With the return of Payment by Results (PbR) to incentivise elective recovery in the NHS, Peter Saunders summarises the benefits – and challenges – surrounding its reintroduction.

Changes have been made to the financial framework in 2023/24 on how elective care is funded in England. Having had block payments through COVID-19, hospitals are now moving back to a more payment-for-activity-based funding system – Payment by Results (PbR) – to incentivise hospitals to undertake more activity and accelerate the reduction of patient waiting lists.

We hosted a conversation with Sir James Mackey, Interim Chief Operating Officer and National Director for Elective Recovery NHS England and Chief Executive of Northumbria Healthcare NHS Foundation Trust, and David Carter, Chief Executive of Bedfordshire Hospitals NHS Foundation Trust:

  • Why PbR is being reintroduced to the NHS in England
  • The benefits of moving back to the payment for activity-based financial framework – and its risks and challenges
  • How PbR fits with moving towards collaborative system working and future payment mechanisms
  • The key areas hospitals need to focus on to make its re-introduction a success.

Watch the video for the key takeaways.

The NHS is delivering on its elective recovery targets but needs to improve its productivity and efficiency to sustain and accelerate its progress. Re-introducing PbR will financially incentivise hospitals to do more activity and is a straightforward, proven mechanism that supports linking operational delivery and funding.

PbR's simplicity and transparency allows decision making to be driven down to operational management, incentivises investment, and provides a more accurate understanding of costs and the financial position of hospital services.

Data quality and recording will improve as a result of its re-introduction. This means information on the care and acuity of patients is more accurate. It also moves data quality back into operational and clinical discussions.

Its impact and risk will need to be managed nationally and locally. Continuing operational difficulties with urgent and emergency care could destabilise finances and the movement back to PbR is uncomfortable.

Payment mechanisms need to be flexed to meet short-term needs and challenges across the NHS. International experience suggests that most countries use activity-based payment mechanisms for planned/elective care and and its re-introduction in England has now been largely supported.

Development of localised payment mechanisms, as recommended by the Hewitt Review, will need to consider how best to support population-based healthcare funding, to provide integrated and collaborative care, while reflecting the delivery and costs of hospital care.

Delivering productivity and efficiency is key to making NHS services operationally and financial sustainable. Reinstalling the link between activity and money for elective care and focusing on costs of delivery will facilitate that.

For more insight and guidance, contact Peter Saunders.

Learn more about how our Health and social care services can help you
New pressures are accelerating transformation in health and social care
Learn more about how our Health and social care services can help you
Visit our Health and social care page

Get the latest insights, events and guidance about the public healthcare sector, straight to your inbox.