New payment approaches for mental health services


Support for commissioners and providers of mental healthcare to shift to new payment approaches.

Context behind the new payment approaches

In a move towards parity of esteem between all health services we and NHS England are supporting providers and commissioners of adult and older people mental health services to implement more transparent payment approaches.

As part of our consultation on the 2017/18 and 2018/19 national tariff we’re requiring mental health providers and commissioners to adopt transparent and robust payment approaches linked to outcomes. This page sets out the different approaches that providers and commissioners can adopt.

Which new payment approach is the right one for you?

The two new payment options that providers and commissioners can choose between are a capitated or an episode of treatment (year-of-care) payment approach, both of which must include a component linked to achieving agreed quality and outcome measures.


A capitated payment approach is the payment of a provider or group of providers to cover a range of care for a population across a number of different care settings. Payments are made on a per person basis and are risk adjusted to reflect the different needs of people with mental ill health. 

Detailed guidance on developing a capitated payment approach for mental health PDF, 2.0 MB

Step-by-step guidance on developing a capitated payment approach for mental health.


An episodic payment approach is the payment of an agreed price for all the healthcare provided to a patient during an agreed time period – the episode. The price paid depends on the mental health condition a person is being treated for and any co-morbidities they may have. 

Detailed guidance on developing an episodic payment approach for mental health PDF, 1.0 MB

Step-by-step guidance on developing an episodic payment approach for mental health.

Linking payment to outcomes: developing quality and outcome measures

The Five Year Forward View for Mental Health outlined the need for services to be able to demonstrate how they deliver evidence-based, integrated mental healthcare with services assessed on the quality and outcomes that are valued by the people who use them. It recommends national and local outcomes measures should be used as part of the payment system.

Linking quality and outcome measures to payment for mental health PDF, 444.2 KB

Technical guidance on how providers and commissioners can link locally agreed quality and outcome measures to payment.

Improving Access to Psychological Therapies (IAPT)

For 2017/19, we have changed the local pricing rules to require commissioners and providers of IAPT services to adopt an outcomes-based payment approach from April 2018, with an expectation to shadow test this in 2017.

Developing an outcomes-based payment approach for IAPT services PDF, 832.1 KB

This guidance supports providers and commissioners to develop and implement an outcomes-based payment approach for IAPT services that is consistent with these rules.

What are the benefits to the two payment approaches?

The objective of the payment approaches

More transparent payment arrangements support the delivery of holistic, integrated and evidence-based care for the biological, psychological and social issues related to people’s mental health, in the least restrictive setting as close to home as possible, and recognise the delivery of the outcomes that matter to those who use services.

How the effective use of data, information and evidence can help you to meet these objectives

By working collaboratively providers and commissioners can ensure that measures are in place to use data and information to: 

  • identify the healthcare needs of the local population
  • consider service design and resource use to meet those needs in the most efficient and effective way
  • provide clarity on accountability for service delivery, quality of care and potential investment needs
  • better facilitate and enable constructive, evidence-based discussions between providers and commissioners
  • develop robust local prices
  • enable continual improvement to care
Processes should also feed back data and information to frontline staff to support care of individuals, and inform continuous improvement in service design.

Meeting these objectives will help establish parity of esteem between mental, physical and community healthcare by 2020. Changes to the payment system are essential for meeting the objectives set out for mental health in the Five Year Forward View.

What is the background to the changes?

The Five Year Forward View for mental health sets out objectives to transform the way in which health and care is organised and delivered which includes an increased focus on person-centred and co-ordinated care for patients. 

With increasing pressures on mental health services, providers and commissioners must introduce transparent payment approaches that support timely access to NICE-concordant care. This results in better patient outcomes, and can lead to long-term benefits for the local health economy, as patients have a more sustained recovery with fewer readmissions. Commissioners and providers also need to meet the new access and waits standards, as they are introduced.

In October 2015, we consulted on the capitated and episodic payments options and the responses from providers and commissioners' helped us to develop these approaches. 

Care clusters

Adult mental health care clusters continue to be an important tool locally and nationally for understanding need and improving services. In the mental health payment changes introduced, we’ve recognised the importance of care clusters:

  • in local pricing rules as a source of activity and outcomes data - we continue to require providers to collect and report on the basis of care clusters for the 2017/19 national tariff
  • in both capitated and episodic payment approaches - we have outlined in guidance examples of how the sector can use care clusters to inform implementation of new payment approaches

We recognise that further work may be needed to develop care clusters further. NHS England will undertake work with the commissioners, providers and clinicians in 2017 to strengthen the clinical relevance of clusters in relation to clinical care pathways. 

We are also working together with NHS England and other system leaders to develop a data strategy for mental health, of which care cluster data will be a part.

Related content

These additional resources will also help providers and commissioners to move towards more transparent payment systems for mental health services.

What are capitated payments?

An animation explaining capitated payments and how they differ from some of the current payment approaches in place in the NHS in England.

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