![]() ![]() The primary method of funding NHS mental health services in England has been block contracts between commissioners and providers, with negotiations based on historical expenditure. Results suggest that hospitals vary systematically in their probability of mismatch but this variation is not consistently associated with observed hospital characteristics. We use administrative data for all mental health patients in England who were clustered for the first time during the financial year 2014/15 and estimate multinomial multilevel models of over, under, or matching clustering. The aims of this study are to investigate the degree of mismatch between predicted and actual clustering and to test whether there are systematic differences amongst providers in their clustering behaviour. Clinicians are supported in their allocation decision by a clinical clustering algorithm, the Mental Health Clustering Tool, which provides an external reference against which clustering behaviour can be benchmarked. Clinicians, who make clustering decisions, have substantial discretion and can, in principle, directly influence the level of reimbursement the hospital receives. Under the new model, patients are categorised into 20 groups with similar levels of need, called clusters, to which prices may be assigned prospectively. Reimbursement of English mental health hospitals is moving away from block contracts and towards activity and outcome‐based payments. Understand the three key building blocks of PbR: currency, reference costs and tariffs.Ĭonsider the evidence on PbR in acute physical care and the implications for mental health services. Understand the difference between retrospective and prospective reimbursement systems and the incentives generated by each financing system. It explores the challenges for mental health services as PbR is introduced. This article describes the incentives generated by PbR and gives evidence on PbR in acute physical care services where it has been in operation for a decade, with respect to efficiency, quality, volume of activity, administrative costs, upcoding or gaming, equity of provision, and cross-subsidisation. The ultimate goal is the creation of a national tariff or fixed price for each cluster. The Mental Health Clustering Tool has been developed to capture activity which reflects the relative needs of patients, and cluster costs are being collected by service providers. Called payment by results (PbR), it represents a fundamental change to the way providers of psychiatric services are paid for care of patients. Against the backdrop of a tight financial climate, a new method of funding mental health services is being rolled out in England's National Health Service.
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