COVID-19 has been a catalyst for change in NHS finance where a new ‘system-level’ funding arrangement has been introduced in England. This sees providers working together to determine how money should be spent locally.
The scheme, which supports integrated working by enabling large sums of money to be released to healthcare systems for distribution, rather than to individual providers, aligns with long-term plan ambitions for population-health management.
Together with other joined-up finance structures already in place, system-level funding will drive big changes in patient pathways as the NHS permanently moves away from payment by results (PbR).
Block contracts managed by NHS England and NHS Improvement (NHSE/I) replaced PbR in April, in response to COVID-19. However, a Phase 3 COVID-19 guidance letter from NHSE/I in the summer highlighted the need for increased system responsibility and management to help local health economies achieve financial balance.
In line with this, the lead Clinical Commissioning Group (CCG) in a health system will now manage the system budget, including the provider block contract and a large system allocation. This allows greater freedom and encourages integrated working.
NHSE issued the financial allocations in September to cover the second half of 2020-21. The allocations will be subject to adjustments depending on how each system restores elective activity.
“It has never been more important for pharma to consider how its products and services can benefit the whole system”
Long Term Plan
System-level funding is aligned with the move towards collaborative, place-based working. For example, aligned incentive contracts have seen some provider trusts and CCGs working together to determine how best to use their combined funding and set incentives around quality.
A joined-up financial approach was also advocated by the Long Term Plan, which said that ‘reforms to the payment system will move funding away from activity-based payments and ensure a majority of funding is population-based’.
It also said the NHS would move to a blended payment model – a flexible framework that comprises a fixed payment with one or more of the following:
- A quality or outcomes-based element.
- A risk-sharing element.
- A variable payment.
Changes in prescribing
The blended payment structure is currently rolled out for emergency, adult mental health and outpatients services. Blended payments that cover currently contracted secondary care-led services may include lower cost drugs.
Research by Wilmington Healthcare has found signs that non-high cost drugs and primary care budgets are also starting to become integrated into the service contract in certain areas, such as Manchester. System budgets will aid this integration and focus more on patient outcomes and total pathway costs.
NHSE is considering a number of blended payment structure proposals where:
- High cost drugs and genetic testing would remain outside the blended payment remit but there would be some changes to the list with a new category of innovative products included in blended payments.
- All non-high cost chemotherapy drugs would be reimbursed on a pass-through arrangement.
Another important development recently is that the Quality, Innovation, Productivity and Prevention programme (QIPP) has stopped, so whereas previously 20% of QIPP savings were related to medicines management savings, that is no longer happening. However, cost pressures will continue to increase and local system cost improvement, including drugs, will be back on the agenda. But it will be hard to implement a new cost saving value proposition against the standard drugs budget.
As payment structures change and the NHS thinks more holistically around cost and prescribing budgets, it has never been more important for pharma to consider how its products and services can benefit the whole system rather than a specific drugs budget for a hospital or for primary care.
This involves thinking widely about key NHS priorities, such as keeping patients out of hospitals, where possible, and caring for them in the community and at home. So, for example, managing early discharge and risk monitoring will be essential to prevent hospital admissions. It will also be important to empower patients to take greater control over their health.
Pharma also needs to think about how its solutions can enable the NHS workforce to operate more efficiently by reducing the need for regular contact with patients. So, for example, how can it reduce the number of times a patient needs to go to hospital for drug administration or testing?
Integrated payment structures are having a profound impact on healthcare systems. We are already beginning to see costs transferred between elements within blended contracts, and system-level funding will expedite the joined-up approach.
Financial changes are helping to drive major pathway reconfiguration across all pathways. This is not just in terms of where drugs are used but in terms of everything – from triage to follow-ups – as the NHS seeks to deliver on key Long Term Plan priorities and reset services.
It is essential for industry to monitor these changes, understand how its products fit into the new pathways and how services are contracted. This will enable industry to get involved in pathway reconfiguration and help the NHS achieve its transformation goals.