While the ambitions of the 10-Year Health Plan are clear, one year on from its publication the challenge is making them stick. NHS leaders back the shift towards community care, prevention and digital transformation, but many are unconvinced that the rules governing how money flows through the system will drive the behaviours needed to deliver them.
The changes fit under four broad themes – sharper incentives to raise performance and shift care into the community, fairer distribution of funding, rewards for financial discipline and changes to the NHS capital regime.
Incentives
The 10-Year Health Plan's main financial lever to encourage a shift away from hospital-focused care is the introduction of year of care payments (YCPs), capitated budgets designed to cover a patient's care over 12 months rather than ‘activity based' funding. NHS leaders agree that this could encourage more proactive, preventative models of care to keep patients well at home. But for YCPs to succeed, tariffs must accurately reflect the true cost and complexity of care. All too often, that's not the case.
Another approach being considered is patient power payments (PPPs), which would allow patients to decide whether a provider should be fully reimbursed for the care they have received. While NHS leaders support the idea of a closer focus on patient experience, there are so many potential influencing factors, some of them beyond individual providers' control, they're sceptical the current proposals could work as an effective part of the financial framework.
A further incentive is the prospect of increased autonomy and financial freedoms for advanced foundation trusts (AFTs). Leaders support the principle of greater autonomy, but many trusts – however well-run – are dealing with structural issues largely beyond their control. Even for those that can generate surpluses, there would still be constraints on their ability to invest under national capital spending rules. To address this and wider issues around the lack of access to capital funding, health leaders have said the Government should set a trajectory to increase the capital share of health spending from just over 6% to 10% by 2035.
Fairer distribution
There is a commitment under the 10-Year Health Plan and subsequent guidance for ICB funding to move towards ‘fair share' allocations so areas with the highest health need are better resourced – a move backed by NHS leaders. However, there are concerns about how quickly ‘overfunded' systems would have to adjust to a new baseline. It is encouraging that NHSE has confirmed a gradual approach, but it will be important that this is monitored closely and support made available where it is needed.
Rewards for financial discipline
At the centre of this commitment are two reforms: phasing out deficit support funding; and replacing block contracts with activity-based payment models.
While there is near unanimous support from NHS leaders for scrapping deficit support funding, removing it too quickly risks destabilising finances and widening the gap between the strongest performing organisations and the most challenged. Many face deep-rooted financial challenges, including estate problems, workforce shortages or a lack of local social care capacity. Withdrawing deficit support funding too quickly could be counterproductive and place the most challenged organisations under even more pressure.
NHS leaders agree that a closer link between activity, quality of care and funding can help incentivise productivity and improve accountability. But here too there are concerns. Any expansion of activity-based payment must be phased, affordable and grounded in up-to-date cost data. Incentives should reward value and outcomes - not simply volume - and be tailored to support mental health, community and preventative services, if they are to deliver the ambitions of the 10-Year Health Plan.
Reforming the capital regime
NHS leaders have strongly welcomed the 10-Year Health Plan's proposal to introduce multi-year capital budgets, providing greater certainty over their capital allocations over the next five years. This will enable them to plan their capital expenditure for the foreseeable future and ensure capital projects can be prioritised and sequenced more effectively. However, they also stressed that multi-year capital allocations will only go some way to resolving issues with the capital regime, most notably the requirement for capital to be spent in-year.
The Government should look into the use of new public-private partnership models beyond neighbourhood health models and consider expanding their use for larger schemes. It should also provide a clear long-term vision for how the NHS estate will need to adapt to accommodate newer models of care and respond to the demands of the future.
Double-running
Shifting activity out of hospital will not be cost‑neutral in the short term and diverting resources from already stretched acute services could create gaps in provision and intensify existing pressures. Reforms to the financial framework, therefore, need to be phased carefully, with Government providing support to manage the inevitable ‘double‑running' costs required to maintain acute capacity while investing in new community and preventative services.
Finally, financial reform will only succeed if it is grounded in economic reality. The NHS cannot incentivise every objective at the same time and attempts to do so risk diluting focus and impact. The test of the 10-Year Health Plan will be whether the Government sets a clear, credible and affordable delivery ask – and then sticks to it.
