35% of primary care trusts' resource allocation and over 60% of acute hospital income was through the PbR system.

Currency, tariffs and bundles

For PbR to work, a way of pricing hospital activity is needed – a currency.

The hospitals have used two major coding systems to describe their activities. The first is the OPCS codes for interventions (named after the former Office of Population, Censuses and Surveys' classification of operative procedures). These are used for interventions such as cardiac catheter implantation.

The second group is the International Classification of Disease Codes (ICD-10) for diagnosis.

This patient-level information is the correct building block, but a single hospital admission involves a collection of interventions and diagnoses. Therefore it was necessary to bundle these codes into a higher level to provide an adequate currency to which to apply a tariff.

The Healthcare Resource Group (HRG) codes provide this higher level of coding and to each of the HRG codes a tariff is applied.

It describes the bundle of intervention and diagnostic codes that were applied to the patient while in hospital. The hospital records these patient-centred events through its OPCS and ICD-10 codes and these are subsequently grouped into an HRG code to which the tariff is applied.

This system, based on the patient's clinical notes, provided the costing system for Payment by Results.

The need to look at bundling

The bundling of activity into HRG codes is suitable for many situations but does not promote good practice in others – for example one-stop shops and community rehabilitation. It was to address these issues that the need for bundling and unbundling arose.

There are some circumstances where HRG codes need to be aggregated into bigger bundles and other circumstances where they need to be unbundled into smaller elements.

Aggregating HRGs into bigger bundles

A typical situation is the provision of care in a one-stop shop setting. Instead of multiple outpatient appointments and a resulting procedure attracting separate HRG tariffs, it is better in terms of healthcare for the patient to receive the assessment, investigation and treatment in a single appointment. But in the present system the single episode may attract only one HRG, which would not reflect the comprehensive nature of the care being provided.

The case for aggregating bundles of care into care pathways is becoming more relevant as commissioning clinicians are entering into constructive dialogue with provider clinicians. The independent sector treatment centres have provided the lead in some areas.

Clinical assessment and treatment centres are another setting where the bundling of comprehensive packages of care represents good quality provision.

The case for unbundling

The building blocks that construct the HRGs are based on provision of healthcare in the hospital setting. But clinical medicine changes and the bundling under PbR must not block the move towards the delivery of care closer to the patient's home.

This was the message from an Audit Commission report published two months ago, criticising PbR for working directly against moves to shift more care into the community. The report called for more unbundling of tariffs that would accommodate different pathways from primary care more easily.

At the time the report was published though, the DH was already pulling together the results of a consultation on unbundling tariffs.

Key to unbundling tariffs will be the introduction of HRG4 from 2009/10, a more refined case-mix classification system that not all trusts have upgraded to yet.

HRG4 will allow unbundling of tariffs for the following nine services:

• radiology

• rehabilitation

• chemotherapy

• radiotherapy

• renal dialysis

• critical care

• high cost drugs

• specific palliative care

• interventional radiology.

There is a need to ensure that incentives are built into the system to facilitate the shift of such interventions into community settings. The two most obvious areas are access to diagnostics and rehabilitation.

Unbundling diagnostics

Patients attending outpatient departments attract a single HRG payment for that appointment. In some cases the patient may have been comprehensively investigated by the referring clinician, which is preferable.

However, undertaking diagnostic investigations, such as an MRI scan, prior to the appointment incurs a cost on the commissioner but not a reduction of the outpatient HRG cost they will subsequently pay.

As more comprehensive diagnostics become available in the community, it is necessary to unbundle the investigation from the other components that made up the high level HRG code.

It would otherwise become a disincentive for referring clinicians to undertake investigation prior to referral as they would have to pay for the investigation element of the unbundled HRG.

The mechanics would depend on whether there was a single provider for all the diagnostic and treatment elements or whether they were separate. The mechanisms may involve credit systems for the cost of investigations or completely separating the investigation from the OPD tariff.

Unbundling rehabilitation

The pathway of care for many conditions is changing so that elements traditionally provided in an acute hospital setting are now being provided in the community. This means a significant element of care needs to be unbundled from the HRG for these conditions. The most obvious example of this is the provision of rehabilitation after a cerebrovascular event (CVE).

In response to this, the most recent HRG guidance includes so-called ‘indicative tariffs'. These relate only to the acute phase of care and allow the payment system to take account of the provision of the rehabilitation element of care in a dedicated unit based in the patient's own community rather than the acute hospital.

There are important caveats for commissioners who pursue this option. The disestablishment of efficient rehabilitation units in hospital settings should not happen inappropriately.

The standard of rehabilitation provided must be of high quality and be in a new setting rather than a different phase of care in the acute hospital.

It may also be necessary to agree locally whether the unbundling occurs at the early acute phase – typically around day seven after the CVE – or at the late acute phase – typically around day 12.

It is clear that this guidance is indicative only, but there is an expectation that such unbundling will be agreed locally where it is requested.

The future for unbundling

There are limitations in having HRGs based on traditional methods of acute hospital-based care. Part of this issue is being addressed through the unbundling work currently being undertaken.

This is not without risk. It is a prerequisite to have early agreement on what is in and what is outside an HRG tariff. There is also a need for improved information systems to support this work.

The PbR system based on interventions is poorly suited to meet the proactive and integrated care needed for patients with long-term conditions. In this case, needs-based funding is more appropriate as care is patient-centred rather than intervention-based.

It does raise the complexity of being able to identify a so-called principal provider, usually the GP, who would be responsible for the use of that patient's resources during the year. This would incentivise the system to commission proactive and preventive care rather than purchase reactive care.

The resource allocated to the principal provider would be based on an average ‘year of care' for a patient with that long-term condition – again separating the different elements currently locked up in traditional HRGs and adding other elements of care (for example, smoking cessation services) to form a new bundle.

So to summarise, in developing PbR, the currency used was based on traditional packages of care provided through acute hospitals. Unbundling begins to unlock the elements of care from their traditional settings. The bigger challenge involves the rebundling of such elements into patient-specific ‘year-of-care' bundles.

Dr Donal Hynes is joint vice-chair of the NHS Alliance, a GP in Bridgwater, Somerset, and PEC chair of Somerset PCT

Getty illustration

Unbundling begins to unlock the elements of care from their traditional settings.

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