Payment by results: key outcomes and variations across HRGs, providers and patients in 2006/07 and 2007/08

This project identified the medium-term consequences of activity-based funding for hospitals in the English NHS. It built on a completed project examining the implementation and early effects of the Payment by Results policy. Activity-based funding systems in other countries, similar to PbR, have been shown to have significant effects on the costs, quality and volume of care. Research on some of these payment systems shows the effects to be short-lived. Using micro-econometric techniques we: (i) charted the evolving impact of the new financial regime on key indicators of activity, cost and quality; (ii) rolled forward previous work using Scotland (where the policy is not being implemented) as a comparator; and (iii) investigated the variability of the effects across three key dimensions: (a) patient group; (b) provider organisation; and (c) type of treatment.

Outcome and Translation

This research directly informed the Department of Health in England of the variation in impact of PbR, informing the future development of the policy.

HERU researchers involved in this research project: Shelley Farrar

External collaborators: M Chalkley (University of York)


Farrar, S., Yi, D., Chalkley, M., Ma, A. and Sutton, M. (2009) Interim report on the medium term consequences of payment by results, Department of Health

Farrar, S., Yi, D., Sutton, M., Chalkley, M., Sussex, J. and Scott, A. (2009) 'Has payment by results affected the way that English hospitals provide care? Difference-in-differences analysis', BMJ, 339:b3047.

Farrar, S., Chalkley, M., Yi, D. and Ma, A. (2010) Payment by results: consequences for key outcomes measures and variations across HRGs, providers and patients. Report for the Department of Health, Department of Health. [pdf]

Farrar, S., Yi, D. and Boyle, S. (2011) 'Payment by results ' in Mays, N., Dixon, A. and Jones, L., eds., Understanding New Labour's Market Reforms of the English NHS, London: King's Fund.

Farrar, S. (2011) 'Using national tariffs to pay for hospital care', HERU Briefing Paper, University of Aberdeen, February 2011.



Yi, D., Farrar, S., Sutton, M., Scott, A. and Chalkley, M. (2007) ‘Do hospitals become more efficient under a new prospective payment system? Effects of Payment by Results on length of stay in English hospitals’, Health Economist’s Study Group, Brunel University, September 2007.

Farrar, S., Yi, D., Ma, A., Sutton, M. and Chalkley. M. (2009) ‘Behaviour of English hospitals in the early stage of implementing payment by results: difference-in-differences analysis using Scotland as control. Exploiting Existing Data for Health Research’, Scottish Health Informatics Programme, St Andrews, September 2009.

Farrar, S., Yi, D., Chalkley, M., Ma, A. and Sutton, M. (2009) ‘Impact of Payment by Results on providers and services: latest findings from the national evaluation. Department of HealthPRP Health Reforms and Evaluation Programme’, London School of Hygiene and Tropical Medicine, London, November 2009.

Farrar, S., Yi, D., Chalkley, M., Ma, A., Sutton, M. and Sussex, J. (2010) ‘Payment by Results: impact and policy implications. DoH PRP Health Reforms and Evaluation Programme’, Symposium on Policy Implications of Emerging Findings for the English NHS, King's Fund, London, February 2010.

Farrar, S., Yi, D., Ma, A., Chalkley, M. and Sutton, M. (2010) ‘Measuring the impact of activity based hospital financing across patient group’, ECHE, Helsinki, July 2010