In 2002 the Department of Health announced a fundamental change to the way in which NHS hospitals in England are paid for the work they do. Under this new system - Payment by Results (PbR) - hospitals are reimbursed for the activity they carry out using a tariff of fixed prices that reflect national average costs. This briefing explains how Payment by Results works, examines the evidence on whether the system has achieved, or is likely to achieve, the policy aims set for it, and describes the government's current proposals for the future of PbR.