Payment models: bringing budgets together to develop coordinated care
New payment models to support integrated care
Traditionally, the NHS and local government have paid for delivery of services rather than outcomes. Commissioning care in this way has contributed to a health and care system in which services are fragmented and service users experience gaps or delays in care.
Developing person-centred, coordinated care, in which services are designed to meet the holistic needs of people, requires new models of care and new ways of financing, commissioning and paying for services.
Innovative finance, commissioning and payment systems are some of many levers that can be employed to integrate health and care. Creating solid foundations, based around strong relationships and the pooling of budgets, is the first step in enabling the development of more sophisticated payment methods in the future.
For a decade now, there have been a variety of different policy drivers trying to provide the framework for integrated care. The fact these have differed tactically over the decade does not signify the fact that governments cannot ‘make up their mind’– rather it designates the strategic importance of the agenda. Every major health care system in the world is struggling to better integrate health and social care. None are finding it simple and all will be working on it as an issue for many years to come.Paul Corrigan CBE, National Care Integration Adviser and Non-executive Director of the Care Quality Commission
Designing contracts to support coordinated models of care
True integrated care radically shifts the focus for commissioners from the traditional approach of contracting separate providers for episodic activity, towards achieving a pathway which leads to outcomes for the individual. In the traditional contracting model, each provider is accountable for the episodic care they provide. No one has accountability for, or visibility of, the whole cycle of care. To successfully provide a coordinated pathway of person-centred health and social care, the accountability for delivering outcomes and the drive to reduce costs need to be joined up, which will, in turn, require existing contracting models to change. This section explores the development of different coordinated models of care.
Some areas of the UK have developed a model of joint commissioning for health and social care provision, while others have developed a joint accountability agreement between existing providers and commissioners to support coordinated provision.
Some commissioners create change through novel contracting models and commissioning tools, which are used by local authority and NHS commissioners to drive transformational and sustainable service integration. Others bring together all the main providers and commissioning organisations in the system to share experiences, learn, and jointly develop and implement better care for individuals.
Depending on where an organisation currently stands on the journey to integrated commissioning, it may need to take different steps. Example case studies show that it takes several years for programmes to deliver the intended transformation. Contractual vehicles do not replace the need for continuing to work at cementing local relationships and ensuring there are strong foundations on which to develop integrated commissioning (see Building trust as a key foundation).
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As commissioners of health care at both a national and local level, we want a commissioning architecture that gives people the best possible opportunity to achieve the outcomes and commissioning models that align incentives for those people that provide care with the outcomes that matter most to the population we serve.Ros Roughton, Director of Transformation, Department of Health and Social Care, former National Director, NHS England
Evaluating the options against different payment models
There are three main types of payment model that can help incentivise integrated working across health and social care systems:
- block contracts
- bundled payments
- stratified population capitation
Block contract model Open
This funding arrangement enables commissioners to put in place block contracts with one or more providers to provide a service (or group of services) for a set period of time. The payment model encourages provider productivity in meeting service outcomes for the lowest cost. In this model, commissioners transfer the risk to providers if more people require services than planned. Block contracts are sometimes viewed as a crude payment mechanism, but can be an appropriate starting point to enable honest conversations about the scope of the joint health and social care activity covered by Better Care Fund and sustainability and transformation plan agreements.
- If managed correctly, providers have an incentive to manage demand for their services and improve productivity.
- The contract enables commissioners to purchase joint health and care provision.
- Providers can be innovative in designing and delivering services to meet required outcomes.
- Providers may respond to the incentive by reducing the availability of the service or by attempting to shift demand to providers of other services. Careful management of outcomes is required to ensure the incentives function appropriately.
- Historically, establishing block contracts has not created or encouraged increased transparency around costs and activities.
- The value of the contract may not cover the costs of care, due to changes in numbers of users over time, or changes in recommended treatments.
Bundled payment model Open
A bundled payment (or pathway payment) is a single payment for a group of services relating to a specific treatment or condition. This can involve multiple providers in multiple settings. A provider, generally operating under a ‘prime provider’ or ‘accountable provider’ model, is paid a fixed fee for a defined bundle of services surrounding an episode of care. An episode of care is a complete pathway for a particular condition, usually including all pre- and post-care as well as a provision for complications. An example of a bundled payment for a hip or knee replacement would include any consultations preceding the operation, the procedure itself, rehabilitation, and any required readmissions.
- Bundled payments are usually based around one condition or treatment, which discourages unnecessary care, encourages coordination across a particular pathway by the accountable provider, and can improve quality of provision.
- While the model can help to control costs, it does not incentivise prevention to reduce overall volume if payment is for activity rather than outcomes. There have been instances in which providers have been thought to deliberately extend hospital care within this model.
- To work effectively, a bundled payment model requires an extended data system; it can often be difficult to link records across providers.
Stratified population capitation model Open
Different areas of the UK are at different stages of this journey. More areas use capitation payment models across health and social care. For example, Population Level Commissioning for the Future in Kent , and the Symphony Project in South Somerset. A capitation payment model offers providers a fixed price paid per individual over a defined period of time for a range of services. This encourages providers to meet care needs in the most efficient cost settings and to coordinate services in order to minimise unnecessary duplication.
- The model encourages coordinated, preventative care that keeps people well at home and avoids unnecessary high-cost care.
- The model encourages commissioners to segment their populations and ‘risk stratify’ them, developing a better understanding of need in the area. This can, in turn, help to ensure that services are better planned and delivered. Further information about this can be found in Sharing risks and benefits of integrated care: quick guide.
- Providers have the incentive and flexibility to take innovative approaches and allocate their resources; they are incentivised to achieve the greatest efficiencies so they can share in the savings realised.
- The model requires significant capabilities, in particular the ability to coordinate between professions and information systems that can track an individual’s activity and costs across many organisations. Numerous sites in the UK are in the process of developing the infrastructure to support this model of payment.
- There is a large incentive to restrict access to care, or ‘cherry pick’ patient cohorts. Commissioners should seek to prevent this by establishing appropriate contractual requirements and compliance processes which are then carefully monitored.