What are the advantages of payment by results in NHS?

A press release from Monitor quotes its Director of Strategy as saying that "Improving the pricing of NHS services is essential to help commissioners make better decisions for their patients, and to ensure that hospitals and other providers of care are fairly reimbursed." It's sometimes difficult to understand what the motivation is for extending payment by results (PbR) in the NHS, when it's not clear that the cost is worth it (see previous post). After all, the report that this quote is taken from has been published to introduce a system for varying the national price if the costs of providing a service are too high or the revenues generated  too low. Some services are too essential to fail.

PbR in mental health services will be introduced in shadow form from this April. If the system works (which must be in doubt) and there are few advantages, it'll be interesting to see what Clinical Commissioning Groups do next year. Despite all the hype, it might actually make sense to continue block contracts. And I'm not saying this because I don't think that mental health services can be provided more cheaply (see another previous post). And, I'm happy for PbR to be experimented with at the edges of block contracts (see another previous post). This will be happening this year with psychological therapies in primary care in some parts of the country, but not in Norfolk and Suffolk where I work.