Contracting and Payment Systems
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Contracting and Payment Systems

The plethora of contractual forms and payment systems operating in the NHS and within social care, is often cited as one of the key barriers to achieving true integration, even just within the NHS itself. The fragmentation of NHS commissioning brought about by the Health and Social Care Act 2012 has contributed to this.

Health and social care services are subject to a number of regulatory requirements that must be considered when contracting for such services. There are also a number of contractual terms and conditions that must be included when contracting for certain services. For example, the NHS Standard Contract is mandated for commissioning certain health care services. This only allows for one provider to hold the contract, which some argue has contributed to an approach where providers operate in silos and are not incentivised to collaborate and provide patient-focused care. There is also a different range of provisions that must be included in primary care contracts to reflect regulatory requirements.

Talk of the 'spectrum' of integration and the different contractual models available to achieve it is nothing new. Lead provider models are well known to the NHS, where one provider holds the contract and is responsible for managing the supply chain of sub-contractors. Most recently alliance contracting has been considered a potential option to enable a more collaborative approach to achieving shared outcomes amongst a community of providers. Risk sharing in a 'true' alliance arrangement requires open and transparent relationships between the provider community and as between that community and their commissioners. Trust is key.

 Any risk sharing arrangements must tread a potentially precarious path between the differing payment and incentive systems currently in place. Within health and social care services, there are a number of payment and contracting systems in existence, many driving in different directions. For example:


 Service type  Payment system  Features
Acute care National Tariff
  • must be used as a default for certain services in the acute sector
  • rewards activity in routine acute care
General medical services GMS Statement of Financial Entitlements 
  • capitated global sum payment
  • based primarily on a price per patient on a patient list
Mental health and community services Block payments under NHS Standard Contract
  • block payments for a specified service
  • margin for performance based payments
Specialised Services  National Tariff
  • must be used as a default for specialised services
Social care  Local arrangements
  • block payments

It is possible to navigate around these systems, where such systems are not flexible enough to achieve the outcome required for successful integration. This can be achieved through governance arrangements which 'overlay' existing contracting and payment arrangements. For example, an alliance agreement can be put in place between all providers (and potentially relevant commissioners), which acknowledges and works within existing contractual and payment systems but brings together the providers to achieve a set of common goals within a common service specification. This requires expertise and strong local leadership, and many will look to Devo-Manc as a test case for whether such an approach can be successful. Increasingly, we are seeing experimentation around payment systems, for example, trialling 'year-of-care' tariffs and capitated budgets across a provider group or Accountable Care Organisation.

Integrated commissioning is being driven by initiatives such as the Better Care Fund which has mandated the pooling of budgets between CCGs and local authorities, and primary care co-commissioning where a significant number of CCGs are now commissioning primary medical care on behalf of, or at least jointly with, NHS England. The logical next step would be to extend co-commissioning to cover all primary care services, further bolstering the integration of commissioning and provision at a local level. A key challenge will be balancing this with the financial constraints all commissioners are under, not least local authorities which face significant budgetary pressures which will inevitably impact on their appetite for risk sharing.