Payment models are seen by Monitor and NHS England as pivotal in the process of implementing new models of care. It has been recognised that existing payment models do not typically promote improved quality of care or facilitate the achievement of integration objectives.
Traditionally in both health and social care activity based ‘tariff' payments or block contract payments have traditionally been utilised. Alternative payment models that are frequently used in commissioning integrated services include:
- Capitation is a means of paying ‘a provider or group of providers to cover the majority (or all) of the care provided to a target population…across different care settings' (NHS England/Monitor 2014). These payments are a lump sum per patient with an estimate of the population to be served. An advantage of this is increased awareness of service costs and budgetary requirements.
- Risk/Gain/Loss Share models provides an opportunity for providers and commissioners to establish a network to identify and distribute financial gains or losses. Comparisons are drawn between the estimated and actual contract spend, Any surplus or deficit is then shared amongst the group.
- Outcome or Incentive payment models Risk/Gain share models are frequently combined with capitation as a means of establishing a comprehensive outcomes focused payment model in which a proportion of a capitated payment is awarded pending achievement of mutually agreed outcomes. Amounts of payment withheld can vary from relatively small amounts up to the majority of the payment.
Although not meeting the requirements of integrated services or commissioning:
- Payment by Results a long standing NHS payment model in which providers are paid for each episode of care, adjusted to take account of the complexity of a patient's healthcare needs. PbR warrants a mention as one of the more recognised payment models. It varies from the outcomes based models in that it is determined by national currencies and tariffs rather than local agreements and arrangements
Frequently asked questions
Why use a capitated approach rather than the existing tariff system?
Providers are incentivised to provide cost effective, sustainable care and preventative interventions that meet the required outcomes. If the needs of the target population are met for a lower cost the provider will have a financial gain.
What are the most common challenges to capitated approaches?
Potential issues associated with this model include providers restricting access to services for complex cases and provider financial instability. Other issues include defining a population, requirements and costs.
Detailed datasets are required to benchmark and facilitate the introduction of a capitated payment system. Although some of this information is becoming available through the Right Care Programme there are still gaps in the knowledge.
What are the challenges to risk/gain share approaches? Risk share models can place a financial burden on the provider that may be untenable. Additionally, the contract monitoring and management procedures for this and outcomes based payments can be onerous.
Case studies and examples
LGA support and resources
- Better Care Fund: Risk Sharing, a quick guide advice on how to meet the risk sharing requirements of the Better Care Fund. It covers the specific risk shares associated with improving out of hospital services, reducing non elective admissions and delayed transfers of care.
Selected tools and resources from our partners
- NHS England: Different approaches to support new care models a range of resources and guidance to payment models, capitation approaches and risk sharing
- NHS England: Capitation potential payment model to enable integrated care. Also includes information regarding risk mitigation
- NHS England: Multilateral gain/loss sharing: a financial mechanism to support collaborative service reform guidance for local care economies that want to design and implement gain/loss sharing arrangements to change care delivery
- Department of Health Payment by Results team: A simple guide to Payment by Results a simple introduction for newcomers to PbR
- North West London Whole Systems Integrated Care Toolkit: Capitation and its alternatives outline of different payment models
- Nuffield Trust: The NHS payment system: evolving policy and emerging evidence research report into different approaches to payment in the NHS. It summarises the available evidence on whether recent payment initiatives have met their goals
- King's Fund: Payment by Results: How can payment systems help to deliver better care? reviews the role and objectives of payment systems in the NHS, focusing on PbR, and considers the experiences of other countries using similar payment systems.