The must-read stories and debate in health policy and leadership.

A quiet revolution in the NHS has happened. After decades of an internal market, NHS England has outlined new changes tying financial allocations and incentives to system-level performance instead. 

Over the past six months, providers had been allocated block funding based on activity from 2019/20 with top-ups and retrospective funding to support covid pressures, ensuring they financially break even during the crisis.

Now, in a letter accompanying funding envelopes for Integrated Care Systems and Sustainability and Transformation Partnerships around the country, NHSE outlined how health service finances will be system managed for the remainder of the year.

Systems will have not only control of the kitty (with all system costs to be met from its allocation) but funding will be linked to the performance of their member organisations, with some incentive payments or penalties for over/under performance at a system level.

Although introduced as part of a package of changes during first wave recovery and preparation for winter, how likely is it that this groundwork will be dumped from 2021/22 onwards? It seems that the moment to seize more control for systems, via the piggy bank, has been set.

And while the traditional purchaser-provider model has been waiting to exit stage left for years, there are still those who have questioned the pace of these root and branch alterations in the untested (and non-statutory) world of system working, particularly during covid.

Glen Burley, the chief executive of a group of three acute trusts in the West Midlands, branded the move “very risky” in response to HSJ’s coverage of the change and suggested a more traditional tariff performance would drive performance.

Highlighting another of his concerns he said: “We have very little experience of doing so at system level, so this is a very risky tactic in a very risky year.”

Systems will get until 5 October to submit new system plans, a relatively short period of time given the amount of delays systems and providers tolerated in the lead-up to allocations. And whether you agree with the system working, many say their funding envelopes have come up short.

How systems will manage the shortfalls will hinge on elective delivery, system co-ordination, how to reduce forecast costs and recover income, set, of course, against the threat of a second wave of covid-19.

One thing’s for certain: it’s a far cry from April when the NHS tore up its financial architecture to get cash flowing quickly for the crisis in-hand. At the time, the simplification triggered discussion among finance directors about how NHS financial management and governance could be improved to drive efficiency and stymie perverse funding incentives. 

It could well be that the next six months address those ambitions. Alternatively, as one FD told Daily Insight, it might turn next year into “a nightmare” not yet imagined…