My Lords, in 2005–06, payment by results applies mainly to elective admissions. At this stage, the emphasis is on learning how to operate successfully in the new system. We are doing that in a managed way, introducing the tariff incrementally and limiting the financial impact. We will bring more services within the tariff from next April. By 2008, the tariff will apply to the vast majority of acute services. Early indications are that organisations are paying more attention to productivity, financial management and better information.
My Lords, I thank the Minister for that reply, but is not payment by results a misnomer as it is payment by activity, regardless of quality? Hospitals whose reference costs are below the national tariff increase their income by admitting and treating patients. Does the Minister share my deep concern at the 50 per cent rise during the past 10 years in Caesarean section rates? What financial incentives are there to promote natural birth?
My Lords, I do not share the noble Baroness's concern about payment by results generally. That system will improve productivity and quality of services. International evidence from similar payment schemes shows that the benefits include increased use of day surgery and a reduction in length of stay. On the specialty that she mentioned, I share her concern about the rise in Caesarean operations but, under a tariff scheme, we can adapt the tariff over time to ensure that best clinical practices are pursued through the tariff.
My Lords, is the Minister aware that primary care trusts are now worried about payment by results because the projected increase in payments to hospitals, which comes from primary care trusts, will further increase if hospitals increase their activity? What advice would he give to primary care trust boards for them to balance their budgets? Should we restrict the type and amount of activity of hospitals?
My Lords, payment by results is being introduced over a four-year transition period, during which the year-on-year income changes for baseline activity will be capped at 2 per cent for individual providers, so there will be a limit on how much income people can use. The noble Lord asked what PCTs should be doing. They should pursue stronger commissioning in how they take forward their agenda and incentivise practice-based commissioning so that GPs are more in the driving seat.
My Lords, why is payment by results being introduced for most things in the health service yet being taken away from dental treatment? There has always been payment by results in dentistry and everyone viewed that as a treadmill. Why is that stopping just when everything else is changing over to payment by results?
My Lords, I wondered when the noble Baroness would get dentistry in on this Question. She knows as well as I do that we are introducing the changes in dentistry to respond to what dentists have complained about: their treadmill of an item of service payment. Payment by results is not an item of service payment; it is an adaptable system that can take account of different case mixes as we are doing in dentistry.
My Lords, one of the more difficult areas is chronic diseases, such as diabetes, rheumatoid arthritis and so on. Those are treated predominantly in the community by GPs but occasionally they need hospital care and there is a delicate balance between the two. Can my noble friend reassure us that the new system will allow sufficient flexibility for that to happen and not disadvantage patients?
My Lords, the whole purpose of the change is to benefit patients. For the chronic and long-term conditions that my noble friend has mentioned the answer lies in improved practice-based commissioning and commissioning generally by PCTs, so that they can have more of those services supplied in the community. That is where they need to concentrate their efforts. We have begun reducing the number of avoidable admissions to hospital for people with chronic conditions by giving better services in the community.
My Lords, the payment by results system is based on episodes of treatment, which can vary on the case mix. As the noble Baroness knows, we are tackling the issue of infections separately. One of our targets is to reduce infections significantly, and that is taken into account in the performance assessment of the individual hospital trust.
My Lords, I think that I heard the Minister say that he would extend payment by results to acute services. How can one determine whether people are going to become acutely ill? If an area is peculiarly healthy, how will the hospital manage, if it is paid only when people become acutely ill?
My Lords, I hope that I did not mislead the House—I do not think that I did. I said that we were applying payment by results on the whole to elective surgery and that next year it would be applied to most services in acute and general hospitals. By "acute services" I meant those provided in acute and general hospitals.
My Lords, we take account of the performance and success of the many senior managers in the NHS at a modest level in terms of the salary arrangements operating.