Activity-based payments and reforms of the English hospital payment system

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Abstract
Intheir debate article, Andrew Street and Alan Maynard highlight the problems with using average cost pricing for hospital payments in the English National Health Service, pointing out that lack of cost ,containment ,and failure to improve quality are potential weaknesses. In this invited comment we elaborate on a number of further concerns that deserve attention, centring onincentives across different settings, better payment for variations in patient severity, and promoting quality of care. We draw upon experience in the US, Australia and Spain for examples of alternative provider payment,systems and their impact. ,2 Intheir introductory article to this debate series, Andrew Street and Alan Maynard (2007, henceforth SM) appropriately argue that in England it is faulty to base hospital payments,solely onthe,weighted average of hospital inpatient and outpatient costs. They also highlight some of the many,challenges in revising and updating the current hospital payment,formulas. We agree