Providers must not feel commissioning for outcomes deals require them to scale an impossible height in a single jump, says Matthew Custance

Commissioning for outcomes is about focusing on what matters, improving population health, helping people to achieve goals, and delivering a quality service. What’s not to like here? If we’re not commissioning for outcomes then what are we doing?

Experiences in Bedfordshire and now Peterborough and Cambridge, however, have shown that translating these ambitions into contracts is not easy. But what can we learn from recent experiences to help develop outcome-based commissioning approaches that work?

A key feature of both the Bedfordshire and the Peterborough and Cambridgeshire stories is that the process was procurement led. At the time the contract came out, the feeling among providers was that it looked like they were being asked to scale an impossible height in a single jump; and the idea that competition can drive value did not appear to be borne out, as the number of bidders in each case reduced to just one.

There are also indications in both cases that local systems may have been trying to move too far too fast in realising financial benefits. Certainly in the Peterborough and Cambridgeshire case the opinions expressed on behalf of local providers indicate support for the new model of integrated care and shared commitment to improving outcomes.

However, the contract has apparently been ‘handed back’ to commissioners because the providers couldn’t make it work financially. At the time of the procurement it is clear that several well qualified organisations were initially very keen to bid but became disillusioned and withdrew as the details became clear.

Unrealistic expectations

They simply did not believe that the service specified could be delivered within the budget on offer. The problem for commissioners is that the winning provider had the option of reverting back to a combination of payment by results and historical block funding because this is the default position set out in the applicable guidance and regulations.

This raises three questions:

  • Were the commissioners in these cases making unrealistic expectations of how far and how fast new care models would deliver improved outcomes and generate financial benefits?
  • Was too much risk passed too quickly?
  • Does the current regulatory framework make it too easy for providers to ‘hand back’ financial risk to commissioners when the going gets tough?

The first issue is a relatively obvious one. If the financial envelope is not sufficient for the services demanded either the procurement will fail quickly – or the provider will fail later.

In reflecting on the latter two questions it is helpful to look at other examples of outcome-based commissioning for potential insight. Over my 10 years working on NHS transactions, I am increasingly convinced that the NHS system is much better suited to risk sharing rather than direct risk transfer. Monitor’s published case studies on developments in capitated funding highlights examples in Cheshire West and Oxfordshire, where risk sharing is kept under review.

The review process is enhanced by open book accounting to aid transparency and governance structures that help facilitate collaboration and shared decision making. These processes are likely to result in a mature approach to risk sharing that is better able to cope with uncertainties and more resilient to breakdown in relationships.

The approach of New York State in developing value-based payments as part of its Medicaid transformation programme is also insightful. For example, New York State secured a ‘waiver’ from the federal government that modified the rules on payments as part of its strategy to incentivise reform. This has helped avoid the problem of providers being able to revert back to payment by results-style rules as and when they might choose.

However, New York’s approach to incentives involves a lot more ‘carrot’ than ‘stick’.

Providers are offered opt-in incentives to collaborate and transform care models.  They are then rewarded for reducing avoidable hospital use and, crucially, the hospitals themselves are rewarded for playing their part.

There are also some positive examples much closer to home in places such as Tyneside, Cornwall and Devon.  In these cases local commissioners are developing outcome-based contracts to secure social finance for investing in new care models for frail elderly care, type II diabetes and alcohol treatment.

There are lessons from history that tell us that alternatives to outcome-based commissioning are unlikely to enable the scale of transformation care that we need. There are also causes for optimism when we see evidence of examples at home and abroad that do appear to be working – and that is surely why we must persevere, but perhaps at a more realistic pace of change.

Matthew Custance is a partner from KPMG specialising in major transactions in the public sector.