Emergency payment approach during the pandemic

In April 2020, COVID-19 led to the suspension of the PbR system entirely while the NHS reconfigured services to deal with the pandemic and as it faced significant new costs that were hard to precisely anticipate. In place of the PbR tariff, all trusts moved to a system of block contracts, with additional reimbursement if costs exceed the agreed amount. The value of the block payment was calculated nationally for each clinical commissioning group and provider based on recent past expenditure. Providers were then able to claim for additional costs to reflect genuine and reasonable additional marginal costs due to COVID-19’.

As the NHS moves from the emergency phase of the pandemic towards recovery, the health service needs to develop a new payment system that supports the service to meet its challenges and priorities over the coming years.

In its February 2021 white paper, Integration and innovation: working together to improve health and social care for all, government outlined its intention to introduce new legislation to place ICSs on a statutory footing. The white paper proposes repealing much of the 2012 Act provisions on competition and amending key aspects of the legislation so that NHS England has more scope to reform the payment system. The Queen’s Speech confirmed that the government would introduce a bill in the 2021/22 session of parliament to enact these changes and the Health and Care Bill was introduced to parliament in July 2021.

Before considering how the payment system could be redesigned to meet the challenges of reform and recovery, we look at what constitutes an effective payment system.

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