An aligned payment and incentive (API) system was introduced in April, covering the vast majority of services commissioned from NHS providers. Under the new system, integrated care boards (or NHS England for many specialised services) agree a fixed payment with providers to deliver activity and objectives included within system-wide plans. This fixed payment includes funding to cover a target of 104% by value of 2019/20 elective activity.
In addition, a variable element further supports the elective recovery programme and adjusts the fixed payment depending on under- or over-performance compared with the 104% threshold.
There are further adjustments related to quality. First, commissioning bodies should include 1.25% of the value of each contract in the fixed payment based on delivery of agreed CQUIN (commissioning for quality and innovation) metrics. If providers fail to deliver the target, funding is withdrawn as part of the variable payment.
Similarly, the fixed payment should include funding to reflect the expected performance under the best practice tariff (BPT) scheme. If the volume of activity meeting BPT criteria differs from the expectation, then the fixed payment is reduced or increased based on the difference between the relevant BPT and the published unit prices.
Rob Unsworth, NHS England head of payment policy, said the service had largely welcomed the move to using a fixed payment to cover the majority of funding for providers.
With the fixed payment intended to reflect a realistic local cost of planned services, he said, the general view was that the system facilitated a population health approach and put the money into the right places.
However, he accepted there had been a more mixed response to the variable element.
This has been evident in the various engagement sessions the national body has undertaken around the new payment system. But it is also the focus for 30 formal variation requests from integrated care systems, predecessor clinical commissioning groups or NHS England specialised commissioning teams.
Some of these variation requests were looking to disapply API altogether, with systems that had already adopted local risk share arrangements seeing this as a backwards step towards a payment by results-style approach.
However, the bulk of the requests relate to the quality-related aspects of the variable payment.
Some argue that the value of the CQUIN payment (which reduced from 2.5% to 1.25% for 2019/20) is low, with the costs of compliance outstripping the rewards. Others argue that local quality priorities differ from those covered by the national CQUIN scheme.
There are similar arguments against the use of the 21 BPTs, which link enhanced payments to best practice care processes and are only relevant to acute providers. There is also a recognition that providers need to set up local data flows to monitor and report on achievement of BPTs.
Systems submitting variation requests would prefer to roll previous CQUIN and BPT payments into the fixed element and simply ignore any in-year transactions.
Mr Unsworth said NHS England had ‘not quite got it right yet’ on CQUIN and BPTs. ‘But we retain the view that some link between payment and quality indicators that we think are valuable nationally is important, at least in the initial stages of the API model,’ he said.
In part, this helps to mitigate any concern that ‘block’ contracts could lead to a reduction in quality as systems look to stay within budget.
In future, this might lead to a more detailed process around agreeing the level of BPT payment included in the fixed element, but dropping the in-year transactions. This could fit well with the planning cycle, with systems agreeing up front the investment and steps needed to deliver on prescribed quality goals.
The assessment of variation requests was ongoing as Healthcare Finance went to press, but is likely to be brought to a head after the summer, particularly as elective recovery fund adjustments are expected to start flowing from the third quarter of the year.
NHS England is continuing to engage on its proposals for the payment system in future years. Although formal consultation will take place in the autumn, the national body has already suggested that the payment scheme rules could be set for two years rather than one. There is an expectation that the variable element related to elective activity would continue to operate in a similar way.
However, NHS England is considering a possible move to using a 100% variable rate, meaning activity over or under whatever threshold is set would be paid or withdrawn at 100% of national unit prices, rather than the current 75% rate.
It is also considering the implications of removing the £30m threshold for contracts that cross system boundaries. While API applies to all arrangements between NHS organisations within a system, only system-to-system contracts above the £30m value are currently subject to API rules.
The CQUIN (commissioning for quality and innovation) scheme was reinstated this year having been suspended for two years during the pandemic. The scheme aims to provide a financial incentive for providers to deliver quality improvement goals – with achievement of the targets collectively worth 1.25% of the fixed element of contract value under the aligned payment and incentive scheme.
Different metrics have been published for services commissioned by integrated care boards and NHS England commissioned specialised services. Commissioners and providers are recommended to include no more than five indicators within a CQUIN scheme, with the financial value of each indicator equally weighted.
HFMA members, associates and friends come together again for the biggest and most prestigious HFMA event of the NHS finance calendar.
We will share with you the resources available to help you in your role, where you can find them and how they all fit together.