Integrated care payment design

The NHS Long Term Plan outlines how closer working across health and care organisations could help the NHS in England. We are working to develop a payment system which better supports integrated care.

The need for change

Currently, health and care services use a mixture of payment approaches, including block contracts, payment by activity and capitation. This mix of approaches can create confusion and make it harder to understand how resources can be used to create the most value for patients across care settings. Applying inconsistent payment approaches across organisations providing different types of care can also create conflicting incentives and frustrate efforts to integrate services.

Integrated care systems everywhere

The NHS Long Term Plan outlines ambitions for the NHS in England to provide ‘more joined-up and coordinated care’. 

One option for delivering service integration is through local collaborative arrangements between different providers within an Integrated Care System (ICS). ICSs are expected to be in place nationally by April 2021, bringing together local organisations to integrate primary and specialist care, physical and mental health services, and health with social care.

Another option for service integration is to give one lead provider responsibility for providing services for a population. The Integrated Care Provider (ICP) contract, being made available for use from 2019, will enable a population-based approach to service delivery. Payment will be via an integrated budget that enables more flexible deployment of resources to best meet a population’s needs and encourages a stronger focus on overall health, rather than simply paying for tightly defined activities.

Integrated care systems

An Integrated Care System (ICS) brings together local organisations to redesign care and improve population health, creating shared leadership and action. ICSs have grown out of Sustainability and Transformation Partnerships (STPs), working as locally integrated health and care systems. They are expected to collectively plan service delivery, manage financial resources and take responsibility for population health. 

The introduction of ICSs is being supported by the development of population-based funding approaches. These aim to make it easier to redesign care across providers, support the move to more preventive and anticipatory care models, and reduce transaction costs.

Integrated care providers

The ICP contract is not yet published but it will allow for a single integrated organisation to take contractual responsibility for providing services to a defined population. Commissioners would use a pooled budget to pay for the entire bundle of in-scope services as a package, rather than on a service-by-service basis. 

This pooled budget (Whole Population Budget – WPB) will represent the total amount available for payment to the ICP, for all services in-scope for the whole population. From this, the Whole Population Annual Payment (WPAP) forms the majority of the funding available to the ICP under the contract. 

The main stages in developing a WPB are:

  • calculating the WPB baseline
  • estimating WPB values for future years
  • converting estimated WPB values to contract values for each year in a contract.

Other elements which make up the integrated budget include those available for payment on an activity-delivered basis (eg vaccinations and immunisations where these are within the ICP service scope), payment under national incentive schemes (CQUIN/QOF) and any local incentive schemes.

Integrated care, the national tariff and blended payment

The national tariff is a set of prices and rules to help providers and commissioners of NHS care provide best value to their patients. 

For 2019/20, the national tariff introduced blended payment for emergency care and adult mental health services. These blended payments comprise a fixed amount (linked to expected levels of activity) and a volume-related element that reflects the actual level of activity. The mental health blended payment also includes an outcome-related element and an optional risk share.

For more details, see the blended payment guidance documents published alongside the tariff.

Blended payment and risk sharing

Blended payment has the potential to support more effective resource and capacity planning. It can focus commissioners and providers on making the most effective and efficient use of resources to improve quality of care and health outcomes, encouraging system-wide action to reduce growth in activity where appropriate. A blended payment can comprise of an intelligent fixed payment, based on forward-looking demand forecasts and best available cost data, and at least one of the following:

  • A variable payment, setting the price for each unit of activity, either at full cost or an agreed marginal cost.
  • A risk sharing element, either activity or financial based.
  • An outcomes-based payment.

The choice of these elements should consider the objectives of the blended payment and a pragmatic judgement about feasibility.

Risk sharing mechanisms have the potential to encourage partners to work collaboratively across organisational boundaries and to collectively manage risk across the system. Through risk sharing, healthcare organisations can make better use of the available resources to achieve their main shared goal: providing better care for the populations they serve.

Our series of webinars introduces the concept of risk sharing and discusses how it might be applied in practice:

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