Payment by Results (PbR) pays trusts for the services they provide. It is intended to be a transparent, rule-based system that:

• rewards efficiency
• supports patient choice and diversity
• encourages activity that makes the best use of available capacity and keeps waiting times down.

The introduction of PbR was a move away from the budgets that paid hospitals a fixed sum for services but that provided no incentive to increase throughput.

Until recently, the price list for procedures, or the 'tariff', was based on the average of all NHS providers' costs. The Department of Health wants PbR to support commissioning, based on patient pathways. It believes this will give commissioners the flexibility to provide services closer to patients' homes and to buy the acute and specialist care their patients need from the most appropriate provider.

Audit Commission report

In February 2008 the Audit Commission's The right result? report looked back at the first few years of the PbR system and made recommendations. The NHS Confederation welcomed the report and agreed that NHS organisations have significantly improved their financial controls and planning as a result of PbR. Commenting on the report, Director of policy, Nigel Edwards, said: "The suggestions on capital are really important and could unlock what up to now has been an intractable problem."

How we involve members

Members are represented on Department of Health groups looking at the implementation, development and extension of PbR. In April 2007 we produced a briefing for members that set out the Department of Health's proposals for the future of PbR. We invited comments and suggestions from members and you can read our response to the consultation.

Confederation representation

In spring 2007 the Department of Health consulted on its proposals for Payment by Results from 2008/09 to 2010/11. We felt the proposals represented a major leap forward. However, a number of issues needed a thorough debate, including the proposals for price-setting; the danger of providers not being held accountable as a result of fragmentation of care; and problems associated with a tariff for episodes of care for those with long-term conditions and mental health needs.