• New guidance published to help mental health sector move away from block contracts
  • Contracts should be either a capitated or episodic and have a proportion of payment linked to outcomes and targets
  • Warning that CCGs withholding outcome based payments from struggling organisations risk creating an “adversarial relationship”

Local commissioners have been warned that withholding payments from struggling mental health providers under new outcome based contracts risks creating an “adversarial relationship”.

NHS England and NHS Improvement published guidance this week to help mental health commissioners and providers draw up new contracts with a proportion of payments linked to outcomes and new waiting time targets.

The documents follow the national tariff proposals for 2017-19, published in August, which said commissioners and providers must move away from block contracts to capitation or episode of care arrangements.

Providers and clinical commissioning groups are expected to sign the new contracts by 23 December to come into force next April.

The new technical guidance says commissioners and providers should:

  • pick between three and seven outcome measures with between six and 15 indicators to link against payments;
  • agree the proportion of payment linked to outcomes, with the recommended percentage being 2-4 per cent;
  • work out the weight of payment linked to each indicator; and
  • decide how the outcome based payments will be structured.

The document says CCGs and providers may structure the outcome based funding as either a bonus for achieving the outcomes on top of a payment that reimburses for “efficient costs of providing the services”; or withholding part of the cash that reimburses for “efficient costs” until the outcomes are met.

The payments can be made at the end of the financial year, or – as recommended in the new guidance – on a periodic basis to improve morale, “reinforce positive behaviour” and create “smoother” cash flow to build on improvement.

However, the national bodies warn that treating the outcome based payments as withheld funds risks:

  • withholding critical cash needed for delivering services, which could demotivate struggling providers and make it more challenging to improve; or
  • creating an adversarial relationship between providers and commissioners, undermining collaborative working.

The document adds: “A quality and outcome payment would ideally comprise a small proportion of the total payment to an organisation. Quality and outcome payments are usually most effective as a bonus over and above payment for efficient cost recovery of services.

“A small bonus would not undermine financial viability, but can help marshal support and leadership to meet stated objectives.

“Where organisations are in deficit, quality and outcome payments may cease to be a ‘bonus’ and the signal may be distorted or lost.”

Commissioners will be allowed to decide how any unpaid quality and outcome payments are spent in their health economies.

NHS England national clinical director for mental health Professor Tim Kendall said the timescale for implementing the new contracts was not too tight and added: “This is immanently manageable, most trusts have been shadowing the use of clusters and episodic payments for the last few years.

“Commissioners have been looking at this for some time. I’m not sure this is going to be a major overhaul.”

Professor Kendall also said the new contracts will also help CCGs free up more cash to implement the recommendations of the Mental Health Taskforce.

He added: “It will be very much in the CCG’s interest to get this money freed up so they can invest it in later years. That will be made easier with these new contracts.”