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Objective To examine whether the introduction of payment by results (a fixed tariff case mix based payment system) was associated with changes in key outcome variables measuring volume, cost, and quality of care between 2003/4 and 2005/6.

Setting Acute care hospitals in England.

Design Difference-in-differences analysis (using a control group created from trusts in England and providers in Scotland not implementing payment by results in the relevant years); retrospective analysis of patient level secondary data with fixed effects models.

Data sources English hospital episode statistics and Scottish morbidity records for 2002/3 to 2005/6.

Main outcome measures Changes in length of stay and proportion of day case admissions as a proxy for unit cost; growth in number of spells to measure increases in output; and changes in in-hospital mortality, 30 day post-surgical mortality, and emergency readmission after …