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Why it’s vital to validate secondary care charges in your PBC budgets

28 August 2008

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Graham Poulter
Managing Director
iQ Medical

Graham is a workaholic who believes passionately in driving
out costly and inefficient processes within the PBC framework so that budgets can be used to deliver improved patient care. The little time he has left is given over to family – including a “minxy” granddaughter

The following are just five contentious issues that have contributed to the slow adoption rate of practice-based commissioning (PBC) within general practice:

  • It’s 99% certain that you are being wrongly charged for some patient secondary care episodes.
  • Exceeding your indicative budget is therefore inevitable.
  • Some primary care trusts (PCTs) have been reluctant to challenge and correct secondary care charging errors.
  • Extracting demand management information in order to redesign care pathways is time consuming and complex.
  • Receiving timely secondary uses service (SUS) information has been a problem for PBC clusters.

However, positive action and solutions by the DH, Audit Commission and the Healthcare Financial Management Association (HFMA) will resolve most of these issues.

In the last two years, more than 1,500 commissioning groups have been created.(1) However, less than half have actively commissioned services and less than two-thirds have an agreed commissioning plan.(2) Those that have reached the stage where they are actively preparing and reviewing implementation plans are concerned over two key elements, which are the cornerstones for successful PBC:

  • Validation of secondary care charges.
  • Analysing demand management information and redesign of care pathways.

What should be an easily managed process has been a complex and confusing process as the main parties involved – trusts and PCTs – have been implementing the DH commissioning guidance in different ways, which was having a negative impact on the majority of PBC cluster ambitions.

However, the recent release of the DH’s Commissioning Assurance Handbook, together with guidance and systems introduced by other leading organisations, will eliminate most of the frustrations being experienced by PBC clusters.(3)

The Audit Commission, in its recent report The Right Result? Payment by Results 2003–07, provided the following recommendations to trusts and PCTs:(4)
Providers of acute NHS services should:

  • Improve coding internally.
  • Ensure local information systems are in place to complement SUS.
  • Engage in discussions with commissioners about changing patient pathways, demand management, and use of local flexibilities, such as unbundling the tariff.

All PCTs should:

  • Further develop commercial, legal and contracting skills, identify gaps in line with developing world class commissioning competencies. (“World class commissioning” is an objective set by the DH to enhance every aspect of the commissioning process. By setting the standards and monitoring performance, its aim is to improve the use of budgets and deliver more efficient patient care.)
  • Adopt a robust yet proportionate approach to monitoring and challenging provider activity and costs under contract, prioritising investment in practice-level information systems so that practices can engage in the planning and monitoring of hospital activity.(4)

Does your practice/PBC cluster have to accept this volume of financial errors?
Despite the Audit Commission reports drawing attention to secondary care coding and Payment by Results (PbR) activity, error rates continue to cause major concerns, since under DH guidance practices should not exceed their indicative budgets.(1)

Most PCTs are undertaking topline analysis of secondary care charges, but these can only identify the obvious mistakes such as excessive long stays. To obtain accurate analysis it is imperative that these charges should be cross-referenced to the individual practice’s referrals and discharges.

This process should clearly identify elective and nonelective procedures, with and without complications, long stay supplements and trim points, which all have a direct impact on the health resource group (HRG) and final tariff charge for the procedure.

One practice in the West Midlands, with 7,440 patients and part of a 36,300-patient commissioning group undertaking this detailed analysis, has found the error rates shown in Figure 1 over the three-month period of validation. As the five practices in the cluster are all using the same group of trusts, it is expected that the same error rate will prevail in the other
four practices.

[[GP Fig 1]]

On this basis, the above practice would be billed £320,000 per annum for errors in HRG coding and unknown patients. Assuming that the trusts can justify 50% when challenged, it still represents a substantial sum from the practice’s
indicative budget.

If this error rate is projected across the whole cluster, it represents approximately £800,000 per annum: a substantial sum, even before the redesigning of care pathways has begun!

Factors compounding problems
The current level of charging errors emanates from the national tariff version HRG 3.5, which comprises 650 codes. With the introduction of HRG 4 in 2009, the number of codes will increase to 2,000 plus unbundling and split tariffs. It is therefore highly probable that the level of errors will increase substantially, making the need for automated validation of these charges a priority.

Unfortunately for some forward-thinking PBC clusters, their PCTs have declined to challenge the trusts in their region. The reasons are unclear, but it is felt by many that the PCTs do not have the resources to undertake the task and that it may be seen as confrontational.

That may, in some instances, be the case, but that cannot be a justification for ignoring one of the key foundations upon which world class commissioning is being framed. Indeed, the DH has recently issued a letter that strongly indicates this situation is not acceptable.(5)

Key points from the DH letter include:

  • “For PBC and commissioning in general to deliver their full potential, accurate clinical coding is essential.”
  • “Where practices identify inaccuracies, PCTs should support and encourage the improvement of data quality by trusts and, where inaccuracies are proved to be correct, PBC data and budget spends should be corrected by PCTs.”(5)

Monitoring the performance of PCTs
The Commissioning Assurance Handbook holds PCTs to account and rewards performance as they achieve world class commissioning. It is one nationally consistent system managed by the strategic health authorities (SHAs). Within the assurance framework, there are 11 “competencies” that assess how each PCT has developed and implemented the criteria expected of world class commissioning.

For example, under Competency 10 the use of performance information will ensure that:

  • Data are accessible and used to monitor provider performance.
  • Data are collected and analysed at appropriate intervals.
  • Monthly data from providers are no more than one-month old.
  • The PCT has a clear track record of not tolerating poor performance (from any type of provider), particularly in patient care, and acting swiftly to ensure change.
  • There is a track record of innovative and effective resolution of conflict.

Resolving financial disputes
Clearly, with such large financial errors being identified, some issues may turn out to be confrontational. This situation has been identified by financial directors and senior managers of both trusts and PCTs, who are all members of the HFMA.

To alleviate these potential issues, the HFMA has created an arbitration service that will allow both trusts and PCTs to meet and resolve matters without the situation escalating.

It is now evident from all quarters that the validation of secondary care charges is a critical task that must be undertaken by all parties – PBC clusters, PCTs and trusts.

Need for accurate data
Virtually every practice in the country has been provided with one of several information systems that provide secondary care activity data, so they can analyse patient treatment activity.

These are powerful yet extremely complex tools, which, for GPs and practice managers with considerable time constraints, are proving too complex to extract the appropriate information with minimum effort.

As a result, many are making broad empirical assumptions on which care pathways should be reviewed and redesigned, without the benefit of accurate and reliable verified data.

In a recent poll of more than 100 practices, it was clearly stated that an automated process of data extraction was required, based on creating a series of templates that specified the care pathways that have been defined in their PBC plans.(6)

These templates should then be able to produce, in minutes, the reports based on accurate historic data from within their respective practices. These data should also be capable of being compiled automatically into a single PBC cluster-wide report, which can be forwarded to the PCT where appropriate.

Integrating PBC information
Practices may find the need to integrate all referral, clinical and discharge information into the practice clinical and PBC monitoring systems is a high priority. Fortunately, systems are now available that can analyse free text held in scanned documents (eg, clinical letters and discharge reports) to find text strings that can be mapped to clinical terms and other classification coding systems, including Read codes. This in turn delivers appropriate HRG codes and tariffs for individual episodes of care.

What does the future hold?
The possibility of political change appears to be strengthening. It is important to note that the following statement is included in the Conservative Party’s health policy: “The Conservatives also propose that the current policy of PBC be extended to allow primary care clinicians to hold ‘real’ budgets compared with the ‘notional’ budgets under the current policy.”(7)

The return of “fundholding” will require practices to have a financial control system integrated with the process of issuing referrals and validating the secondary care charges.

With all these innovative systems and performance monitoring now in place, the objective of achieving world class commissioning is fast becoming a reality. This can only lead to improved care for your PBC cluster patients.

1. Information available from Binley’s database.
2. Information available from Department of Health.
3. Department of Health. Commissioning assurance handbook. London: DH; 2008. Available from:…
4. Audit Commission. The right result? Payment by Results 2003–07. London:
Audit Commission; 2008.
5. From letter by Dr Ian Rutter, Policy and Strategy Group, Department of Health, for onward reference to commissioning groups. 14 April 2008.
6. Research conducted by iQ Medical January 2008–07-16.
7. The Conservative Party. Delivering some of the best health in Europe – outcomes not targets. Policy Green Paper No. 6. London: The Conservative Party; 2008.