1343990990MH Finance Payment Mechanism Discussion Proposal by 0T0N83


									MH Finance Faculty
14th June 2012, London

“The development of a reimbursement system, based upon need, that delivers and
incentivises quality outcomes”


The purpose of this discussion paper is to inform an approach for a future payment mechanism which
supports the successful implementation of Mental Health payment by results. It has been produced
following discussions at the DH National Costing Group in March, the HFMA Mental Health Steering Group
in May, along with discussions with the national PbR team, to inform how we can take forward a move to a
national payment mechanism, which can support the development of a national tariff system.

A dedicated HFMA MH FINANCE Mental Health PbR event is to be held on the 14th June 2012 in London to
allow a wider discussion on the content of this paper, with the objective to agree;

   1. What issues can be agreed for 2013/14
   2. What should be the development areas for 2014/15
   3. What issues need further consideration for longer term (i.e. future HFMA event informed by
      greater knowledge and understanding of 1 & 2 within Local Health economies)

Through developing a national payment mechanism for Mental Health Services we are trying to achieve

      a single national clinically meaningful description of patient groupings by need, and a contract
       currency based on this
      the ability to transparently and clearly link patient needs, with resources used to meet those needs
       to deliver desired and specified outcomes
      a reimbursement system which incentivises implementation of national policy and strategies (e.g.
       Mental Health Strategy, Dementia Strategy)
      a reimbursement system which drives service providers towards delivering best value for desired

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As part of the PbR currency development, it is essential that any future payment
mechanism combines the right incentives for quality and service improvements, as well as
maintaining financial stability.

In order to support a future payment mechanism it is essential that the building blocks for a future “tariff
price” are clearly understood and tested ahead of implementation. For 2012/13 most Mental Health
contracts are supported by the Memorandum of understanding to mitigate financial risk from the
developing PbR activity. In addition within some contracts, additional cluster data quality metrics have also
been included to develop and support Commissioning discussions for 2012/13.

These quality metrics currently include:

                Cluster accuracy
                Time in Cluster
                Cluster reviews
                Cluster transitions

The National Q&O group are also developing a comprehensive range of quality indicators and outcome
measures for testing as an integral part of the currency model including

       The use of a range of existing metrics as an indicator of quality
       The use of MHCT/HoNOS ratings as a measure of recovery and hence an indicator of quality and
        outcome on a cluster basis
       Establishing the use of a number of PROMS, CLOMS and PREMS that can be utilised at either a
        cluster or super class level.

Local development on quality and outcome measures is also taking place across organisations, informed by
local needs, priorities and objectives of commissioners, emerging CCGs and providers.

It is therefore essential that during 2012/13, as well as improving cost data, the focus is equally on the
quality metrics of service delivery and improvement. However, there is acknowledgement that these
quality metrics are currently subject to on-going data quality review, as well as the on-going training and
education for clinicians for a consistent application of the tool.

Some of the key issues and risks in developing a new payment mechanism are as follows:

       Rapid development curve for adoption of clusters in 2011/12 means significant variation in
        underlying data quality
       Wide variation in costs at a cluster level within and across organisations
       Costs based on cluster day not period, and therefore have no valid link to outcomes in the currency
       Variation arises not just due to variation in efficiency but due to variation in data quality, service
        delivery models, provision of service delivery across pathway (e.g. Local Authority, other providers),
        as well as quality of delivery
       Development of national data collection system through MHMDS/Other still under development,
        and information systems at an organisational level highly variable

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       Locking in price based on historical cost will result in significant instability across the health system.
        Also potentially locking in historical practice which, without the link to outcomes being understood,
        will not incentivise desired outcomes and delivery of national policy
       Locking national price mechanism too early will force focus on lowest price, increase transactional
        costs and effort at the expense of quality improvement, policy delivery and transformational
        change across integrated care pathways
       Developing prices on cost, whilst a significant proportion of mental health activity currently
        remains outside of scope may present opportunities for gaming which would skew price and
        reduce transparency.

The consequences of data quality, activity variations, perverse incentives, will require an agreed period of
understanding which if implemented well, will provide a currency which continues to be clinically driven
and importantly ensure the current clinical buy in for the cluster model is sustained.

Pricing Mental Health Services

The PbR guidance currently recommends local prices as a prerequisite to any future National tariff, with
Reference Costs (the traditional acute sector approach...) used to inform prices. The transition to a national
payment mechanism therefore requires a methodology of approach that considers the relationship
between cost, local price and national price.

        Cost (Ref Cost expenditure based)

        Local Prices (Contract Value with MOU)

        National Prices (informed by the above... national prices, transitional period, future Monitor...)

In understanding and defining the above relationship the development path for implementation and testing
can be established, to allow us to consider the financial consequences ahead of the introduction of the new
Cluster PbR activity. However, there remains considerable difficulties in building a payment system on
current cost, given the issues and risks that we have identified earlier in the paper.

For a payment system our overall aim is to understand the relationship between needs, price and
outcomes, and make this transparent across local and national health economies. We also need to
introduce a payment mechanism which provides stability over time and across organisations. To achieve
these aims a more favourable approach would be to develop a methodology based on local pricing based
on current contracting values. At its simplest form this would take existing contract values for service as
described within local contract agreements and rebase them against activity defined by the new currency.
It is recognised that Cluster period durations are a more appropriate currency unit than Cluster days, on
which to base the payment mechanism, as the quality metrics for “time in cluster” are clinically validated
against the standard cluster period currently proposed within the guidance. Rebasing current contract

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values against activity based on cluster periods will therefore, produce a reference price rather than a
reference cost. At an organisational level a different price per cluster period (local current market price)
would emerge within each contract and for the Trust as a whole.

Taking this approach would enable us to understand the relationship between needs and local market
price. The developing and critical work on Quality and Outcomes at a national and local level would overlay
this relationship with delivered outcomes. By understanding the current relationship between needs, price
and outcomes, a basis for dialogue would be created for discussion between commissioners and providers
about how this relationship between needs, price and outcomes can be developed over time. At a national
level, transparency of this relationship would lead commissioners to incentivise the move towards similar
prices for the same set of outcomes to meet the same needs, as effectively this information would drive
the market. It would also enable CCGs to develop their own agendas for improvement in mental health
services and their own desired state through setting some locally determined outcomes for cluster period.
The aim is that outcomes drive price rather than cost driving outcomes.

Providers will also need to understand and manage the extra dimension of cost at a granular level. The
same methodology could be used at a budget and cost level, to enable providers to understand the
relationship between actual cost, budgeted cost and price at a provider level which would enable providers
to understand priorities for service re-design and understand and model their impact. The standard costing
methodology as set out in the HFMA Clinical Costing Standards 2012/13 would enable consistency in
developing this approach. Organisations would be able to understand and see where they are less efficient
at a cluster level, and manage changes within organisations to address this. There will also be variations in
market price that are driven purely by the lack of a historical relationship between local price and cost, but
understanding this at a cluster level, alongside the relationship with outcomes, will also enable local
negotiations between CCGs and providers to manage this variation from the system. It will be important
that the drive isn’t simply towards the lowest price but takes into account the relationship between needs,
resources outcomes and sustainability.

In defining a payment mechanism methodology based on local contract values we should consider –

   A consistency of pricing methodology for accurate and comparable data
   Transparency of data and price production
   Benchmarking price variation, which will drive market changes and support the transition to national
   Increasing the frequency of pricing collections (quarterly) to support understanding of variation over
    time and across organisations, with indicative prices published to inform as a guide, recognising the
    developmental nature of this work
   Identifying options for currency pricing alongside quality metrics, ensuring that financial incentives
    reward achievement of national quality indicators.

Underpinning requirements and proposed next steps

To take this proposal forward there would be a number of underpinning requirements required and we
need to agree a single approach to these and a definition of next steps and milestones through 2012/13,
with the aim of supporting a recommendation from the Product Review Group to the National Project
Board and Ministers for the next stage of implementation of the Mental Health Currency in 2013/14. Some
of the key requirements and actions proposed are highlighted below:

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   National guidance on rebasing of contracts on the basis of cluster period, and development of
    costing/pricing software systems to support methodology. This should also enable the development
    towards patient level costing and pricing
   Maintain separate pricing for in-patient and community services in 2013/14
   Data quality issues for providers may exist within cluster activity following the mandated deadline for
    December 2011 and therefore agreement around stability on overall contract values is required for
   The continuation and development of Memorandum of Understanding at a local level to ensure
    stability across local health economies and agreement of transitions and improvement trajectory paths
    over defined timescales
   The quality and accuracy of the Cluster allocations as well as the underpinning data, is crucial to
    support implementation as this will ultimately drive cost/price allocations and will require effort to
    train and re-train clinicians in the effective use of the clustering tool
   Development of the national algorithm to enable transparency of the clustering process and
    methodology for sampling and audit of the quality of the clustering process
   Development of initial national set of outcome measures/specifications at a cluster level, and
    framework for development of local outcome measures/specifications for use in 2013/14
   Development of a national and local framework of incentives and penalties for delivery of specified
    targets for outcome improvement at a cluster level to be introduced in 2013/14
   Improvement of the accuracy and efficacy of the MHMDS
   Development of a national data repository which links price and outcomes at a cluster level for
    organisations to increase transparency
   Standardised use of and further development of the HFMA Mental Health Clinical Costing Standards
   Standardisation on use of cluster episodes in contracts for 2013/14, but within envelope of existing
    contracts and with local flexibility for further development
   Two to three year programme and deliverables for development of national payment mechanism for
    mental health, with a phased move to increase standardisation, payment for outcomes and
    development of a set of criteria against which each stage can be managed. Suggested criteria are as
    follows for discussion:

           Incentivising improvement in patient outcomes
           Incentivising delivery of national policy
           Clinically accepted
           Enabling contestability and transparency
           Transactional simplicity
           Affordability
           Capability to manage long term and unpredictable patient needs (onset of mental health
           Stability over time, and across organisations


To discuss and consider the proposed approach for development and recommendation of the next stage of
currency and tariff implementation for 2013/14 to the Product Review Group and National Mental Health
PbR Board in December 2012.

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