Some commissioners are exploring new types of contract to increase care out of hospital, but moves to pay for care based on patient outcomes are too important to rush, writes John Myatt
We can't afford to rush community care contracts
Often neglected, community services have been historically financed though a block or fixed contract, irrespective of activity volumes, so funding and activity may have fallen out of kilter.
‘Services delivered in the community are much vaunted as a solution’
Furthermore, the community budget may have been used to balance the wider health economy books.
People who work in community organisations have often experienced multiple reorganisations and transfers to new bodies inside and outside the NHS. Investment in IT, facilities and continuous professional development is patchy.
Morale can be low and tightening budgets can militate against attempts to deliver care for patients in the community.
Services delivered in the community are much vaunted as a solution. Increasing the funding levels attached to community based healthcare can be a cost effective way to cope with increasing demand, by encouraging timely transfer out of hospital when patients are fit to leave.
No room for waste
After a decade long funding freeze there is no place for waste. Many stakeholders anticipate huge financial pressure hitting during 2015-16.
In its Closing the NHS Funding Gap report in October, Monitor estimated that between a third and a half of required savings (£8.9bn-£16.1bn) can be loosely assigned to improving productivity by, for example, reducing length of stay and caring for people in the most cost effective setting.
‘“Community” should not be seen as a panacea for all inherited cost pressures’
Optimising the flow of patients across health economies, while avoiding unnecessary moves, is desirable. Treating people in the setting that delivers greatest value based on a calculation of outcomes against costs is a good thing.
That said, “community” should not be seen as a panacea for all inherited cost pressures. Decommissioning an existing bed base can carry sizeable costs for only marginal gain.
To accelerate the delivery of care out of hospital, some commissioners, learning from US managed care organisations, are exploring contracts that span multiple care settings and incorporate payment to the contract holder based on the delivery of defined outcomes for a specific population.
The target budget for a catchment population is created using a capitation formula weighted on need. The contracts might focus on a range of defined services for strata of the population such as the frail elderly, or focus on a clinical service area, such as musculoskeletal.
The contracts being considered are many and varied. Some insist on a managed care organisation: a prime contractor that is responsible for care coordination and service planning, but not for the delivery of care.
Others allow the prime contractor to take a fuller role in coordinating and delivering care, as an accountable care organisation. In some ways akin to a wider and deeper block contract, the contract owner must isolate the activities that will allow it to deliver the prescribed outcomes within agreed cost parameters.
The contractor might invest in data collection, patient records, population segmentation and prevention initiatives to reduce or avoid costly episodes of care. It would be expected to optimise patient pathways, develop evidence based health improvement programmes and invest in coordinating the care of patients to ensure clinicians follow agreed treatment protocols.
Successful providers will need an excellent grasp of service utilisation levels, and a willingness and ability to change and redesign services to realise value.
Although there are many parallels, US managed care organisations operate within a different healthcare system. They consume 17.7 per cent of GDP, compared with the 9.4 per cent spent in the UK, and operate within a legislative framework optimised for managed care, so the opportunity for cost containment is high.
They work in a competitive environment with a range of provider systems. These include chains of hospitals, providers spanning primary and acute care, and specialist organisations that focus solely on, for instance, outpatient surgery.
Population based management is sophisticated and requires exceptionally agile contracts sharing risk and gain. Managed care organisations bring a medical evidence based commercial edge to their work.
‘Access to an integrated patient record and the ability to coordinate care are likely to be prerequisites for success’
Those who win integrated care contracts in the UK will need a range of skills to be successful. They will need to be able to understand and monitor service use levels, assess populations and quantify demand risk as an actuary might.
They will need to know the interventions that work, measure their impact and invest in those that deliver greatest value.
In addition, they will need to be able to agree subcontracts with other provider organisations and manage their performance to deliver benchmarked service levels.
They will need to have confidence that other providers can engage their workforce to achieve required goals.
Access to an integrated patient record and the ability to coordinate patient care through multiple channels are likely to be prerequisites for success.
For an outcome based contractor, the risks are hard to quantify. There is potential for a funding shortfall that might have an impact on service access or quality.
‘Gaps in data may compromise decision making’
Investment is needed and should be directed towards the interventions that deliver most value. Gaps in data may compromise decision making.
Some contracts may be too short to generate the required return on the initial investment.
Future demand will be hard to quantify so prospective contract owners need to evaluate this risk before committing.
Early adopter contracts may lack the full range of levers that a contract owner would want to access in order to deliver the level of change needed.
A contract owner tasked with improving outcomes for care of frail older people when family medicine and local authority social care services are out of scope can clearly only go so far in delivering improvements.
Few and far between
The market for contract owners is new and embryonic. Few organisations, saving large local incumbents or large private entities, will be able to share the expected level of risk with commissioners. Fewer still have the know-how to make a realistic go of such a contract.
The provider landscape is fragmented and I see little evidence of widespread appetite for new market entrants. However, I do envisage consolidation with larger state-owned providers, spanning care settings and with a wider geographic reach, emerging over the next decade.
Equally, new commissioners, themselves just bedding down, are grappling with and understanding the level of complexity involved before embarking on contracts of this type.
Few commissioners will have the skills and experience in house and fewer still the resources to buy them in, probably from overseas, that they would need to for a contract that vendor and contract owner could successfully meet.
Politicians and commissioners must also consider the reaction from patients. How might NHS users react to potential pre-authorisation by a lead provider, or the coordination or rationing of services by a managed care organisation based on agreed treatment protocols?
Patients may feel their choice has been compromised with the award of contracts to single prime providers buying care on their behalf. The care on offer may vary substantially depending on whether they sit within or without a defined population.
‘To meet the needs of our population affordably, standardisation based on evidence of what works and what delivers value is essential’
The argument that the prime provider was procured on their behalf may not suffice and, certainly, proactive communication would be required.
I am a devotee of services designed around the specific needs of the individual. Advances in genomic profiling and individualised medicine mean healthcare will become more personalised.
I recall a compelling presentation that I heard on self-care, which explored the psychology of receiving a diagnosis, how the person might react in different ways and how this would directly impact their likelihood to self-care.
We are all individuals living within family and societal groups, and people often make choices others can find hard to rationalise. However, to meet the needs of our population affordably, standardisation based on evidence of what works and what delivers value is essential.
Organising funding and incentives around groups of individuals is important and worthwhile.
The risk of difficulties in implementation is potentially high. The need for immediate savings presents a danger of moving quickly to full risk sharing arrangements based on enhancing outcomes and containing demand.
Contracts that lack definition, with key performance indicators that may or may not relate to genuine outcomes, could lead to contract owners being unable to realise the ambitions of their contracts – either because the baseline was inaccurately captured or poorly understood, the timescales were too brisk, or because changes needed are unpopular.
This would be a great shame, and set us backwards on a journey towards new arrangements to pay for healthcare based on outcomes for patients.
I would advocate pragmatism. Commissioners might consider the pace of change that can be achieved if it is to be sustained.
Letting longer contracts to prime providers, working in partnership with those with managed care experience will allow for knowledge transfer and enough time to make change happen. They will complement likely provider consolidation among hospitals and across care settings.
Ensuring a full enough scope that incorporates primary and social care where relevant will allow enough levers of control. Moves to pay for care based on patient outcomes are too important to rush.
John Myatt is strategic development director of Serco Healthcare. He would like to thank Dr Zoltan Varga and Dr Charles Alessi for their guidance in the drafting of this article.