Payment systems: let's talk about the detail

For a service that has been talking about the move to capitation budgets for years, we seem to have done precious little about it.

It has been more than six years since a report for then foundation trust regulator Monitor – An evaluation of the reimbursement system for NHS-funded care – concluded that payment by results was not fit for purpose. There has been some progress on the back of some of the findings.

For example, it found that the information underpinning tariff and other reimbursement mechanisms was flawed. NHS Improvement’s Costing Transformation Programme – getting all NHS providers in England to cost (and submit costs) at the patient level – is a direct response to this finding.

But the report also highlighted the fact that reimbursement mechanisms currently operate within the administrative boundaries of settings of care (acute, community etc) rather than across them. ‘This can sometimes hamper efforts to integrate or shift services.’

This view of payment by results or national tariff is now widely held. And as the integration agenda has really taken off with sustainability and transformation partnerships and integrated care systems, there is a growing consensus that capitation budgets are the way forward.

This might involve giving an integrated care partnership or a lead provider a budget covering the whole population served. Initially set on the basis of historical spend on the services involved, the idea, in theory at least, is that this would move towards being based on an agreed spend-per-capita rate.

But we have seen little central work being undertaken on the detail of how such budgets would work. Instead, the approach has been to allow local health economies to put in place their own arrangements – informing NHS Improvement where they are stepping away from the tariff and national pricing rules – to support existing services or new ways of working.

In some ways, this supports the ‘no one size fits all’ approach to new ways of working, championed in the Five-year forward view. Health bodies have had some support. There was early national work on different payment approaches such as a three-part payment for urgent and emergency care, for example, and NHS England has produced some guidance on whole-population budgets.

But in general the pace has been slow and the profile of work has been low – there has been nothing like the focus given to the introduction of the tariff, for example.

Payment systems are not the key driver of new ways of working – and some people would dispute the efficacy of financial incentives in the health service – but they should underpin these service models and support the transformation of services and then sustain them.

More central work in this area – or supporting the sharing of local work – makes sense. A report from The Strategy Unit makes a great contribution to the debate. It looks specifically at risk and reward mechanisms that could sit alongside capitation budgets, drawing on US experience with similar arrangements.

It explores the details of how such schemes might work. They are likely to be complex (and necessarily so), and we should at least be discussing how this fits with a general feeling that the current tariff system needs to be simplified.  We surely need to see more of this type of work happening, with the finance function taking the lead.

The HFMA’s work with PwC – Making money work in the health and care system – also stressed the importance of reworking financial flows to maximise the value of the new funding promised by government.

We need a bigger debate about the future of payment systems – including the relative merits of using complex models or simpler approaches – and this needs to be at a detailed level of how they would work in practice. We need to evaluate what has been done locally – there are some good examples – and share the learning. We don’t need to undertake all the same work from scratch in every health economy.

The sooner integrated care models are established, the better for the NHS. And we should not wait for these new models to be in place before getting serious about how we need to change payment approaches.