New report identifies guiding principles for a better NHS payment system

24 October 2017

The time is right to review the system used to pay health care providers according to a new publication by the Health Foundation and NHS Providers.

Towards an effective NHS Payment system sets out the eight principles for a future payment system, primarily arguing that clarity of purpose is required to refocus the system’s many objectives.

The report adds that now is the ideal time to review the system, with vanguards and Sustainability and Transformation Plans (STPs) already changing the way that care is delivered, while a two-year fixed payment by results tariff offers space for reform.

The Health Foundation and NHS Providers have engaged extensively with people working in NHS trusts to investigate how the current payment system impacts on those providing care, what works well and how problems could be addressed. The report has identified eight guiding principles that a payment system should meet to support providers in delivering high quality care.

The eight principles are:

  • clear purpose
  • realistic expectations about impact
  • national consistency with local flexibility
  • appropriate, aligned incentives
  • high quality data
  • balance between complexity of design and ease of use
  • independent oversight and support
  • time to embed and evaluate systems

The report found a broad consensus that a well-designed payment system can support positive change for the NHS, and that parts of the current system work very well for their intended purposes – for example driving improvements in efficiency. But many providers reported that the current system – the result of layers of evolution – lacks a clear overarching purpose. They said the system has too many objectives to be clear and coherent, making it harder to focus on and deliver any one objective.

Adam Roberts, Head of Economics at the Health Foundation, said: ‘This in-depth engagement has given us an invaluable insight into how the payment system is working for those who are delivering care to patients.

‘Many parts of the NHS payment system work well in isolation, but it is clear from our research that in its entirety the system lacks a clear purpose, and so is trying to achieve too many things. The NHS is currently looking to change the way it provides services across the country, following the Five Year Forward View. The time is right to consider how the payment system can best support this, by identifying what works well and what needs to change.

‘There is no one size fits all system for the NHS, but the principles presented in this report act as a guide to what would best support providers in improving care services in future.’

Phillippa Hentsch, head of analysis at NHS Providers, said: ‘Our research shows that trusts agree that the NHS current payment system is in need of some level of reform to help them tackle the challenges they face and adapt to new models of delivery through sustainability and transformation partnerships and accountable care organisations.

‘For too long, the payment system has been used as a way to close the financial gap facing the sector, forcing prices down while provider costs continue to increase. Although there will continue to be diverse views on what a future system should look like, providers argue that the national level needs to go back to basics, simplifying and clarifying the ask of the sector.

‘We hope these principles help support the system to review and move towards an effective model, based on high quality data and with the time and space to bed in consistently across the sector.’ 

Media contact

Jack Cutforth
0207 664 4623 

Further reading


Towards an effective NHS payment system: eight principles

How current payment systems impact on those providing care to patients by considering what works well, what problems they enc...

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