Payment by results in mental health:A review of the international literature and an economic assessment of the approach in the English NHS

The use of casemix-based funding mechanisms is increasing internationally. This funding approach potentially offers incentives for a range of diverse objectives, including improvements in efficiency, quality of care and patient choice. However, to date, the application of this approach to mental health care has been limited and there is no long-term experience to inform policy and practice. In England, the Department of Health plans to extend the scope of Payment by Results, an activity based funding approach, to mental health. The Care Pathways and Packages Clusters comprise a set of 21 ‘care clusters’ that together form ‘currencies’, or units for contracting and commissioning mental health services. Each cluster defines a package of care for a group of service users who are relatively similar in their care needs and therefore resource requirements. At the time of writing, the currencies are being refined and tested at several sites in England. In addition, costing exercises are underway to investigate the resource implications of the currencies. The intention is that from April 2010 these currencies can be used for commissioning and benchmarking, using local prices agreed between commissioners and providers. Options for moving to a national tariff will also be explored, although its feasibility is unclear. The University of York was asked by the Department of Health to assess the Care Pathways and Packages Clusters from an economic perspective. This report examines the international literature on payment mechanisms for mental healthcare services. These approaches are described and critiqued, drawing on relevant theoretical and empirical research to explore the strengths and weaknesses of payment mechanisms. Implications for the proposed Care Pathways and Packages Clusters are explored and recommendations are outlined.