Making money work in the health and care system

01 June 2018


Money talks. However, in the health and care system at the moment, it’s not always clear what it’s trying to say. Providers and systems are obliged to deal with a myriad of complex funding mechanisms which incentivise, at times, contradictory behaviours.

A large amount of good thinking has been done in recent years to clarify the direction of the health and care system in England, both within the NHS and by others (including the PwC report Redrawing the Health and Social Care Architecture). And we have seen changes such as some devolution of health and care budgets and the introduction of Integrated Care Systems that are a definite step in the right direction for patients, those accessing social care services and those providing care.

However, a stated desire to move focus towards prevention, to build out of hospital options for care, and to increase innovation and use of technology has not been followed by changes to payment systems which drive these behaviours. Instead, payment by results still pushes activity towards acute settings, and fragmentation in how funding flows from the centre to organisations builds confusion.

Over the last nine months, in collaboration with the Healthcare Financial Management Association (HFMA) we’ve been working with over 300 individuals in the health and care service in England, through round tables, interviews, and polling – from frontline finance teams to the Secretary of State – to understand current attitudes, and how funding flows can catch up with the changing direction of the health and care system. We’ve published our findings in our new report Making money work in the health and care system.


 There is appetite for change, even in a sector which often feels like it is suffering from change fatigue. 76% of those we polled felt that the current funding mechanisms weren’t fit for purpose. 83% felt this meant a conflict between short term cost saving and long term sustainability. 78% believed budgets for health care, social care and public health should be pooled. And – importantly – 70% felt changes to integrate systems would improve value for patients.

Often the challenges in the care system are presented as a problem with a clear diagnosis but no cure. We believe that there are a number of changes that could be implemented – even in an environment with limited scope for legislative change and a political agenda focused on Brexit – in order to give those working in the system the clarity they need to move towards a system which works better for people receiving care.

We have structured our recommendations in two phases. The first being those we believe are deliverable within a one-two year time horizon (short term), and the second being those which are likely to take longer to implement:

Short term:

  • The capital funding system needs to be redesigned
  •  Internal NHS debt should be converted to Public Dividend Capital (PDC)
  •  Replace organisation-based control totals with system-wide targets
  •  Accelerate the National Expansion Plan for personal health budgets.

Long term:

  •  Payment systems for healthcare delivery should be redesigned to reward outcomes rather than volume of activity
  •  When a long term financial settlement is reached for the NHS, the same should happen for local health economies to allow them to plan and invest for the long term
  •  Local health, social care and public health budgets should be brought closer together using the existing statutory mechanisms
  •  Undertake a detailed assessment as to how financial incentives for staff can be used to improve cross-organisation working.

 The question often asked of the health and care system is “is there enough money?”. A 70th birthday present to the NHS - a new injection of money - would be welcome news for patients, but only if it is spent in the right way. Unless there is change to the way money flows in the health and care system, there is a risk that additional money will not create the additional value intended.