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New contracting models and new opportunities

Published On: 15 July 2016

Research by NHS Partners Network shows a dramatic increase in the commissioning of block contracts in the NHS – reported at a value of £700m in two years – which has seen NHS providers increase their share of block contract work by 40%. What does this means for independent sector providers and what are the implications for patient choice?

Integrated care has been the buzzword in the NHS for a number of years now and, whilst this means different things to different people, it is broadly agreed that it is the integration of health and social care services to provide patients with a more seamless service. However, the integration of services between providers has never sat very comfortably next to requirements to offer patient choice. It is arguable that integrating care may well lead to a decrease in patient choice, as more providers collaborate to offer one integrated pathway for particular services, rather than multiple options for patients to choose from.

Block contracts give commissioners certainty over what they are paying, and to a greater or lesser degree, what they will get in return. In these straitened times, it is no surprise that they are increasingly preferred by NHS commissioners over activity based contracts. The increase in NHS providers’ market share for these block contracts is substantial, but whilst this might seem like an immediate threat to independent sector providers, there are some much larger long term opportunities on the horizon.

What are the changes?

Following the NHS Five Year Forward View, commissioning health services is changing. From a short term silo-based contracting system, where NHS commissioners would contract with individual providers for specific services (e.g. acute, community, mental health, primary care) to longer-term outcomes based contracts, where groups of providers collaborate to provide all of the health (and potentially social care) services for a population.

From a contracting perspective, commissioners are moving away from Payment by Results (or National Tariff as it is now known), and towards a capitated budget for the healthcare needs of that population.

This would be commissioned from a provider, or groups of providers, under a long term outcomes based contract. A sizeable chunk of income under the contract will be based on meeting specified measurable outcomes, which will in turn ensure that providers are incentivised to deliver quality services. The vision is for the scope of these services to span acute, community, mental health, primary and social care services.

With all of those providers collaborating and sharing risk and reward under this arrangement, there is an incentive for the providers to deliver care in the primary and community care setting, rather than the more expensive acute setting. The theory is that this will foster a more proactive preventive approach to managing the health needs of a population, and ultimately save the system money over a period of time, and most importantly provide better outcomes for patients. This type of arrangement is dubbed an ‘accountable care system’.

Whilst the clinical model in an accountable care system will be of significant importance (and will need to be iterated), there are many other aspects where collaboration may have benefits. An obvious area relates to the integration of IT systems and shared patient records. Another would be the better use of estates by providers and factoring in the likely change in demand from different settings, based on the implementation of the clinical model over time.

What are the opportunities for independent sector providers?

Such a radical shift demands a range of skills, and this brings with it opportunities for independent sector providers that are positioned to help deliver this change. This could be as outright service providers with the ability to flex capacity. It could be as a strategic partner with experience of managing change, or indeed experience from health systems in other countries that operate similar systems for delivering care. There will also be a great deal of importance attached to data analytics, not only for risk stratification, but also in terms of measuring the achievement of outcomes.

Transformation requires significant upfront investment that may prove difficult for the NHS to provide, and on that basis, there are likely to be opportunities (and a real need) for investment in accountable care systems.

To achieve the aims proposed in the NHS Five Year Forward View, there are significant challenges for the health system to overcome, and the skills within the independent sector will certainly have an important role to play.

This article was published by LaingBuisson's Healthcare Market News publication in July 2016, for more information please contact Hamza Drabu on +44(0)20 7894 6411 or email hdrabu@dacbeachcroft.com.

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