Blended payments: will a new payment system help deliver the long term plan?

Patrick Garratt profile picture

08 January 2020

Patrick Garratt
Policy Officer


Since the long term plan was published a year ago, health and care organisations have been encouraged to focus more on outcomes, and establish more integrated, joined-up forms of care in local systems. This has been accompanied by the evolution of relationships between commissioners and providers to share risk and work together more effectively.

There is a consensus that long-established, activity-based or block contract payment systems do not support these objectives, and may be a barrier to adopting more effective, collaborative ways of working. To take their place, NHS England and NHS Improvement has been developing a blended payment approach. It is intended to become the dominant model in the future, aimed to support the ambitions of the long term plan better than existing payment systems.

NHS England and NHS Improvement has been developing a blended payment approach. It is intended to become the dominant model in the future, aimed to support the ambitions of the long term plan better than existing payment systems.

Patrick Garratt    Policy Officer


There is currently a deliberate attempt to move trusts off block contracts and activity-based ‘payment by results’ (PbR) models. Clinical commissioning group spend on acute services through PbR has been falling, from 88% of total spend in 2016/17 to 58% in 2019/20 – partly due to the introduction of the blended model.

In a block contract arrangement, the provider manages within an annual budget. While these exist in the acute sector, they have historically have been more prevalent for community and mental health care. Although blended payments were introduced in mental health services at the start of 2019/20, it is unclear what the uptake of the piloted model has been.

The proposed blended model involves a combination of ‘intelligent fixed payments’, alongside financial risk-sharing elements, a variable element reflecting actual activity levels, and outcomes-based payments. Under a blended system, providers are paid a fixed amount for a forecast level of activity, can share risk associated with excess costs with commissioners, and receive rewards where health outcomes improve. After bringing in the first blended payment models for mental health and emergency care in 2019/20 – which we are yet to see an evaluation of – NHS England and NHS Improvement wants to extend the approach to outpatients and maternity services for 2020/21.

In their current form, the blended models proposed by NHS England and NHS Improvement replace the existing block or activity-based payments between one commissioner and one provider. They essentially bundle together similar types of episodic care: births, emergency admissions, or outpatient appointments. But over time, NHS England and NHS Improvement intends for them to be used to pay for care across an entire pathway, for example respiratory care, and across acute and community settings. While this would enable payment approaches that better reflect the totality of a patient’s treatment, and may support improved management of long term conditions, the current proposals do not go this far.

Likewise, the blended models proposed are some distance away from providing outcome based incentives for providers. While NHS England and NHS Improvement has provided some examples of quality-based measures to be included in blended payments, we still have limited information about what outcomes-based measures might look like in practice. NHS England and NHS Improvement has also suggested that outcomes-based measures, focusing on specific population needs, will be locally determined.

To achieve this ultimate focus on population health outcomes and pathway improvement, it will be necessary for the payment system to evolve further to support, reflect and encourage greater integration with primary care, social care, and acute, community and mental health services. But changes to the payment system alone will not be the primary driver behind effective, system-led healthcare transformation: they should accompany other reforms. It therefore is important that NHS England and NHS Improvement has recognised that moving away from PbR should not be an end in itself.

While the aim is to deliver enhanced system working and to reward collaboration within local health systems, the success of the new blended payment models will ultimately depend on the maturity of providers’ sustainability and transformation partnership or integrated care system, and of relationships between providers and commissioners. NHS England and NHS Improvement want systems to adopt the blended model, but enhanced system working will not only come about through contractual relationships between providers and commissioners with different payment models. Indeed, contractual disputes may still occur unless there is strong collaboration when determining either the fixed or variable elements.

 

While the aim is to deliver enhanced system working and to reward collaboration within local health systems, the success of the new blended payment models will ultimately depend on the maturity of providers’ sustainability and transformation partnership or integrated care system, and of relationships between providers and commissioners.

Patrick Garratt    Policy Officer

 


Financial incentives can have a role to play in influencing activity, but it is unclear how effectively they can drive improvement of health outcomes across a whole population. In NHS England and NHS Improvement’s proposals, there are very few examples of which outcomes-based measures might be used, how achievable they are, or how they precisely work to support integration.

For the moment, there is no clear payment framework leading to more integrated care, and there are currently more questions than there are answers about how the blended model will help providers deliver on the long term plan. It is therefore important for NHS England and NHS Improvement to support providers and their partners to implement new payment systems, and where possible, that trusts use the blended model to collaborate further with system partners.

About the author

Patrick Garratt profile picture

Patrick Garratt
Policy Officer

Read more

Article tags:

We use cookies to ensure you have the best possible experience on our website. By continuing we’ll assume that you are happy to receive them. Read our updated privacy and cookie policy. Close