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Health Econ Policy Law. 2007 Oct;2(Pt 4):419-27. doi: 10.1017/S174413310700429X.

Activity based financing in England: the need for continual refinement of payment by results.

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  • 1Centre for Health Economics, University of York, York, UK.


The English National Health Service is introducing activity based tariff systems or Payment by Results (PbR) as the basis for hospital funding. The funding arrangements provide incentives for increasing activity, particularly day surgery, and, uniquely, are based on costing data from all hospitals. But prices should not be based on average costs and the potential of PbR to improve the quality of care is yet to be exploited. Without refinement, PbR threatens to undermine expenditure control, to divert resources away from primary care, and to distort needs based funding.

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