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Models for paying providers: Payment for performance

This series of briefings has been designed to help you understand the different ways in which providers can be paid for seeing and treating patients. Block contracts have been widely used throughout the UK, and continue to be the main payment system for hospitals in Scotland, Wales and Northern Ireland.

In recent decades NHS payment systems have evolved, particularly in England, where the national tariff (‘payment by results’) currently dominates payments made to the acute sector. But increasing emphasis on new, integrated models of care means that other ways to pay providers, such as through capitated budgets, may become more dominant in the future.

  • What is payment for performance?

    Payment-for-performance schemes refer to payment arrangements where providers are financially rewarded for achieving high performance or quality. Each scheme rewards providers in a unique way.

    Quality is hard to define in a healthcare setting and quality metrics or indicators can be broken down into three categories:

    • patient outcomes (such as mortality and readmission rates)
    • process measures (such as waiting times and screening rates)
    • clinical process measures (such as measuring blood pressure).

    Patient outcomes are notoriously difficult to measure, and attribute causation to, and thus many payment- for-performance schemes reward providers for adhering to process measures that represent clinical best-practice.

  • How does it apply to the NHS?

    Payment for performance has been used in the NHS across the UK. In primary care, the QOF (quality and outcomes framework) rewards GP practices for achieving performance indicators such as managing chronic diseases and implementing preventative measures.

    Scotland and Wales however have recently announced the end or partial suspension of QOF. Following this, Scotland is considering new payment arrangements for GP practices and Wales has agreed fundamental reforms to QOF going forward.

    In England, secondary care schemes include the ‘commissioning for quality and innovation’ framework (CQUIN). Under CQUIN clinical commissioning groups (CCGs) combine national and local performance targets for provider contracts, achievement of which attracts a financial bonus of 2.5% of the contract value.

    The national tariff (‘payment by results’) also includes best practice tariffs (BPT) for around 18 areas of clinical care. BPTs incentivise best clinical practice either by increasing tariff prices if services are delivered in a specific way (eg as a day case) or making payment of the tariff contingent on adherence to best-practice care.

    Find out more about the national tariff

    The ‘advancing quality’ (AQ) programme specific to North West England rewarded hospitals that achieved the top quality scores in the region.

    In other parts of England, CCGs have been developing their own, local payment models in order to support greater integration of services based on a mixture of capitation and payment for performance.[i]

    NHS England is proposing that the new care models such as multispecialty community providers (MCPs) and primary and acute care systems (PACS) adopt a similar approach by combining a capitated payment approach with an improvement payment scheme and a gain/loss sharing agreement.

    For more information on this proposed approach, see our briefing on Payment models for integrated care: A capitated payment approach

    For more information on capitation, see another briefing in this series

    For more information on MCPs and PACS, see our briefing on Integrated provider models



    [i] Addicott R (2014). Commissioning and contracting for integrated care. London: The King’s Fund.

  • What are the pros?

    There is evidence that payment-for-performance schemes can lead to a clinically-significant reduction in mortality rates (a patient outcome metric). This was found in the advancing quality programme in North

    West England, where providers were rewarded for being top performers in the area and for improving on their previous attainment. The scheme was associated with a clinically-significant reduction in mortality for three of the five incentivised conditions, estimated to be the equivalent of 890 fewer deaths over 18 months.[i] In addition, nationally, introduction of the BPT for hip patients also led to a reduction in mortality rates.[ii] It should be noted that whilst they are relatively easy to measure, there are concerns that mortality rates are an inappropriate and relatively crude indicator of quality.

    There are also numerous examples of payment-for-performance schemes leading to improvements in quality in terms of process and clinical process measures. In the QOF,[iii] (marginal) improvements in the measurement of and prescribing for cardiovascular diseases, diabetes and asthma were seen (clinical processes). There were also improvements seen in the increased use of computers, provider prompts and patient reminders and recalls (process measures).

    As a result of the BPT for hip patients, there was a substantial 10 percentage point increase in the proportion of patients undergoing surgery within 48 hours: 4 percentage points larger amongst providers receiving the BPT than those not receiving it. There was also an increase in the proportion of patients discharged to their usual place of residence within 56 days.



    [i] Sutton et al (2012). ‘Reduced Mortality with Hospital Pay for Performance in England’. New England Journal of Medicine, 367:1821-8.

    [ii] McDonald R, Zaidi S, Todd S, Konteh F et al (2012). A Qualitative and Quantitative Evaluation of the Introduction of Best Practice Tariffs. An evaluation report commissioned by the Department of Health. University of Nottingham.

    [iii] Gillam S, Siriwardena AN (2010). The quality and outcomes framework: triumph of evidence or tragedy for personal care? In: Gillam S, Siriwardena AN (eds). The quality and outcomes framework: QOF transforming general practice. Oxford: Radcliffe Publishing, 2011:156-66.

  • What are the cons?

    Whilst payment-for-performance schemes do have the potential to improve patient outcomes and other quality measures as seen above, they are not guaranteed to do so. For example, whilst the hip BPT led to a reduction in mortality rates and an improvement in other quality measures over and above previous trends, for stroke patients, the improvements in quality indicators did not exceed those experienced prior to the introduction of the BPT.

    Furthermore, there is now a wealth of evidence saying that when financial incentives are used to influence performance, leading to a so-called ‘tick box’ culture, those rewards can undermine performance and worsen motivation.[i],[ii] Some qualitative evaluations of QOF[iii],[iv] have found that the human element of consultations has been negatively affected as a result of the scheme. Whilst this is inherent to all payment-for-performance schemes it is an important fact to bear in mind.

    There is a risk that rewarding performance of certain clinical activities will divert attention from other, unrewarded activities. This can lead to more and more indicators being added to schemes such as QOF to ensure more activities are given attention, leading to a growing workload.

    Finally, there is limited evidence that payment-for-performance schemes save costs. Some have been proven to be cost-effective, but it is unlikely that they will save money overall, unless at the expense of care quality.



    [i] Glasziou P, Buchan H, Del Mar C, Doust J et al (2012). ‘When financial incentives do more good than harm: a checklist’. BMJ, 345:e504.

    [ii] Ariely D, Gneezy U, Loewenstein G & Mazar N (2009). ‘Large stakes and big mistakes’. Rev Econ Stud, 76: 451-69.

    [iii] Maisey S, Steel N, Marsh R, Gillam S et al (2008). ‘Effects of payment for performance in primary care: qualitative interview study’. J Health Serv Res Policy, 13:133-9.

    [iv] Campbell SM, McDonald R & Lester H (2008). ‘The experience of pay for performance in English family practice: a qualitative study’. Ann Fam Med, 6:228-34.

  • What are the implications for doctors?

    At present there are no immediate implications for individual doctors.

    If however payment for performance becomes a more common feature of payment systems, then doctors and other clinicians will be required to focus on achieving particular quality measures in line with the specific scheme in place.

  • What is the BMA’s policy on this?

    We negotiate changes to the QOF annually with NHS Employers, who operate on behalf of NHS England.

    Not all the changes that are made to the QOF however are agreed by the BMA.

    For more information, see the General practice funding section of the BMA website.

    In secondary care, we are generally supportive of best practice tariffs[i] (BPTs) where evidence shows that they lead to positive clinical outcomes, and clinical freedom is not too rigidly restricted. Better engagement with the clinical community to develop more and better-linked payments to good clinical practice is essential. Faster progress with the introduction of new BPTs is also needed, as is a clearer and more robust process for their development.



    [i] BMA response to Monitor National Tariff Payment System Statutory Consultation, December 2014.