Payment system: focused improvement not overhaul

The report – Towards an effective NHS payment system – identifies a broad consensus that a ‘well-designed [payment] system can support positive change for the NHS’. 

It said the design and implementation of certain aspects of the current system – broadly a mix of activity-based payments and block contracts supplemented by pay-for-performance schemes – lead to inefficiency and can adversely affect patient care in unintended ways. But other aspects work well. ‘Focused improvements to some areas may be sufficient and may be in the best interests of provider stability,’ it concluded. 

It criticised the current payment system for having too many objectives and called on NHS Improvement and NHS England to set a clear primary purpose for any new approach.

The need for a clear purpose was one of eight principles identified for a future payment system. The other seven included: 

• Realistic expectations about impact
• National consistency with local flexibility
• Appropriate, aligned incentives
• High-quality data
• Balance between complexity of design and ease of use
• Independent oversight and support
• Time to embed and evaluate systems.

The report acknowledged the need for new payment approaches, such as whole population budgets, to support new models of care and incentivise prevention and early intervention. 

It underlined that the payment system did not need to be identical across all settings. However, different approaches all needed to support the same purpose, with complementary incentives.

Phillippa Hentsch, head of analysis at NHS Providers, said the payment system had been used to close the financial gap facing the sector ‘forcing prices down while provider costs continue to increase’. 

She added that providers wanted the national level to ‘go back to basics, simplifying and clarifying the ask of the sector’.