One of England’s biggest foundation trusts has agreed a contract outside of the national tariff system for the past two years, its chief executive has revealed.

Speaking at the NHS Confederation conference on Thursday, Mark Newbold said Heart of England Foundation Trust was now into its second year of operating a risk sharing agreement with its commissioners.

He told delegates the trust had received 1.5 per cent growth in its funding which it had been able to invest in commissioning out of hospital care. It had agreed to topslice £4m from its budget for a risk pool.

Dr Newbold said: “A large part of our plans for next winter involve commissioning out-of-hospital capacity.

“We see the future for hospitals as not necessarily sitting back and contracting and focusing on the small segment of the pathway that is in hospital but broadening of the pathway to care at home.

“[The contract] means we can start the year with certainty about our income but we are taking a risk on activity. The commissioners are taking a risk as they don’t have the same levers [of fines and contract penalties].”

NHS England and Monitor acknowledged increasing numbers of NHS organisations were agreeing contracts outside of the payment by results system when they launched a consultation on reforming the payment system last month. However, it is rare for organisations to talk publicly about it.

Dr Newbold said there had been “nervousness” from the commissioners about losing their levers with the trust and concern from Monitor about the risk to the trust if activity was significantly above plan. However, he said the benefits outweighed the disadvantages and he was “very pleased” with how it had worked.

“Our experience has been that the biggest benefit [is that] it has allowed us, an acute trust, to become a system player because we are no longer incentivised to admit patients,” he said.

“I don’t believe hospitals deliberately admitted patients to get the money but what they didn’t do [under PbR] was invest in other services.”

He said the trust had altered its cost improvement plan as a result of the move away from PbR.

“Instead of talking about length of stay and ward closures, which doesn’t feel realistic after last winter, we are replacing a bed with a care package out of hospital,” he said.

“The levers in the system are all wrong, you actually have to bend and break the rules.”

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