Creating and embedding risk and benefits sharing of integrated care
What are the building blocks?
From experiences with colleagues nationally and internationally, risk and benefits sharing works well when all stakeholders across the system, including commissioners, providers and patients, have demonstrated the following attributes:
- Transparency – clear 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 be a minimum of a review every quarter. This is the mechanism that will enable stakeholders to know their latest risk and benefits position and help them follow the four attributes.
- Common purpose – ensure there is a clear common purpose concerning the intended outcomes for the local population and the ways in which services will be reshaped to meet those outcomes. The focus should be on system and individual outcomes. Please see How to … understand and measure impact.
- Build a shared understanding among leaders, staff, partners and service users. This is important in terms of the extent to which each partner can influence the risks and benefits identified. Partners should work together to achieve collaborative working.
- Clear and pragmatic governance arrangements concerning decision-making and accountability, with shared leadership at political and executive levels.
- Trust and strong relationships are essential – the personal chemistry between local leaders is as important as formal plans and strategies.
What are the key considerations at each level of the system?
Risks and benefits can be considered at a project, organisation and/or system level. It is for the organisations involved in developing risk and benefits share arrangements to agree at what level this should be done and how risk and reward should be apportioned between the parties involved.
The aim should be to move towards agreeing risk share at a system level to incentivise and drive the local system to deliver improved outcomes and results.
- Service or project level: Risks and benefits within each service/ project are allocated to areas of an organisation. Each area will bear the risk and benefits of that element of the service/project.
- Organisational level: Each organisation takes on the risk and benefits of the projects it manages.
- System level: Sharing risks and benefits between all organisations on the basis of a shared understanding of the vision and objectives.
What are the routes to risk and benefits sharing?
There is a range of routes to sharing risks and benefits. The simplest are set out below.
A simple route to risk and benefits sharing is to allocate risk and reward on the basis of the activity that each organisation commissions in that area. This can be calculated at an overall health and wellbeing board level, down to a more detailed project level.
The logic here is that the more activity an organisation commissions, the more influence it has over the risks and benefits.
Once it is determined which party has influence over certain risk and benefits of the agreed arrangement (e.g. underspend or overspend of a service), it may become apparent that some risks or benefits are influenced by only one organisation. In this instance, the group should consider whether it is appropriate to share these risks/benefits or whether they should remain with the organisation with the main influence over them.
Pro rata contributions
Overspends and underspends can be allocated pro rata to commissioners on the basis of their contributions into the project. This can be in the form of one overall risk and benefits share agreement for the pooled budget, or a number of subsections within the budget for which there are different risk and benefits share agreements.
How is risk and benefits sharing initiated?
The decisions required to develop a successful risk and benefits share framework are set out as a step-by-step process below. This guide should be used in conjunction with the How to … understand and measure impact guide which provides more support regarding identifying and managing benefits measures.
The order shown is only a suggestion. Elements of the process will be iterative, and should therefore be revisited during the process if necessary. For example, estimated populations may be determined early on, but this will need to be revisited and refined to agree baseline figures.
1. Determine who are the relevant parties to be involved in the risk and benefits share. (Governance) Open
Who needs to be involved for the discussions to have an impact? The right people must be around the table from the start.
It is important for all parties to understand the broader context in which agreements are being made. There will be external factors influencing each organisation, including the extent to which they have the capacity to bear risk and what benefits they need to realise to support their strategy and business plans.
2. Establish any circumstances affecting what risks and benefits each organisation can take on and any factors preventing them from taking on certain elements of risk. (System context) Open
There will be some circumstances that make it impossible for some organisations to legally take on certain types of risk or reward. For example, non-foundation trusts are not able to take on certain delivery risks and trusts in special measures are restricted in terms of what risks they can legally embrace. Local authorities need to have balanced budgets.
3. Agree priorities and objectives of each party and the risks and benefits to achieving this individually. (System context) Open
Before agreeing joint objectives, it is important to understand the objectives of individual parties. This will give all parties an understanding of the context of the risks and dependencies, both internally and externally. Impact and likelihood should be assessed for each risk. Each objective should be included on the individual entity’s risk register and benefits management tracker. It is important to note that all organisations involved should have a gain or benefit from the objectives and approach being set out. If not, then this needs to be refined as ‘everybody needs to gain’. Each organisation also needs to bear some form of risk. The process will not work if only one organisation receives all the rewards or bears all the risks.
4. Use information from step 3 to agree collective priorities and objectives. (Governance) Open
In agreeing joint objectives, the target populations and scope (service, initiative) of the change that will bear the risk and benefit of the target outcome should be identified and estimates created of baselines and metrics.
Parties should all agree how success and impact (from both risks and benefits) will be judged and therefore agree collective decision-making criteria for investment and disinvestment in initiatives. Criteria should include thresholds above and below which action will be taken, to avoid continual change.
It is important that disinvestment decisions are made before action is required, to ensure that system priorities remain the focus during difficult decision-making processes.
5. Agree collective net risks and potential benefits for achieving objectives. (Governance) Open
Calculations should include impact and likelihood assessment.
Shared risks should be included on a joint risk register, each with risk owners.
6. Determine each organisation’s risk appetite at a system level. (System context) Open
The risk appetite and the certainty of benefits will determine the willingness of the system to make bold changes to service provision.
If organisations have different risk appetites, parties should ‘workshop’ practical examples to develop shared criteria for assessment of acceptable risk and how to incentivise the realisation of benefits to drive different behaviours (e.g. CQUIN).
7. Identify the extent to which each organisation can influence the risks and benefits. On this basis, agree how risks and rewards will be shared in principle. (Governance) Open
Individual organisations are unlikely to be willing to take on risks or sign up to benefits that they can’t influence, but will want to sign up to the other benefits that they can influence. This stage should therefore support cases for risk and benefits share among the group.
Some risks and benefits may not be shared. Local teams need to agree on an approach for risks that are wholly in one organisation’s control. Where this is the case, it may be most appropriate for the controlling organisation to retain the risk and sign up to benefits within that organisation. It is important to think of this in a whole-system way – e.g. reducing Non-Elective admissions, which is a system challenge. On paper, this would ‘benefit’ clinical commissioning groups – however, there needs to be additional investment from local authorities in community and home care to support this and for both acute and community providers to work differently. There needs to be a financial benefit and incentive for the up-front investment and potential shared reward. This also poses a risk – if the additional investment doesn’t materialise then all parties should put in a mitigation plan for this, but also an incentive to ensure it works.
8. Identify target population for each project (Metrics) Open
Unless projects are aimed at the entire population, the group needs to be specific about which population group a project is targeting. It should be this population that is monitored to establish impact.
9. Agree baseline against which to measure performance (Metrics) Open
Systems may need time to get data in place to agree the baseline.
The expected cost, or baseline, could be the current performance, or future performance in a ‘do nothing’ scenario. This should be agreed so that performance of projects can be measured.
If full detail cannot be obtained upfront, agree what the baselines will be and what will be measured. Actual measures should then be confirmed at a later date when the data is available.
10. Agree metrics for measuring performance (Metrics) Open
The logic of the metrics should be tested to ensure that the selected metrics are appropriate for tracking performance.
Consider the following when determining whether metrics are appropriate:
- Do partners have a high degree of influence/control over factors that affect performance?
- Do the necessary resources to act exist or can these be developed?
All organisations should agree on the metrics used and trust in those selected being appropriate for the projects implemented.
All organisations and the system as a whole should monitor metrics at regular intervals and adjust the course of action as necessary.