The future NHS financial regime in England: a discussion paper

Sarah Day

24 June 2020

The Covid-19 pandemic has fundamentally changed the way in which the NHS operates and, for the first time since 1948, the service is presented with a chance to redesign the national health and care system from an almost blank sheet of paper. This opportunity must not be overlooked, and this is why the HFMA is asking for your views in this discussion paper about what the future NHS financial regime should look like in England.

In 2018, the HFMA worked with PwC to examine the way that the money flows around the NHS, and the behaviour that this enables or blocks.

‘Together we have concluded that the current financial system needs to be overhauled if it is to support and enhance the journey that the NHS is on. Funding is currently too short term. It does not support the integration of health and care locally, nor does it drive a sharp focus on outcomes. There are limited incentives for providers to change their behaviour. There is an overwhelming consensus that the financial flows need to be redesigned if the aim of integrated care is to be achieved.

The way the NHS financial system currently works is simply not aligned with place or outcome-based care. Today the care system and the way that money moves around it is in a messy no-man’s land with a chaotic and bewildering array of financial mechanisms in place.’ 

The NHS must not be allowed to slip back to how it was before Covid-19 without taking this opportunity to consider where beneficial changes could be made, learning from good practice across the country and seeking out ideas and innovations to meet the challenges of a 21st century health system. This must be done in the context of delivering a financially, and environmentally, sustainable health and care system. 

Across the health and care system, new and innovative practice has emerged as organisations meet the challenge of a completely new disease. The United Kingdom is not alone in seeing a rapid and significant shift to digital consultations since the start of the pandemic, for example, similar stories are being shared worldwide and efforts to combat Covid-19 are being developed across the globe. This willingness to change must be capitalised on; health services, staff and patients are realising that things do not have to stay the same.

Closer to home, the NHS financial regime has been substantially changed for the duration of the pandemic, reflecting the government’s commitment that ‘whatever extra resources our NHS needs to cope with coronavirus – it will get’ . But what will the NHS financial regime look like in England when it returns to business as usual, whatever business as usual may look like after the pandemic?

The pre Covid-19 financial regime does not support the way in which organisations need to work now in order to combat the virus and prepare for future epidemics and pandemics, nor does it reflect the activity levels or demand that are anticipated.
This paper sets out the areas where the HFMA believes that beneficial changes can be made to develop a financial regime suitable for a post-Covid NHS. It covers contracting arrangements; system working; the NHS long term plan; the capital regime; financial governance and business planning; procurement; workforce; and the NHS finance function.
The future NHS financial regime in England: a discussion paper

June 2020 (PDF 660KB)

Additional documents

NHS financial management and sustainability

May 2020 (PDF 216KB)

Capital expenditure in the NHS

May 2020 (PDF 245KB)

An introduction to aligned incentive contracts

June 2020 (PDF 234KB)

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