The NHS landscape isn’t simply changing like it typically does. We’re witnessing the biggest attempt to join up health and social care in any major western country. It is imperative for market access professionals to keep up-to-date and adjust plans accordingly or Industry will be left behind.

Sustainability and Transformation Partnerships (STPs) are evolving into Integrated Care Systems (or ICSs, since we don’t want to use the phrase Accountable Care Systems anymore)i. The aim is to join up care; focusing on place and defined populations rather than on organisations like we used to. STPs and ICSs will try to reduce hospital activity because it is more expensive and instead encourage self-care and provide more services in the community. This leaves hospitals to deal with fewer, specialist patients.

The NHS is also looking to provide primary care at scale. Since the Five Year Forward View in October 2014 and the Next Steps on the Five Year Forward View in March 2017ii, the NHS has been transitioning to a model where it is no longer the norm for patients to be treated with costly hospital visits. Instead they should be treated closer to home with GP federations, networks and super practices taking on far greater responsibilities for population groupsiii. To give some idea of the scale involved, the Primary Care Home Model developed by The National Association of Primary Care (NAPC) is for defined, registered populations of between 30,000 and 50,000 patients. This trend is accelerating with the news in April that 6 GP Practices in Bury, Greater Manchester have received approval from the CCG to merge to form Tower Family Healthcare, which now has 50,000 patients; the largest number of GP Practice patients in a single database in the country.

This move is not without some collateral damage. NHS Provider Trusts used to be so powerful that commissioners felt they had to gang up on them. Now organisations in an STP have to pool risk. Providers are expecting to lose large volumes of patients and therefore receive less revenue than they would have received in tariff. We’ve heard reports of NHS Hospitals actively investigating what it would take to set up clinical trial units or rent out hospital wings due to concerns over revenue.

To take this a step further, the trend is to move away from Payment by Results (PbR). For years the NHS paid hospitals using block contracts where the value of the contract was independent of the actual number of patients treated. It then moved to PbR to pay for healthcare based on activity in order to drive up quality. Now this has largely been achieved NHS commissioners are thinking about how they can transform care delivery but not completely kill off Trusts while they do so.

Their motivations are clear enough. We already know that the NHS is in serious budget deficit and Government doesn't want to spend extra money on public services. However, the figures are contested. In 2017-18 NHS Improvement reported a £960m overspendiv but the Nuffield Trust believes it was close to £4bn if all of the clever accounting is removedv.

Some of the health spend is due to having too many regulators and far too many commissioners. One senior NHS official speaking on condition of anonymity likened the situation to a football match with 8 teams and 7 referees before adding the last thing that a business in financial trouble should be doing is splitting its operational footprint into hundreds of overleveraged, micro teams arguing about toenail services for the elderly. 

All of this leads us to how NHS Hospitals are now acutely concerned about their revenue.

The usual issues around waiting times, capacity and staffing (exacerbated by Brexit) still exist but NHS Trusts are also being pushed to examine the true costs of delivering care. The Carter Review on NHS productivity put a real emphasis on Adjusted Treatment Costs and NHS Improvement has already mandated patient-level costing (PLICS) for hospital activity.

We’re now seeing the emergence of Aligned Incentive Contracts (AICs). The name possibly hints that commissioners and providers are misaligned and have perverse incentives e.g. for hospitals to keep treating patients when commissioners don’t think they should be.

In an AIC there will be Expected Income Guarantees against an agreed activity plan. This means NHS Provider Trusts aren’t reimbursed for each patient treated. Since the NHS Provider is no longer paid each time it treats a patient the incentive exists to reconfigure and even transform care. An AIC already exists between Western Sussex Hospitals NHS Foundation Trust and Coastal West Sussex CCG. This has led to innovations that benefit patients from One Stop Shops, virtual clinics and also closer working with primary care.

As a board paper from Portsmouth CCG indicates, rather than focussing on transactional, tariff-based financial payments, AIGs will instead focus on value - cost, efficiency, effectiveness and qualityvi. In some areas they are not small-scale projects any more either. Bolton Foundation Trusts Operational Plan assigns £190m to their AIC budget linevii.

Hull’s AIG contract has an overall fixed value of £312m, providing a minimum income guarantee for the Trust roughly equivalent to their 2016/17 forecast outturn with “an amount of growth included to enable the Trust to tackle the backlog issues in Ophthalmology (notably Wet AMD and Glaucoma)”. Financial risks under AICs are not confined to the Trust alone either. In agreeing the AIC at this level, Hull Commissioners had to include a £5m savings assumption into their own financial plansviii.

NHS England and NHS Improvement’s document ‘Refreshing NHS Plans for 2018/19’ offer a big clue as the how these changes will be driven through the system, by tying AIGs closely to STP plans. “Building on the 2017/18 in year contract alignment approach, we will be asking STP leaders to return a contract and plan alignment template to demonstrate that updated plans and contracts are aligned financially between commissioners and providers”.

It is worth looking back at what Jennifer Dixon, now Chief Executive of the Health Foundation, said about the benefits of moving to Payment by Results in 2004: “Paying providers on a cost per case basis, rather than the current block contract basis (not linked to number of cases treated) may encourage providers to treat more patients, as payments will reflect workload and productivity much more clearly and support the new policy to allow patients a choice of providerix”.

Dr Dixon also suggested fixed national tariffs could encourage providers to scrutinise efficiency, competing with other providers on the basis of quality more than price. As well as improve information, particularly the accuracy of hospital episode statistics, on which good commissioning and planning depend.

Overall, we have seen improvements in both these areas. NHS England also clearly appreciates potential advantages for tariff-based incentives through the Innovation and Technology Payment (ITP) schemex. We would encourage industry to engage with this initiative, signalling its own desire to compete on quality and added value.

Some health outcomes and market access professionals have raised concerns that this will make it harder for them to develop their Budget Impact Models to provide the NHS with the information it needs to evaluate the benefits of their products. However, NHS Provider Trusts still plan to shadow monitor activity under tariff for benchmarking and will still need to provide activity information to NHS Digital. This means datasets such as Hospital Episode Statistics (HES) will become even more valuable for market access.

It could also mean less information is fed up the line about true costs of service provision though, and if this is the case it only widens the disconnect between cost and tariff data within those regions that progress with AICs the fastest. This is one reason why there is such emphasis on PLICS data on patient-level costing and NHS Digital has already announced plans to link PLICS to HES data in 2018.

Ultimately, AICs are broadly welcome provided sufficient data is shared so we can all evaluate and learn from the various improvement initiatives these projects help foster. One way the cost in information loss from moving to AIGs could be offset is by linking data on cost and activity at primary and secondary care together providing a fuller picture of system wide costs.

Like with AICs there are a number of initiatives progressing along these lines at a more regional level. We would recommend all interested stakeholders, particularly market access teams, get involved with such initiatives in their areas. These include the Great North Care Record and the Whole System Integrated Care (WSIC) project in North West London.

By Hassan Chaudhury and Anthony Woodhead

PM Society Market Access Interest Group


i. Chris Ham, Kings Fund Blog. 2018. What has the STP or ICS ever done for me?. Available at:

ii. NHS England. 2017. Next steps on the NHS Five Year Forward View. Available at: .

iii. NHS England. 2018. Refreshing NHS Plans for 2018/19. Available at: .

iv. Denis Campbell, The Guardian. 2018. NHS deficit last year twice as high as expected, say sources. Available at: .

v. The Nuffield Trust. 2018. Nuffield Trust response to NHS financial figures. Available at: .

vii. Bolton NHS Foundation Trust. 2016. Operational Plan 1 April 2017 to 31 March 2019 Version 1.10. Available at: .

viii. Hull and East Yorkshire Hospitals NHS Trust. 2018. Agreement of the Aligned Incentives Contract. Available at: .

ix. Jennifer Dixon, BMJ. 2004. Payment by results—new financial flows in the NHS. Available at: .

x. NHS England. 2017. Innovation and Technology Payment (ITP) 2018/19. Available at: .