Page 0024


3.4 Failure of incentives

To recap, in the words of one interviewee: "We have a system designed to

cope with demand when it happens, not prevent demand - probably more

than two-thirds of those in hospitals are there with long-term conditions, most of

which could be managed much more effectively in the community if you had

neighbourhood and community based/social support systems. The evidence is


But the system is conditioned to look to hospital provision for all the solutions.

And one of the main reasons that is proving hard to shift towards meaningful

integration, according to our survey of local health leaders, are perverse

financial incentives, named by 61 per cent. Norman Lamb agrees, saying:

"We incentivise acute hospitals to do more and don't incentivise the system to

prevent ill health or a deterioration of health. There needs to be a fundamental


This echoed concerns articulated by a large proportion of the local health leaders

that we surveyed and interviewed as part of this report. Many interviewees

were firmly of the view that there was a built-in incentive for acute trusts to keep

patients in hospital for longer than was strictly necessary, with one director of

public health suggesting that: "hospitals need to keep people in their beds in

order to survive [financially]." Where there is spare bed capacity in a trust, the

trust is incentivised through the tariff system to ensure that those beds are filled,

they argued. In 2006-7 the Government introduced a system called Payment by

Results (PbR). PbR governs transactions between commissioners and secondary

healthcare providers representing more than 60 per cent of income for the

average acute hospital.72 The intention for PbR was for it to align payment for

work done by delivering on the promise that 'money will follow the patient'.73

However, several of our interviewees felt that the scheme was not working as

planned, with one calling it an 'unmitigated disaster'. These interviewees all

agreed that, contrary to its name, PbR was not paying for results (i.e. making

people to get better) but was instead paying for activity.

Indeed protection of individual service budgets was the number one answer

in our survey when asked what was holding back health and social care

integration, with one interviewee adding: "[Hospital] Trusts are currently the

main beneficiaries of this model and are thereby disincentivised to work in a

more joined up way."

That said, the cost profile is also more complex than is often cited, as one

interviewee explained that: "non-elected admissions for older people who do

not actually need to be in hospital are funded at a 30 per cent rate of the

normal tariff". But 30 per cent is still more than zero per cent.

Again and again the subject of financial incentives came up. One of the top

issues that interviewees cited when asked if they could reverse one disincentive

towards more integrated care was financial incentives. And nearly half (46 per

cent) thought that the lack of adequate incentives in the system were one of the

specific underlying causes of delayed transfer of care (see figure 2).

71 Peters, D, "Lamb roars against

'ridiculous' health and social

care divide" The MJ (31 October


72 Department of Health, A simple

guide to Payment by Results


73 Department of Health, A simple

guide to Payment by Results



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