At our school they use a complex assessment system where the child reads to the teacher from a particular ORT book, and the teacher checks off a large number of individual items - phonics, blending, fluency, sight words, (I think also how effectively the child applies 'searchlight' methods), comprehension of all sorts. I think if there are enough checks, the child can be moved up, or tried on the next level particular book (I think these are books that they only use for book level assessment).
This takes a lot of time - 30 minutes to one hour 1-1 teacher time per child. So they only do it once at the beginning of the year, to determine the child's home reading book level, then let them get on with it (child stays on same level until read all books). The more able readers aren't then heard reading 1-1 at all anymore.
We are told that the teacher still 'constantly' assesses every child's reading progress, because every day classroom activities incorporate plenty of opportunity to observe the children reading.
I absolutely dislike this part of a supposedly 'outstanding' school. IMO it is totally sub-par and that, in conjunction with the school's very lukewarm attitude towards phonics, would probably make OFSTED very unhappy. Except OFSTED won't appear as long as KS2 SATS remain good (and all school efforts go towards getting those KS2 SATS results).
So though this approach may in theory be better than a 1970s list of words, it is really a 1980s method and not much better.
But these things are very individual to schools. Sadly, a lot of schools seem to be stuck in the ways of the 70s/80s but some have moved on.
But just because it is new and on the computer, doesn't mean it is better... See all the debates about Accelerated Reader (where if I understand correctly, a child answers a quiz on every book they read and their reading level is automatically adjusted according to how well they do on their quiz).