Payment by results suffers hospitals setback

At least three strategic health authorities have partially suspended "payment by results", a cornerstone of the government's NHS reforms. The authorities covering Hampshire, Surrey, Oxfordshire, Berkshire and Buckinghamshire say they fear the payment system will further destabilise hospitals and NHS purchasers that are already in financial trouble.

The decision is "a serious setback for the government's flagship policy for reforming the NHS," David Hunter, professor of health services management at Durham University, said yesterday. It may also mean further extension of the system, by which money follows the patient, would be delayed a second time.

"Payment by results" hospitals are paid a fixed price for each patient they treat, rather than agreeing activity and finance levels at the start of each year.

Hospitals that treat more patients get more income, creating the competition the government believes necessary to improve health service efficiency.

For most hospitals, payment by results applies only to waiting-list operations. Moves to extend the scheme last April to include out-patients and emergencies were put off until April 2006 amid fear of financial chaos.

Last night the health department said it still intended to broaden the system. Ministers would "not make final decisions on the details until after their preparatory work".

Hint of a possible delay came as the King's Fund health think tank warned the NHS's financial problems would worsen unless the government formed a regime to deal with hospital failure.

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