Has payment by results affected the way that English hospitals provide care? Difference-in-differences analysis

OBJECTIVE To examine whether the introduction of payment by results (a fixed tariff case mix based payment system) was associated with changes in key outcome variables measuring volume, cost, and quality of care between 2003/4 and 2005/6. SETTING Acute care hospitals in England. DESIGN Difference-in-differences analysis (using a control group created from trusts in England and providers in Scotland not implementing payment by results in the relevant years); retrospective analysis of patient level secondary data with fixed effects models. DATA SOURCES English hospital episode statistics and Scottish morbidity records for 2002/3 to 2005/6. MAIN OUTCOME MEASURES Changes in length of stay and proportion of day case admissions as a proxy for unit cost; growth in number of spells to measure increases in output; and changes in in-hospital mortality, 30 day post-surgical mortality, and emergency readmission after treatment for hip fracture as measures of impact on quality of care. RESULTS Length of stay fell more quickly and the proportion of day cases increased more quickly where payment by results was implemented, suggesting a reduction in the unit costs of care associated with payment by results. Some evidence of an association between the introduction of payment by results and growth in acute hospital activity was found. Little measurable change occurred in the quality of care indicators used in this study that can be attributed to the introduction of payment by results. CONCLUSION Reductions in unit costs may have been achieved without detrimental impact on the quality of care, at least in as far as these are measured by the proxy variables used in this study.