Following the money can support personalised payment mechanisms: exploring the health payment system

Alternative Guide to the NHS - from the King's Fund
Alternative Guide to the NHS – from The King’s Fund

Most discussion about health and social care is about how much money there is(n’t) in the system. Relatively little attention is given to how the money in health and social care flows through that system.

This post shares some extended thoughts on what we know about the payment system in health, how this has been applied to mental health and how, despite potential perils, we can use current and future payment system changes and extensions into social care to support personalisation.

It is a bit dense in places, but it hopefully gives a useful grounding in the payment system for those who’d like to know a bit more about it and the opportunities (and difficulties) it presents. The post is broken up into 3 parts: (1) How the health payment system works; (2) How the health payment system has been extended into mental health; and (3) The perils and opportunities of moving a health payment system into social care.

I. The health payment system

To understand how a system works a good rule of thumb is to follow the money. In large parts of the health service this is pretty easy to do because of the payment/tariff system (which used to be known as “Payment by Results”[1]).

The core building blocks of the payment system are currencies and tariffs. The currency defines the unit of healthcare for which a payment is made (i.e. the ‘what’, such as a hip replacement or cataract operation) and the tariff defines ‘how much’ for each currency (i.e. what will be paid).

Thus, for any person receiving any treatment in certain settings, the following basic process is followed:

  • Treatment occurs
  • Treatment is coded using separate classification systems for diagnoses and interventions
  • Grouping of treatment – a Healthcare Resource Grouping (HRG) is allocated based on clinical codes and other patient data
  • Tariff – The tariff price depends on HRG and type of admission, and there are a variety of tariff adjustments made
  • Payment – standard monthly payments are made in advance, based on activity plan. Actual activity transmitted from provider to commissioners adjusts these payments up or down

In its introduction to the payment system (from 2013) the Department of Health produced this useful diagram to explain the broad principles of how the payment system applied to Mrs Smith having twins, Mr Jones having an emergency hip replacement and how much their treatment costs.

PbR worked examples
Click to enlarge

To get to this point the payment system in health has evolved a lot since it was first introduced in 2003/4. That year this type of payment system made up around £100m of health spending (some 0.2% of relevant commissioner allocations); by 2011/12 it made up £28.9bn of health spending (32.4% of relevant commissioner allocations).

II. Extending the health payment system into mental health

For things that are relatively well defined (such as giving birth or hip replacements), a currency/tariff system is relatively easy to define. This is partly to do with how well the evidence base is developed: in health, NICE pathways exist which outline exactly what should be done and when. (Here’s the pathway for multiple pregnancies and here’s the one for hip fractures.)

What if, though, we apply similar principles to areas where definitions or boundaries aren’t so easy to come across: mental health and social care?

In mental health, a lot of effort has already been made in this direction. All of the various mental health problems that people can have are divided up into 21 ‘clusters’ – a way of grouping people with mental health problems according to their needs, based on descriptions of characteristics of people who are assumed to have similar mental health support needs, and the level of resource needed to meet these needs. In mental health, these ‘clusters’ are the currency (i.e. the ‘what’, or the equivalent of hip replacements etc.).

If this were to follow the twins / hip replacement example, we would then allocate an amount of money to the treatment of someone in a particular cluster and all would, we hope, be sorted. In mental health, though, there are a whole range of other factors that affect what is or isn’t included in someone’s treatment. These factors include (but are not limited to):

  • Mental health episodes are more difficult to define and diagnoses are less clear-cut
  • There is less clinical consensus on optimal care pathways, making cost variations more pronounced. Even if there was a consensus on pathways, mental health support is not consistently available across the country, including where some types of support simply aren’t available
  • Interrelationships with physical health are complex, with mental health problems having a substantial impact on health conditions
  • Mental health problems typically imposes costs and benefits in non-health sectors
  • There are shortcomings in both the availability and quality of activity data for mental health, which make very difficult the development of robust remuneration
  • The evidence base for mental health interventions is far less developed than for traditional health interventions
  • The money that meets different elements of the support comes from different sources, most notably health and social care pots of money.

What this list of factors means is that the pathway and the payment are much harder to determine in mental health.

Efforts have been underway since 2010/11 to both define the typical pathways associated with each cluster and the prices that might be attached to them. Progress is very mixed, though: clustering people with mental health problems is required by central government, but payment isn’t yet compulsory – local areas can develop their own ways of arranging payment. Furthermore, the extent to which the new payment system in mental health has changed the nature of activity and the differences it has made in people’s lives is a moot point. A recent survey by the Healthcare Financial Management Association (HFMA) (pdf) shared the views of health finance managers on progress regarding the mental health payment system. Findings included:

  • 84% reported commissioner understanding of the mental health payment system to be very poor, poor or fair
  • 60% reported cluster-based activity as having “no” financial impact
  • 70% reported that they still operated under a block contract with commissioners with a shadow tariff.

III. The opportunities and perils of moving a health payment system into social care

As it is in mental health, so the picture would be (even) more complicated in social care.

It isn’t yet the case that formal segmentation of the care population (to create ‘currencies’ and ‘clusters’), associated care pathways and prices have been developed. What we are starting to see, though, is a more concerted effort to define what we might typically expect from a social care pathway; this is mainly been driven through the NICE Collaborating Centre for Social Care (guidelines are being produced, for example, on the topics of home care and reablement). The drive to integration will also bring social care far more, perhaps fundamentally, under the aegis of agencies like Monitor and NHS England, who are jointly responsible for the payment system in health. CQC is, of course, already a joint regulatory body that operates across both health and social care.

In my personal view, and drawing on the experience in mental health, there are both perils and opportunities of bringing a health-type payment system into social care.

The biggest peril is that social care could be the less richer for such a payment system. This lost richness would be made up of a more medical focus in social care, painting a more black and white picture of people than the complexity and range of social care represents. Health is making attempts to shift away from this viewpoint (see, for example, the Coalition for Collaborative Care, Co4CC), but the experience in mental health suggests the practice of anything other than medical thinking related to payment systems is very hard to do.

There are, though, 4 positive opportunities we can take from any current or future attempts to develop currencies and payments in social care.

  1. Such a payment system begins to bridge the gaps (professional, language etc.) people from different professional backgrounds bring. Health and social care professionals start from very different technical positions, though aren’t different in what they seek to do for and with the people they support. Thinking about pathways and payments and trying to put them in place enables people across the piece to come together for a common goal, starting from where they currently respectively are
  2. Building standard national mechanisms won’t, I think, work. But providing a strong requirement to develop a local model, backed up by excellent guidance, support, encouragement and sharing of learning can help areas to create strong local health and social care economies through their common work to develop (if not produce) pathways and payments
  3. Attempts to build the picture will show where evidence is most needed in social care (and health). I am by no means advocating the unrealistic position that we should only spend money on models/interventions/supports backed up by ‘gold-standard’ evidence; but I am saying that knowing where more appropriate evidence is needed will help us to ensure more of what is available through social care is as effective as it can be in supporting people
  4. Perhaps the most exciting opportunity is that developing payments systems like this does much of the heavy lifting in identifying how much money is associated with the care and support of an individual. Even more exciting is the idea that such information would incorporate both health and social care provision. Once the amount is known it is then easier for an individual to take that resource as a Personal Budget / Personal Health Budget, with all the benefits we know are associated with this. After such work, the natural foundations for things like Integrated Personal Commissioning are then in place.

These are 4 reasons I could get behind.

Reforms in health and social care aren’t always renowned for their subtlety. What I’ve therefore endeavoured to do in this post is show how there are always opportunities in reforms – in this case, the payment system, with its currencies and tariffs  – that can be used to support a whole range of ends. Here, following the money provides a chance to bring health and social care people together and do much of the heavy lifting that personalisation through, for example personalised payment mechanisms, requires. Though this isn’t without its perils, as the experience in mental health shows, the opportunities aren’t too bad either.


[1] – Back in 2013 I wrote an introductory guide to what was then Payment by Results in mental health. Though some of the technical information has been superseded by development since then (and on which a publication is forthcoming) most of the information in the guide remains useful. You can find it here.


Payment by Results in mental health: introduction

By themselves, the topics of Payment by Results or mental health services are pretty complicated, but when you combine them the complexity more than doubles.

As a topic I’m interested in – both for work and personal reasons – I’ve brought together a series of blogposts intended to provide a brief introduction to Payment by Results in mental health.

These posts are by no means comprehensive, but hopefully provide a useful overview for anyone generally interested in this topic.

A bibliography / reading list of the documents used to inform this overview is included as a separate post, and will provide the interested reader with much more comprehensive and detailed information on the topic of Payment by Results in mental health.

The posts in this series are as follows:

Payment by Results and mental health: bibliography and reading

This post is one in a series on Payment by Results in mental health, written for both professional and personal reasons. The full series is introduced and linked to here.

Association of Directors of Adult Social Services (ADASS) (2009), Payment by Results for Mental Health as a driver for personalised services: Joint ADASS and DH position paper (available via here)

Association of Directors of Adult Social Services (ADASS) (2011), Position Paper: Recovery and Payment by Results in Mental Health (available via here)

Centre for Health Economics (CHE) (2009), Payment by Results in Mental Health: A Review of the International Literature and an Economic Assessment of the Approach in the English NHS (available here (pdf))

Department of Health (DH) (2010), Practical Guide to Preparing for Mental Health Payment by Results (available here (pdf))

Department of Health (DH) (2011a), A simple guide to Payment by Results (available here)

Department of Health (DH) (2011b), Payment by Results: Draft 2012-13 Mental Health Guidance (available here)

Department of Health (DH) (2012a), Draft Mental Health Payment by Results Guidance for 2013-14 (available here)

Department of Health (DH) (2012b), Mental Health Clustering Booklet v3.0 2013/14 (available here (pdf))

Department of Health (DH) (2013), Key steps for successful implementation of Mental Health Payment by Results (available here (pdf))

King’s Fund (2012), Payment by Results: How can payment systems help to deliver better care? (available here)

Mental Health Network, NHS Confederation (MHN) (2011a), Payment by Results in mental health: a challenging journey worth taking (available here (pdf))

Mental Health Network, NHS Confederation (MHN) (2011b), Mental Health Payment by Results Readiness Review (available here)

National Development Team for Inclusion (NDTi) (2012), Getting it together for mental health care: Payment by Results, personalisation and whole system working (available here)

Royal College of Psychiatrists (RCP) (2012), Payment by results for mental health (England): Position statement PS02/2012 (available here (pdf))

Sitra (2013), Report: Payment by Results (available here)

Payment by Results in mental health and personalisation

This post is one in a series on Payment by Results in mental health, written for both professional and personal reasons. The full series is introduced and linked to here, including a post with all references in it.

In theory, PbR should support personalisation and the introduction of personal health budgets. Early on in the process of introducing Payment by Results, some of those responsible for its implementation were positive that the clustering process gave them new information about the people they were treating, leading to a better understanding of where quality and outcome improvements could be made. Similarly, the currency model is focused on paying for individuals, not individual services, and so means that delivery may be provided by different organisations, such as those in the voluntary and independent sector, rather than “just” NHS providers (DH, 2013:18).

In the early days of PbR in mental health, it was noted that implementation needed to support the adoption of best practice in the delivery of outcomes, as set out in No Health Without Mental Health. Similarly, ADASS amongst others noted that PbR in mental health needed to take a whole-systems approach to mental health needs, or otherwise risk “unwittingly undermine some of the innovative partnerships, services and associated health and social care outcomes for people” (ADASS, 2009).

The potential was clear:

“The Care Pathways and Packages approach that is being used for mental health Payment by results has the potential for embedding personalisation into mental health services. By focussing on individual needs it potentially lends itself to commissioning for outcomes and this will be developed further. The “results” should ultimately be more personalised services and improved outcomes.” (ADASS, 2009)

However, people have felt unclear how PbR fits with personalisation and some concerns about PbR have been expressed about whether or not it will be a systems change that will in practice lead to real improvements, choice and control for people (King’s Fund, 2009).

These worries have included whether PbR may perpetuate a medical model of mental health rather than taking into account a range of social care outcomes. Similarly, by taking a deficit approach to mental health – through, for example, using HoNOS measures – the tools of PbR may not be geared towards promoting recovery-based approaches and increasing social inclusion (ADASS, 2011). The language currently used in the PbR Clusters and the allocation tool tends to focus on symptoms and problems” (NDTi, 2012:13). This is a concern echoed by the Royal College of Psychiatrist:

“The College recognises that social, economic and cultural influences will have a large impact on outcomes… Likewise, the College’s determination to support recovery principles and service user empowerment emphasises a focus on patients’ strengths and skills which are currently absent from the care clusters.” (RCP, 2012)

There is a concern that the Care Pathways and Packages approach reflected in the PbR currencies focuses on intervention and treatment (ADASS, 2009) and so potentially misses the opportunity for PbR to be an:

“added ingredient to make it possible to achieve a culture that embraces personalisation, recovery and a whole systems approach, with person-centred integrated planning, easily accessible personal budgets for health and social care, whole system creative commissioning in partnership with people and communities and recognising the contribution they make, and a personalised PbR system that will reward recovery and inclusion as well as activity and efficiency.” (RCP, 2012)

Currently, PbR is felt to be more about contracting, rather than commissioning mental health services (MHN, 2011b:15). For it to be successful it needs to evolve from “being an essentially ‘payment by activity’ model, to becoming a true ‘payment by results’ approach” (RCP, 2012:8).

Clearly, PbR in mental health is still a work in progress, and its impact on personalisation will be more apparent as PbR, and the framework to measure outcomes, begins to be further developed and implemented (ADASS, 2011).

As NDTi notes in its paper on PbR in mental health and personalisation:

“As with any development in public services, raising key questions in the development stage may avoid the danger of disappearing down a rabbit hole of systems development without coming up to see that on the surface nothing much has changed, and the burrowers have lost sight of important values and principles.” (NDTi, 2012:15)

As such, it is important to check the extent of understanding of those developing and delivering PbR in mental health care about personalisation in practice, and the culture, attitude and systems changes that it brings, and not leave this to chance (NDTi, 2012:13).

Practicalities of introducing PbR in mental health – Transition protocols, National / local tariff, Data quality, Link to social care

This post is one in a series on Payment by Results in mental health, written for both professional and personal reasons. The full series is introduced and linked to here, including a post with all references in it.

Transition protocols

One considerable concern regarding PbR in mental health is the possibility that a person may, during reassessment using the Mental Health Clustering Tool, have a lower recorded score because they are receiving effective treatment, but that if this treatment is stopped – by being discharged or allocation to a lower cluster – their needs may grow.

To specifically address this possibility, the Mental Health Clustering Booklet includes what are known as “Draft Care Transition Protocols”. These should be considered by the relevant clinician(s) before the final result of the MHCT score is recorded (DH, 2011b:6).

National / local tariff

In PbR in acute care there is a set national tariff, with a Market Forces Factor (MFF) index applied to reflect local variations.

A national tariff for PbR in mental health, however, does not exist. The commitment in Equity and Excellence: Liberating the NHS is for there to be clusters as the currency but with local prices, and that tariffs will be agreed locally between commissioners and providers.

Nevertheless, and though reaffirming the fact that a national tariff is not being introduced for PbR in mental health, some indicative cluster costs were published by DH (DH, 2012a:7), which are based on costs derived from 2011/12 data.

The future decision as to whether there will be a national tariff will fall to Monitor and NHS England (DH, 2012a:7). In preparation for this, Monitor is looking to base tariffs on costs submitted by organisations using the PLICS3 system and drawing on the Healthcare Financial Management Association’s mental health clinical costing standards (DH, 2012a:6).

Within clusters, the payment for each care cluster is generally an average payemtn. However, since variation of costs within clusters is not understood in great detail, there are likely to be requirements for top-up payments or alternative funding arrangements in addition to any average cluster payment (DH, 2011b:13).

Data quality

Very closely related to the question of determining a tariff (be it local or national) is the issue of data and its quality to inform developments and decisions. Any payment system needs to be underpinned by high-quality data and analysis, and risks a lack of compliance and/or unintended consequences if this isn’t in place (King’s Fund, 2012:vi).

There are concerns with data within the current system of PbR in mental health. Issues include:

  • Completion rates for collecting HoNOS scores are low, even though they should be collected as part of the mental health minimum data set (MHMDS)
  • Inconsistency in whether users are correctly allocated to clusters
  • Inconsistency in the use of care transition protocols
  • IT systems may not be well-enough developed to support the recording of assessment scores and cluster allocations (DH, 2010:14).

This picture is likely to become more complicated, since some quality metrics are being mandated in 2013/14, including:

  • Cluster caseloads (%age clustered)
  • Cluster caseloads (Client Numbers)
  • Adherence to cluster reviews periods
  • Adherence to Care Transition Protocols” (DH, 2013:17).

There is also a growing expectation that patient experience measures, such as PROMS, will feature in PbR data and its use (DH, 2013:17).

To address questions of data and its robustness, a significant project has been commissioned from Capita by the Audit Commission to explore the issue (DH, 2012a:6).

Link of Payment by Results in mental health to social care

It was noted early in the development of PbR in mental health that “the costs of social care and other provision should be identified and factored into the PbR work.” (ADASS, 2009:3).

The Department of Health moved in this direction: the costs of social care staff directly employed by a mental health provider or under formal Section 75 arrangements should be included in cluster costs (DH, 2011b:13). However, the same guidance noted that “non-NHS costs should [be] deducted to arrive at the cluster care price” and that “[t]he funding of interactions with social care will be subject to further national work” (DH, 2011b:13).

Though the scale of such a piece of work isn’t underestimated (see, for example, King’s Fund, 2012:40), there is confusion amongst health commissioners and providers about how to deal with social care in mental health PbR (MHN, 2011a:3).

Practicalities of introducing PbR in mental health – Defined interventions and packages of care for each cluster

This post is one in a series on Payment by Results in mental health, written for both professional and personal reasons. The full series is introduced and linked to here, including a post with all references in it.

As highlighted in the reasons why it may be harder to adopt PbR in mental health than in acute care, there is less clinical consensus on optimal care pathways, as well as there being considerable variation in what mental health services are available in any given area (CHE, 2009:1).

Nevertheless, some localities are taking the approach of defining interventions and packages of care for each cluster. Though initially mixed progress was made on this initially – by 2011 a third of trusts had made considerable progress and half had not started (MHN, 2011b:6).

Similarly, one specialist mental health trust has developed standardised care packages for each cluster. Each package:

  • Describes what activities are needed to meet identified needs
  • Has a core element, which all users in the cluster will receive
  • Has essential elements, which only some users in the cluster will receive
  • Has variance elements, that are occasionally required  (CHE, 2009:4).

The IMHSEC project / resource also takes a similar approach –

The care packages are designed to inform, but not supersede, clinical decisions (CHE, 2009:4); they are based on both clinical guidelines and NICE guidance. The Department of Health is more generally clear that clusters themselves shouldn’t define appropriate interventions and treatments, and draws attention to the fact most interventions are well defined by NICE / SCIE professional guidelines and associated standards and outcomes (including those of CQC) (DH, 2011b:6; DH, 2013:5). RCP is also clear on this point:

“Evidence-based interventions care packages and pathways must be based on the most effective treatments and these should be delivered in a way that offers the best value. This means supporting integrated care between primary, social and mental health specialist care and providing care that conforms to evidence-based professional standards and National Institute for Health and Clinical Excellence/Social Care Institute for Excellence guidelines.” (RCP, 2012:6)

The Department of Health is also clear that what care options are available to people are developed locally (DH, 2010:7).

Practicalities of introducing PbR in mental health – The care clusters

This post is one in a series on Payment by Results in mental health, written for both professional and personal reasons. The full series is introduced and linked to here, including a post with all references in it.

  • Care cluster 0: Variance cluster – Despite careful consideration of all the other clusters, this group of Service Users are not adequately described by any of their rating profiles or descriptions.  They do however require mental health care and will be offered a service.

Non-psychotic clusters (1-8)

  • Care cluster 1: Common Mental Health Problems (Low Severity) – This group has definite but minor problems of depressed mood, anxiety or other disorder but they do not present with any distressing psychotic symptoms.
  • Care cluster 2: Common Mental Health Problems (Low Severity with greater need) – This group has definite but minor problems of depressed mood, anxiety or other disorder but not with any distressing psychotic symptoms. They may have already received care associated with cluster 1 and require more specific intervention or previously been successfully treated at a higher level but are re-presenting with low level symptoms.
  • Care cluster 3: Non Psychotic (Moderate Severity) – Moderate problems involving depressed mood, anxiety or other disorder (not including   psychosis).
  • Care cluster 4: Non-psychotic (Severe) – This group is characterised by severe depression and/or anxiety and/or other increasing complexity of needs. They may experience disruption to function in everyday life and there is an increasing likelihood of significant risks.
  • Care cluster 5: Non-psychotic Disorders (Very Severe) – This group will be severely depressed and/or anxious and/or other. They will not present with distressing hallucinations or delusions but may have some unreasonable beliefs. They may often be at high risk for suicide and they may present safeguarding issues and have severe disruption to everyday living.
  • Care cluster 6: Non-psychotic Disorder of Over-valued Ideas – Moderate to very severe disorders that are difficult to treat. This may include treatment   resistant eating disorder, OCD etc, where extreme beliefs are strongly held, some personality disorders and enduring depression.
  • Care cluster 7: Enduring Non-psychotic Disorders (High Disability) – This group suffers from moderate to severe disorders that are very disabling. They will have received treatment for a number of years and although they may have improvement in positive symptoms considerable disability remains that is likely to affect role functioning in many ways.
  • Care cluster 8: Non-Psychotic Chaotic and Challenging Disorders – This group will have a wide range of symptoms and chaotic and challenging lifestyles. They are characterised by moderate to very severe repeat deliberate self-harm and/or other impulsive behaviour and chaotic, over dependent engagement and often hostile with services.
  • Care cluster 9: Blank cluster

Psychotic clusters (10-17)

  • Care cluster 10: First Episode Psychosis – This group will be presenting to the service for the first time with mild to severe psychotic phenomena. They may also have depressed mood and/or anxiety or other behaviours. Drinking or drug-taking may be present but will not be the only problem.
  • Care cluster 11: Ongoing Recurrent Psychosis (Low Symptoms) – This group has a history of psychotic symptoms that are currently controlled and causing   minor problems if any at all. They are currently experiencing a period of recovery where they are capable of full or near functioning. However, there may be impairment in self esteem and efficacy and vulnerability to life.
  • Care cluster 12: Ongoing or recurrent Psychosis (High Disability) – This group have a history of psychotic symptoms with a significant disability with major   impact on role functioning. They are likely to be vulnerable to abuse or exploitation.
  • Care cluster 13: Ongoing or Recurrent Psychosis (High Symptom & Disability) – This group will have a history of psychotic symptoms which are not controlled. They will present with severe to very severe psychotic symptoms and some anxiety or depression. They have a significant disability with major impact on role functioning.
  • Care cluster 14: Psychotic Crisis – They will be experiencing an acute psychotic episode with severe symptoms that cause severe disruption to role functioning. They may present as vulnerable and a risk to others or   themselves.
  • Care cluster 15: Severe Psychotic Depression – This group will be suffering from an acute episode of moderate to severe depressive symptoms. Hallucinations and delusions will be present. It is likely that this group will   present a risk of suicide and have disruption in many areas of their lives.
  • Care cluster 16: Dual Diagnosis – This group has enduring, moderate to severe psychotic or affective symptoms with unstable, chaotic lifestyles and co-existing substance misuse. They may present a risk to self and others and engage poorly with services. Role functioning is often globally impaired.
  • Care cluster 17: Psychosis and Affective Disorder – Difficult to Engage – This group has moderate to severe psychotic symptoms with unstable, chaotic lifestyles. There may be some problems with drugs or alcohol not severe enough to warrant dual diagnosis care. This group have a history of non-concordance, are vulnerable & engage poorly with services.

Organic (18-21)

  • Care cluster 18: Cognitive Impairment (Low Need) – People who may be in the early stages of dementia (or who may have an organic brain disorder affecting their cognitive function) who have some memory problems, or other low level cognitive impairment but who are still managing to cope reasonably well. Underlying reversible physical causes have been rule out.
  • Care cluster 19: Cognitive Impairment or Dementia Complicated (Moderate Need) – People who have problems with their memory, and or other aspects of cognitive functioning resulting in moderate problems looking after themselves and maintaining social relationships. Probable risk of self-neglect or harm to others and may be experiencing some anxiety or depression.
  • Care cluster 20: Cognitive Impairment or Dementia Complicated (High Need) – People with dementia who are having significant problems in looking after themselves and whose behaviour may challenge their carers or services. They may have high levels of anxiety or depression, psychotic symptoms or significant problems such as aggression or agitation. The may not be aware of their problems. They are likely to be at high risk of self neglect or harm to others, and there may be a significant risk of their care arrangements   breaking down.
  • Care cluster 21: Cognitive Impairment or Dementia (High Physical or Engagement) – People with cognitive impairment or dementia who are having significant problems in looking after themselves, and whose physical condition is becoming increasingly frail. They may not be aware of their problems and there may be a significant risk of their care arrangements breaking down.

Practicalities of introducing PbR in mental health – Clustering and initial assessment

This post is one in a series on Payment by Results in mental health, written for both professional and personal reasons. The full series is introduced and linked to here, including a post with all references in it.

Since 2010/11, there has been a considerable programme of work to support the introduction of Payment by Results into mental health. Below outlines the various areas that have been covered in the introduction and some of the issues arising. (Note that not all issues are dealt with as comprehensively as others.)


Recall that, in PbR for acute care, there are three fundamental features of Payment by Results: (1) classification; (2) currency; and (3) costing (DH, 2011a:18; CHE, 2009:45; NDTi, 2012:8).

Unlike PbR for acute care, mental health classification in PbR does not use the ICD-10 or OPCS-4 classification systems. Instead, mental health professionals rate service users using something called the Mental Health Clustering Tool (MHCT). This tool has 18 scales: the first 12 of these are the Health of the Nation Outcomes Scales (HoNOS), covering areas like depressed mood, problems with activities of daily living etc. Each scale is given a rating from 0 (no problem) to 4 (severe to very severe problem). The additional six scales are known as the Summary Assessment of Risk and Need (SARN), and take into account historical information (DH, 2011b:5).

The result of this process is that it enables clinicians to allocate people to a cluster.

In PbR for mental health, the cluster is the currency.

The key points to note with regard to clusters are as follows:

  • Clusters are groupings based on common characteristics such as level of need, and requiring similar resources to meet those needs through the provision of packages of care
  • There are 21 clusters in total. These are split into 3 super-clusters:
    • Non-psychotic (clusters 1-8)
    • Psychotic (clusters 10-17)
    • Organic (clusters 18-21)
    • (A full list of the what each cluster covers is included in a separate post. Cluster 9 is a blank cluster)
  • The clusters are mutually exclusive. A service user can only be allocated to one cluster at a time – if they transfer to a new cluster following a reassessment, the previous cluster episode ends
  • The same diagnosis could be associated with several clusters, since clusters reflect the assessed level of need
  • The mental health clustering booklet – which has so far been published annually by the Department of Health – helps clinicians to decide which cluster someone should be allocated to
  • If no match to cluster is possible, but the service user requires treatment (typically non-severe autism or learning disability), then a variance cluster (cluster 0) is used. Cluster 0 is sometime also used because of co-morbidities. The use of cluster 0 should be reducing over time as clinicians gain more confidence in clustering, and the clustering tool is further developed to take account of less frequently encountered complex needs
  • The final decision on which cluster to allocate a service user to rests with the mental health professional.
  • Clusters are based on a period of care over specific periods of time, which range from four weeks to 12 months before a review takes place
  • The clusters apply to both admitted patient care and care in a community setting
  • The clusters are designed to be setting independent, on the premise that people should be treated in the least restrictive care setting possible

The approach of establishing 21 clusters was initially developed by the NHS in Yorkshire and Humber and the North East. The approach started life as a clinical tool and then shifted to support the implementation of PbR in mental health (DH, 2010:4).

Clustering can happen at any one of three points (DH, 2011b:5-6):

  1. Initial assessment
  2. Scheduled reassessment
  3. Any reassessment following a significant change in need that cannot be met by the continuation of the current cluster care package.

Initial assessment

It is useful to note that initial assessments are paid for as a separate activity (DH, 2011b:3). This reflects the fact that initial assessment can be an intensive process requiring significant professional resource (DH, 2011b:10). For 2013/14, the assumption is that initial assessments will be the average of the number of user-professional contacts prior to clustering, which is set at two contacts or two working days for in-patients (DH, 2012a:41). Though it is preferred that this assessment is calculated for each cluster, the calculation for average assessment costs will be done across all initial assessments for all clusters in 2013/14.

It is also useful to note the areas not currently included within the scope of PbR in mental health:

  • CAMHS (though this is currently being piloted in 22 sites – see
  • IAPT
  • Forensic services
  • Secondary drug and alcohol misuse
  • LD services for non-mental health needs

MH services provided under a GP contract (DH, 2011b:15)

What is the international evidence for Payment by Results in mental health?

This post is one in a series on Payment by Results in mental health, written for both professional and personal reasons. The full series is introduced and linked to here, including a post with all references in it.

England is at one of the most advanced stages for introducing Payment by Results in mental health anywhere in the world. There is limited and no long-term experience from anywhere else to inform policy and practice (CHE, 2009:iii). The most relevant learning can be found in Australia, Canada, New Zealand, the Netherlands and the United States, which have all considered or introduced a form of Payment by Results for mental health (CHE, 2009:6).

Different approaches to PbR in mental health were to be found in different places. For example, in the classification of mental health problems – the equivalent to clustering in England – there was some variation:

  • Australia produced 42 groups as part of its classification system: 19 for community episodes and 23 for inpatient episodes. These include diagnosis (using ICD-10), severity (using HoNOS) and other factors (CHE, 2009:16)
  • The Canadian system (which focuses on inpatient care only (CHE, 2009:vi)) groups mental health assessments into one of seven categories and 47 groups. Two further categories covered no diagnoses and records for short stay episodes (CHE, 2009:21)
  • In New Zealand, there were 42 classes identified: 20 inpatient and 22 community (CHE, 2009:21)
  • In the United States, patients were covered by one of 468 Diagnostic Related Groups (DRGs) (CHE, 2009:40)

Different places also used a variety of different factors for determining what is and isn’t included directly within classifications, or instead adjusted for on top of the classification. For example:

  • New Zealand used regression analysis that helped to incorporate patient characteristics rather than the interventions they received  (CHE, 2009:21)
  • New Zealand also explicitly included ethnicity in its classification system, since it had a major impact on case complexity (CHE, 2009:22)
  • Australia and New Zealand used episodes as the unit of analysis, rather than interventions or services received (CHE, 2009:49)
  • In Canada, each episode is adjusted for the length of stay and location of the treatment (CHE, 2009:20)
  • The US doesn’t use classifications at all as a means of payment: it uses average cost, per diem case payments which are then adjusted by a range of factors, including patient characteristics (for example, age, comorbidity, use of ECT) and provider characteristics (for example, rurality, teaching status and local wage rates) (CHE, 2009:41;45). 

As CHE notes (2009:48), the English approach to PbR in mental health (21 clusters that are not based on diagnosis, though people with similar diagnoses and similar levels of symptom severity are likely to be found within the same cluster) is most similar to the Australian and New Zealand approaches.

In both Australia and New Zealand, though they had trialled these classification systems, they were not subsequently used for payment purposes (CHE, 2009:iv). The difficulties of covering both inpatient and community care contributed to this decision (CHE, 2009:16;45). Furthermore, the significant variation in provider costs identified in Australia meant that an average cost approach couldn’t easily be used (CHE, 2009:17).

More generally, the complexity of the introduction of PbR in mental health has meant that, in all of the countries where it has been tried, it has been introduced gradually, over a period of years (CHE, 2009:v).

Very little is known about the impact of PbR in mental health on the quality of mental health services. All that can be concluded from work in other countries is that:

No country has developed a single system that covers inpatient hospital care and community care (CHE, 2009:48)

Even if there were consensus on optimal treatment pathways – which is far from clear (and especially so in England) – “differences in service configuration, economies of scale and scope, resource availability and local costs may mean that [the impact of PbR] may vary in practice.” (CHE, 2009:49).

Differences between Payment by Results in acute healthcare and mental health

This post is one in a series on Payment by Results in mental health, written for both professional and personal reasons. The full series is introduced and linked to here, including a post with all references in it.

There are some clear differences between PbR in acute care and in mental health.

Some of these are positive. For example, unlike in physical health, PbR for mental health covers both hospital and community care (RCP, 2012:5). Similarly, by linking payment to individual service users, rather than to services, PbR in mental health in theory builds an incentive to providers to reduce the need for more specialist mental health care through preventative interventions (DH, 2010:6).

From a financial point of view, and despite worries that PbR in mental health may be seen (erroneously) as an attempt to save money on mental health services (CHE, 2009:iv) if mental health services were to be funded under PbR, this could protect mental health funding against pressures to disinvest from the acute sector. Other strengths could include integrating health and social care commissioning, supporting best practice, enhancing choice, and encouraging community or primary care (CHE, 2009:50).

However, there are also reasons why introducing PbR in mental health may be less positive and/or more difficult. These include the following, all of which flow from the fact that mental health care is more complex than acute care:

  • Mental health episodes are more difficult to define
  • Mental health diagnoses are less clear-cut
  • There is less clinical consensus on optimal care pathways, making cost variations more pronounced
  • Interrelationships with physical health are complex, with mental health problems having a substantial impact on health conditions (CHE, 2009:45).

Similarly, figuring out the appropriate costing models that underpin mental health is challenging, for the following reasons:

  • There is a complex relationship between mental and physical health
  • Mental health problems typically imposes costs and benefits in non-health sectors Mental health problems may be acute or chronic and the course of the illness may vary unpredictably over time
  • There are shortcomings in both the availability and quality of activity data for mental health, which make very difficult the development of robust remuneration.

Provision of mental health services varies considerably (CHE, 2009:1).