Agnes, please correct me if I'm wrong with this comment, because I have been away from the NHS for a number of years.  The old, old system was that hospitals were paid based upon a fixed and budeted payment.  That payment was not based upon the actual volume of cases done in the calendar year.  (I believe the budget was adjusted over time as populations shifted, but that didn't help a hospital with an increased workload in a particular year.)

Also in a particular year, a hospital could get hit with an unfavorable case mix in terms of cost.  In other words, they might do 1000 cases just like last year, but the current year's case mix could have very high cost cases, requiring expensive surgeries and long hospital stays.

That approach obviously had significant faults.  Was the PbR required to fix this?  (It's possible there was some fix before now that addressed this issue.  But it sounds like this is similar to the DRG concept in the US.)