Directing the flow of funding through the NHS is one of the levers by which policymakers can try to influence the provision and cost of care. Evidence from the UK and further afield suggests that the way health care providers (such as hospital, mental health and community health services) are paid can influence the quality and efficiency of care.,

Over the coming years the NHS will face unprecedented challenges as it tries to recover the substantial backlog of elective care, deliver already demanding efficiency targets, and integrate care services – in part to facilitate shifting services out of hospitals and into community and primary care settings. In addition, ambitious long-term goals, such as better population health management and reducing health inequalities, are very unlikely to be met through the combination of the PbR tariff for hospitals and block contracts for community and mental health services.

This briefing considers these challenges and the role of a new payment system in meeting them as the NHS embarks on further reform and recovery from the pandemic. We begin by setting out the kinds of payment structures available to the NHS and describe the hallmarks of a ‘good’ system. We conclude by exploring what kind of system will be needed for the immediate COVID-19 recovery and to transform and meet the challenges of the post-pandemic environment.

The briefing focuses on the payments for hospital, mental health and community health services rather than the payments to primary care providers (GPs, pharmacists, dentists and ophthalmologists) who are, in the main, independent contractors to the NHS.

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