Risky business: new changes tying financial allocations and incentives to system-level performance

A quiet revolution in the NHS has happened. After decades of an internal market, NHS England has outlined new changes tying financial allocations and incentives to system-level performance instead. 

Over the past six months, providers had been allocated block funding based on activity from 2019/20 with top-ups and retrospective funding to support covid pressures, ensuring they financially break even during the crisis.

Now, in a letter accompanying funding envelopes for Integrated Care Systems and Sustainability and Transformation Partnerships around the country, NHSE outlined how health service finances will be system managed for the remainder of the year.

Systems will have not only control of the kitty (with all system costs to be met from its allocation) but funding will be linked to the performance of their member organisations, with some incentive payments or penalties for over/under performance at a system level.

Glen Burley, the chief executive of a group of three acute trusts in the West Midlands, branded the move “very risky”  and suggested a more traditional tariff performance would drive performance.

Highlighting another of his concerns he said: “We have very little experience of doing so at system level, so this is a very risky tactic in a very risky year.”

How systems will manage the shortfalls will hinge on elective delivery, system co-ordination, how to reduce forecast costs and recover income, set, of course, against the threat of a second wave of COVID-19.

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Source: HSJ, 17 September 2020