£20bn of funding has been secured for the NHS, can we ensure that funding supports integration and not the ever-growing deficit?

Authors: Bev Evans, Guy Cochrane
Published: 29 June 2018

The generic argument against increased funding for the NHS is based on the idea that the NHS has plenty of money, it’s just not spending it in the right way. Critics pointed to previous funding increases, such as under Blair, which saw productivity rates plummet. In contrast, during the leanest funding period in NHS history, between 2011 and 2015, productivity levels rose to 1.6% - double the long-term average. Whether you agree with the premise that the NHS has enough money or not, there is a clear case for moving into the new funding period with a renewed focus on productivity, to ensure the funds available are spent in the best way possible.

Identifying the precise driver of improved productivity during this period is difficult. On the one hand, a lack of focus on cost reduction during the Blair and Brown years resulted in a proliferation of ‘low hanging fruit’ – easy targets that through relatively simple actions could yield significant savings. However, credit must also be given to the payment by results (PbR) funding mechanism. Funding mechanisms are central to incentivising organisational behaviours, and PbR, which saw Trusts paid by the unit of activity, reduced waiting lists by increasing through-put, encouraging more competition, and inviting greater capacity from the private sector. This came alongside an efficiency requirement, which providers had to meet if they were to be paid in full.


"The system-wide approach needed is constrained by current arrangements, which encourage competition."


Now, however, the priorities of the NHS have changed. Eight years of funding at a level well below the long-run average and an ageing population have made it clear that far greater integration is needed. The key operational challenges, such as the need to improve flow, reduce the length of stay, reduce DToCs and improve A&E attendances are all proving difficult to overcome, as the system-wide approach needed is constrained by current arrangements, which encourage competition.

Therefore, far greater integration between primary, community, acute and social services is needed; however, the ability to do this without changing funding flows is severely hampered. Currently, PbR means we have a system that incentivises hospital-based care and does not support freeing up or transfer of resources to invest in any of these areas, not to mention the level of investment needed in Mental Health. Ensuring that the money is spent in the best way possible within this environment is proving extremely difficult.

Simon Stevens has recognised this, and during his speech at Confed18 made it clear that “there is no plan B”.  Capitated budgets, Accountable Care Organisations, Integrated Care Systems are all ways of joining the funds together to support the stated objective of Integrated Care.  To really make the money work though, we need to change the underlying notion of competition and focus on how to use the resources available to improve outcomes and reduce cost within a system. Good work has been seen in some areas, including those systems we have worked with – Devon’s recovery has been driven by the system working, while some parts of Kent & Medway have an aligned incentive contract.  Examples of these arrangements are few and far between, and this is largely due that regulators are not always supportive, and sometimes directly challenge attempts to work in a more integrated manner.

One way of making sure the money is spent in the best way possible is to create a dedicated transformation fund. We have to learn the lessons of the past and realise that giving something a name does make it behave in a certain way – the Sustainability and Transformation Fund (renamed this year to be the Provider Sustainability Fund) was a prime example of this.  We need to ensure that the additional resources for the NHS are used to build something that will truly be sustainable, as the demand for health and care grows beyond the NHS 70th birthday. 


"More effort must be given to establishing incentives that encourage investment in care outside of the hospital"


During a time of real financial challenge for the NHS, with increasing deficits in both provider and commissioner sectors, consideration must be given to ring-fencing funds for the transformation needed. Alongside this, more effort must be given to establishing incentives that encourage investment in care outside of the hospital, so that the flow inside the hospital can be improved. This work must be done, not in a knee-jerk reactionary way, but one that starts to change the public perception of healthcare. The hearts and minds change has to involve patients, staff and the public, to move from a conception of health that focuses on buildings to one that is a combination of self-care and care in the right place, from the right people.  This will not happen overnight and the money is not a magic bullet but, if used well, can be a real power for good.  

The announcement may not be all that was hoped for or even, arguably, all that is needed. Additionally, the detail of where the money will come from and how it will be issued is to be worked through.  We should not spend time complaining about the amount of money but instead seize the moment and focus on driving the transformation to build sustainable services. While healthcare is at the forefront of the public consciousness, we much leverage this attention to utilise the capital resources and social care resources to develop a health and care system that will be looked back as being truly transformational. If we do this, there is a real opportunity to makes sure the NHS 70th birthday becomes as celebrated as its inception.