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Tariff is dead – long live the alternative contract!

If I am your local district general hospital what possible incentive is there for me to manage patients as cost effectively as possible with as few interventions, investigations and admissions as possible? None whatsoever; said interventions, investigations and admissions are my lifeblood, my income. Tariff was introduced, successfully, to promote productivity in secondary care and encourage the consumption of waiting lists. It was great for single component widgets such as carpal tunnel decompressions but very poor for managing the frail elderly with multiple long term conditions overlaid with cognitive and social challenges whose needs were best met through integrated pathways of care that crossed organisational boundaries.


Now this month it is the third birthday of the Alternative Quality Contract – introduced in the US by Blue Cross Blue Shield in Massachusetts as its major health insurer tried to rein in soaring healthcare costs. Their ambitious plan moved away from fee-for-service (tariff) to a global payment system (capitation) that included a generous bonus if stringent quality targets were met. The system is further finessed by mutual profit (and loss) sharing so if a hospital saves money out of the budget by caring for more patients on an ambulatory care rather than inpatient basis it receives a share of that saving rather than, as in the UK, being penalised by loss of earnings.

Anyone for AQC?