An opportunity to reset the financial regime

by Emma Knowles

24 June 2020


The NHS has already made fundamental changes to the way it delivers services in response to the Covid-19 pandemic. These have not only been in frontline care – for example increasing capacity, establishing patient pathways and the rapid introduction of virtual consultations – but in various financing and governance arrangements that underpin the service. There is now a chance to establish a new financial regime that builds on these arrangements and helps the NHS meet its future objectives.

The replacement of the normal contractual arrangements with temporary block contracts and top-up funding to meet providers’ exceptional Covid-related costs was a pragmatic step. Simplified capital approval processes and streamlined governance arrangements have also supported rapid decision making and helped ensure that finance was not an obstacle to the frontline efforts.

But while there is recognition that the temporary measures cannot stay in place for the long-term, there is little appetite to return to the pre-Covid financial regime. This point has been underlined in a survey of finance directors to inform an HFMA discussion paper – The future NHS financial regime in England – published this week.

While the HFMA believes the current block contract arrangements should stay in place for the rest of 2020/21, there was broad support from the polled finance directors for some form of block or aligned incentive contracts to be adopted beyond that.

Aligned incentive contracts are already in place in some areas and definitions vary – as our recent briefing An introduction to aligned incentive contracts pointed out. However, they share a common approach in agreeing population health aims and underpinning this with a fixed payment giving both sides financial certainty. In some cases, this is underpinned by formal risk sharing arrangements.

We now want to hear a broader range of views on this – you can let us know what you think on this and other issues by responding to this survey.

The NHS was already moving in this direction – away from activity-based contracts and towards something that looks more like population health budgets. The blended payments approach introduced last year as part of the national tariff is arguably compatible with aligned incentives. However, there is an increasing belief that we can move faster and adopt a payment system that supports the greater collaboration we have seen in recent months and helps to drive greater system working.

Changes made to governance arrangements are also worth closer scrutiny. Evidence suggests that good financial governance has been maintained throughout the pandemic to date, despite decisions having to be taken quickly to support agile responses to daily developments. Checks and balances are still required, but can we learn from some of the temporary arrangements that have been in place? Can we develop slicker systems that still ensure the proper management of public funds without adding unnecessary layers of bureaucracy and delay?

Again we are keen to hear from you – particularly about any changes to governance procedures that you have already made permanent.

The HFMA and the finance community are united in wanting to see the moves towards system working accelerated. The last few months have surely underlined the power of coming together to tackle common challenges. This has to be the way forward as we look to develop pathways that best meet the needs of patients and to address some of the wider determinants of health and health inequalities between different parts of our population.

The new processes and systems won’t deliver this on their own. Whatever payment system is put in place won’t deliver results unless there is the right level of funding in the first place. And with an increasing recognition that health and social care have to be seen as part of the same system, the underfunding of social care needs to be addressed.

The pandemic has provided an opportunity to reset our financial regime – or to accelerate changes we were already moving towards. It is an opportunity that must not be missed.