Conclusion: a payment system for the recovery and transformation

The whole health service – indeed the whole country and our economy – needs to recover well from COVID-19 and transform to meet the challenges of the post-pandemic environment. A sustainable health system needs to use public funds efficiently, adapt and evolve to meet changing patient needs and respond to public expectations.

A new payment system can play a part in supporting such a transformation. Incentives in the payment system must be designed to encourage all parties to work towards the same or aligned objectives. Shared objectives will foster effective relationships between providers and the new ICSs. Achieving goals, such as population health management and reducing health inequalities, are very unlikely to be met through old methods such as the PbR tariff and block budgets. On this point, the NHS has reached a consensus.

A single approach to a payment mechanism, and the incentives contained within, will also not address the range of complex challenges facing the NHS over the next decade. Therefore, a blended approach seems most appropriate. However, identifying the precise nature of this blend is challenging.

We argue that the system being considered by the NHS before the pandemic based on three elements – a fixed payment with additional activity and quality payments – remains fundamentally right. If designed well, a three-part payment system could help to ensure the right capacity is in the right place, support care transformation with appropriate resource shifts, enable a reduction in the backlog of elective caseloads and ensure that the focus on activity does not drive out a focus on quality and population health. Local discretion in setting elements of the blended system would allow the weight on particular elements to be varied based on local needs. But that discretion needs to be accompanied by transparency and accountability and a national led evaluation programme that provides rapid learning to guide the evaluation of the payment system will be critical.

The scale of the challenges facing the NHS are daunting. To some extent, the NHS is simultaneously facing the challenges of the early to mid-2000s (waiting and capacity), alongside those of the 2010s (efficiency and financial control) and the 2020s challenge of population-based health improvement. While there is considerable agreement about the broad direction of travel for the payment system, the detailed design work for the new system will involve difficult choices and tensions as the service balances these, sometimes competing challenges.

If the health service is to have a payment system that effectively supports wider system goals it will be very important to recognise there will be an element of experimentation as new approaches are rolled out. These should be evaluated – in as close to real time as possible – to allow improvements to be made.

Payment systems are complex and not the most obviously engaging aspect of health care policy – but they do matter. They are the wiring that gets the right amount of money to the right part of the system to ensure needs are met with high quality, efficient and effective care. When the wiring is working, nobody notices. When the wiring fails, problems are felt throughout the health system. Getting payment reform right needs to be high up the agenda for the incoming chief executive of the NHS.

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