Pooling budgets and agreeing risk share to develop coordinated care

Creating shared public accountability through pooling budgets

Public sector organisations are held to account over their finances, and have robust internal governance systems to oversee the spending of public money. Person-centred, coordinated care is only successful when governance systems can support similarly strong financial accountability across organisations.

Pooled budgets combine funds from different organisations to enable them to fund truly integrated services. Since the introduction of the Better Care Fund in 2015, CCGs and local authorities have been required to operate a pooled budget for the Better Care Fund via a section 75 agreement. This has resulted in a major increase in pooled budgets, starting as part of the BCF but continuing as part of the development of more integrated systems within STP development. An increasing number of areas are transitioning to ICSs with pooled budgets, shared risks and rewards, and shared accountability for outcomes. Integration of care, while complex to deliver, is recognised by leaders across the country as a much needed response to the challenges of rising demand and budgetary constraints.

If we are to succeed in integrating health and social care to bring about better experiences and outcomes for people, we need real readiness and commitment to work across organisations, and find better ways to pool our collective resources for better overall value and benefit.

Dr Jo Farrar, formerly Director General for Local Government and Public Services, Ministry of Housing, Communities and Local Government

Section 75 of the NHS Act 2006 allows partners (NHS bodies and councils) to contribute to a common fund which can be used to commission health or social care related services. This power allows a local authority to commission health services and NHS commissioners to commission social care. It enables joint commissioning and commissioning of integrated services. See Risk sharing/S.75 agreement for more guidance.

In some cases, such as Section 117 of the Mental Health Act 1983, legislation requires that joint funding be administered by councils and CCGs.

Section 117 states that aftercare must be jointly funded for people leaving hospital after being detained for treatment under the Mental Health Act.

In other cases, councils and CCGs choose to jointly fund care simply because they believe it is the right thing to do and will help prevent future admissions.

The Healthcare Financial Management Association (HFMA) and the Chartered Institute of Public Finance and Accountancy (CIPFA) have produced pooled budget guidance . See Sharing risks and benefits of integrated care: quick guide.

Our clients and patients do not see our organisational boundaries so we must work together to make sure they don’t stand in the way. The finance team needs to work with their colleagues to ensure that the accounting and assurance arrangements are as seamless as the frontline services that are provided. This means getting involved proactively so that all bodies involved in commissioning and providing health and social care services can continue to meet their financial and statutory responsibilities as operational arrangements are put in place.

The Healthcare Financial Management Association

Case studies: pooled budgets working to deliver improved outcomes

Pooled budgets are not a new concept to health and social care – below are several examples of where pooled budgets have been implemented and have delivered better outcomes for people who use services.

Place-based budgets: Overview of models and options for placed-based budgets

Whilst s75 agreements are a requirement of the 2019–2020 Better Care Fund Policy Framework, there are other models and options available for place-based budgets that can be considered for localities moving towards integrated care. These are listed below:

Seat at the table

Under this model:

Joint arrangements

Under this model:


Under this model:

Devolution *

Under this model:

* NB: There are three options for devolution under the Cities and Local Government Devolution Act. We have only included the option of a full transfer of functions.

Sharing risks and rewards

Pooling resources requires investment decisions from a range of different stakeholders. In the context of financial pressures, each participating organisation will need to consider costs and benefits, as well as risks and rewards. Across the system, it is critical to establish how risks and benefits will be shared and develop a plan for how gains and potential losses will be distributed. Gains and losses are calculated as the difference between the baseline (expected cost) of delivering care to a defined population and the ‘out-turn’ (actual cost).

Developing a robust plan for risk and reward sharing requires answers to two key questions: How can we incentivise better system outcomes and what will happen if plans don’t materialise? Sharing risks and benefits of integrated care: quick guide sets out the building blocks.

  1. Transparency – baseline and performance measures can be tracked. This needs to be proactive and regular, so that issues can be dealt with ‘in-flight’. There should, at minimum, be a review every quarter.
  2. Common purpose about the desired outcomes for the local population and how services will be reshaped to meet those outcomes. There should be a focus on system and individual outcomes – the rest will come through efficiencies.
  3. Build a shared understanding among leaders, staff, partners and people – how can each partner influence the risks and benefits and work together to drive collaborative working? This also involves considering what ‘levers’ to use, such as, for example, the Commissioning for Quality and Innovation payments framework (CQUINS), incentive payments and delayed transfer of care reimbursements.
  4. Clear and pragmatic governance arrangements setting out decision-making and accountability structures, with shared leadership at political and executive levels.
  5. Trust and strong working relationships – the personal chemistry between local leaders is as important as formal plans and strategies.

Five steps to agree risks and benefits: establish risks and benefit share agreements

  1. Identify relevant parties who should be involved in sharing benefits and risks. (Governance)
  2. Establish any circumstances that might affect the risks and benefits that each organisation can own, and any factors that might prevent them from taking on certain elements of a risk. (System context)
  3. Agree priorities and objectives of each party and the risks and benefits to achieving this individually. (System context)
  4. Use information from step 3 to agree collective priorities and objectives. (Governance)
  5. Agree collective net risks and potential benefits of achieving objectives. (Governance)

Checklist for pooling budgets

Your checklist has been saved successfully

To save your checklist, please login to your MySCIE account or register if you do not yet have an account.

Develop a joint funding agreement with documentation that outlines:

To save your checklist, please login to your MySCIE account or register if you do not yet have an account.

Further reading

Pooled budgets must be soundly based and follow the appropriate accounting arrangements. In the Better Care Fund ‘Support and resources pack for integrated care’ (NHS England) there is information about section 75 pooled budgets, including what is required to make them work effectively, other joint financing options, general considerations and what should be included in partnership agreements.

How to... bring budgets together and use them to develop coordinated care provision
Previous section | All sections | Next section