Payments and contracting for integrated care: The false promise of the self-improving health system

This content relates to the following topics:

Part of Payment systems for accountable care in the NHS


  • For thirty years, policy makers in the English NHS have attempted to devise financial incentive schemes to improve the performance of health services.
  • Despite the disappointments, successive governments have remained convinced that their latest round of payment reform would finally create a self-improving health system.
  • Over the last few years, the national NHS bodies have proposed new payment schemes to incentivise a single service provider or partnership of service providers to deliver high quality integrated care for local populations.
  • There appears to be broad agreement amongst technical advisors on this way forward, including creating whole population budgets, new incentive schemes to reward providers for good performance and new arrangements to transfer risk and reward to providers.
  • This paper questions whether these latest incentive schemes will be any more successful than their predecessors. There are significant unresolved difficulties in applying the type of incentive scheme developed for accountable care in insurance-based health systems to tax-funded health systems with state-owned providers and limited choice of provider.

What are the challenges for the NHS?

The English NHS will struggle to implement effective incentive schemes for new integrated health and care systems. One recurring challenge is how to measure the performance of health services as a basis for handing out financial rewards and penalties. As experience has shown, it is extremely difficult to devise metrics that effectively capture local health systems’ overall performance and can be measured accurately in the short to medium term. Another recurring challenge is how to apply financial incentives effectively in public health systems. If the state withholds payments from underperforming health care providers, this makes it harder for them to deliver adequate services: the absurdity of punishing patients who have already been let down by risking even worse care.

An alternative approach

While English policy makers have gravitated to the payment schemes for integrated care in insurance-based health systems, other countries with tax-funded healthcare have been heading in a different direction. A number of these countries are now foregoing complex financial incentive schemes in favour of partnership arrangements between funders and planners and groups of service providers, with the focus on effective joint working to make best use of healthcare resources.

Commissioners and providers in many local health systems in England have also now started the transition from arm’s length contracting to collaborative relationships. While these arrangements are at an early stage, there is emerging evidence of the benefits. Organisations across local systems are working together as a single team and resources that would in the past be consumed by contracting are now being used for improvement.

Case study: Canterbury District Health Board

Ben Collins interviews Carolyn Gullery from Canterbury District Health Board in New Zealand, about their unique collaboration with health and care service providers.


Ben Collins

Projects Director,
The King's Fund
Comment date
25 March 2019

Pearl - thanks so much for your comment. The incentive schemes that we challenge in this paper seem even more dubious when set against the gaps and inadequacies in services and huge social challenges you mention. Against these challenges, tiny incentive schemes seem like a distraction. On a separate note, we have a paper coming out on 27 March on outcomes in mental health which touches on some of your concerns. Ben

Nick Samuel

Comment date
19 March 2019

I have not seen an NHS payment system yet that does not produce perverse incentives but, perhaps, the quality-based ones are best at avoiding such?

Any payment system should be devised to support the best practices in the NHS/social care not to create them.

Pearl Baker

Carer/Independent Mental Health Advocate and Adviser,
Comment date
17 March 2019

More 'vulnerable' with LTC conditions such as those suffering from Schizophrenia Bipolar see themselves 'marginalized' by the very system that is supposed to have 'closed' the 'gaps' decades ago. The Government Welfare reforms has seen more death by suicides, increasing homelessness, and hunger than anytime in the history of the NHS, those requiring long term treatment, which can be purchased over the counter, instead of ongoing prescriptions, have added to the daily 'stress' of those with limited funds. It is now the choice of food, heating, the rent, or the ongoing treatment. UC has made one choice to survive. (food banks) are increasing, the rest is history: no money, children in poverty, and a GOVERNMENT so 'out of touch' with reality that they will only allow those earning over £30.000 a year to work in our Country.

The Rowntree Foundation tweet everyday with their concerns. Poverty, makes a bleak future for our children, who become depressed, increasing the need for more resources in our schools, and LTC waiting in the 'wings'!

'Integration' what integration, it is a 'dream' that all will be cared for equally in our society, many on Welfare Benefits receive as little as £6.500 a year. Personal choice, Person centre, Holistic is ALL in the MIND.

Luke Burton

Programme Manager,
Surrey Heartlands
Comment date
14 March 2019

In theory this is amazing and needed. The only problem is people get in the way of any good idea. There needs to be a whole lot of trust developed in a system that doesn't have too much of that at the moment.

Trust from central government (and between departments) that devolved areas have it all in hand,
Trust between organisations that make up devolved systems,
Trust between those that joint commission with/for providers,
Trust between providers
and more importantly Trust that the citizen understands their need better than anyone

Ed Macalister-Smith

Comment date
14 March 2019

Integrated systems, yes (social care too).

Single-budget accountable care systems, yes.

Tracking activity (from a clinical rather than financial perspective), yes.

Contracting system, no...

The mind-numbing waste of time that is the annual contracting round adds almost no value, costs a huge amount in transaction costs, and sets entirely the wrong tone for a system intended to promote better care.

And a minority of GPs and consultants (and CEOs) will always be better than the accountants at gaming the system and producing significant unintended consequences.

John King

Ethos Health
Comment date
14 March 2019

Speaking as a finance person by training don’t think that pop incentive are a bad thing per se and certainly better than activity based incentives. That said, in no way will they do the real job of a provider with a compelling vision. Our simulation-based Learning Health Systems out to achieve just this by gathering communities around said vision - all in a virtual risk free test environment.

Simon O' Connor

Comment date
14 March 2019

It is clear that Accountable care systems / organisations (or whatever NHS England wishes to rebrand them as) will not abolish the purchaser provider split as Simon Stevens has claimed - it is more that NHS England will contract with fewer providers (the Accountable care system). They themselves will no doubt have the usual myriad of massively wasteful sub contracting. The whole idea of marketisation has been a massive failure in the NHS and out, but the government clings to it for ideological reasons and because of naked financial self interest. As ever, copying the most broken health system in the world, the USA

Add your comment