4. Has the risk of perverse incentives been mitigated?

As part of its plans to introduce league tables, the government has also signalled its intention to link organisational performance to various rewards and penalties. While the goal is to further motivate improvement, if these measures are not carefully designed, they could have unintended consequences.

DHSC and NHSE should actively monitor the impact of league tables and any associated incentives for unintended consequences, including effects on system collaboration, quality and safety, recruitment to 'challenged' organisations and staff wellbeing and morale. To support public transparency and accountability, DHSC and NHSE should publish their findings on a regular basis. They could do so, for example, by providing an update to the NHSE Board every six months.  

Tunnel vision

League tables can lead to 'measurement fixation', whereby organisations focus narrowly on what is measured, neglecting other important but unmeasured aspects of care. This risk is heightened this year, as the Oversight Framework focuses on a smaller set of short-term, organisational-level metrics. While this should support financial and operational recovery in the short term, in the longer-term healthcare leaders should also be incentivised to focus on delivering the three shifts set out in the 10-year health plan.

The Francis Inquiry serves as a reminder of how performance pressure, if misapplied, can compromise quality and safety. In the Mid-Staffordshire case, the board's pursuit of foundation trust status - which was contingent on eliminating its financial deficit - led to deep staffing cuts and years of unsafe care. The balance between finances and quality must be front of mind as the government develops its reinvigorated foundation trust regime, especially with the eventual prize being the ability to hold outcomes-focused contracts for a defined population as an integrated health organisation.

Closed cultures and reduced transparency

When pressure to meet performance targets creates a high-stress environment for staff, it risks altering behaviours or reporting to improve the appearance of performance without actually improving patient outcomes or experience. For instance, as a response to a five-minute emergency waiting time target back in the 1990s, some hospitals employed 'hello nurses' whose role was to greet patients within the first five minutes, simply to tick this box.

Another example we have heard about is that using 'distance from plan' metrics rather than absolute performance measures can unintentionally encourage trusts to submit less ambitious plans. By setting lower targets, trusts may increase their chances of appearing successful, even if overall performance is more modest.

Undermining system collaboration

There is also a risk that a league tabling approach, which ranks organisations against one another, may discourage collaborative working across trusts. When performance is judged competitively, organisations may be less willing to take on stretch targets or additional responsibilities that carry higher risk, even if doing so benefits the wider system.

This risk has been described in relation to the financial override (see section 1), but we have also heard examples from the past 18 months where trusts have supported neighbouring organisations by 'load balancing' for issues such as elective care pressures - essentially taking on extra patients to help others meet targets. While this reflects strong system collaboration, it has negatively impacted the supporting trust's league table position. This creates a risk that such collaborative behaviour will be disincentivised in the future, undermining efforts to work as a unified system for the greater good. 

Risk aversion

If performance linked penalties - such as tying executive pay to performance - are too severe, they can make organisations more risk averse. This can discourage innovation and openness about challenges, undermining the culture of continuous learning and improvement that is essential for patient safety.

There is also a risk that these measures will deter top leadership talent from joining the most challenged organisations. If executives know their pay could be capped or reduced due to systemic issues beyond their control, they may avoid roles in the trusts that need the strongest leadership the most. This would be perverse, as these organisations require experienced and capable leaders to drive improvement.