Mental health providers could be required to adopt new payment systems from April next year, in a bid by Monitor to finally move the sector away from block contract funding.

  • Capitated, “year of care” or episodic payments could be mandated for mental health
  • Changes could come into effect by April
  • Monitor’s flexibility welcomed by mental health network

The regulator has launched a consultation on plans to force a change in payment methods which would mean mental health providers and commissioners would have to adopt either year of care, episode of treatment or capitation payment systems.

In a letter to the sector, Monitor also signals a move away from commissioners paying for services based on the clustering of mental health patients according to type and severity of illness.

Stephen Dalton

Mental health ‘can’t carry on with block contracts’, Stephen Dalton said

It says: “Some local health economies are using mental healthcare cluster data as a payment currency, with payment based on cluster days or episode of care. However, we believe that payment based on cluster days does not best incentivise early intervention and recovery focused care. Using an episode of care approach, where appropriate, would provide better incentives, and we believe the sector is capable of implementing this type of payment approach in 2016-17.”

Monitor made clear its intention to shift the mental health system away from block contracts in proposals for the 2015-16 tariff and said commissioners should either use the clustering system or an alternative system.

Block contracts have long been blamed for cuts to mental health funding. However, a move to a payment by results system has been beset by delays in recent years amid concerns about the quality of mental health cluster data designed to support a payment by result system.

Launching the consultation this week Monitor said the changes would “increase equity of access to evidence based services and reward quality and outcomes.”

It said block contracts did not do this and “do not incentivise delivery of the objectives in the Five Year Forward View.”

It added that whatever method was chosen by commissioners and providers, “it would be important to maintain focus on delivery of clinically appropriate care and the outcomes patients need”. Therefore, payment would be linked to the achievement of agreed quality and outcome standards. Providers will be able to use a mix of methods and agree ‘gain and loss’ deals with commissioners.

The consultation, which ends on 19 November, is seeking views on which method providers would be most likely to adopt in 2016-17 and what the key challenges to implementation would be.

Stephen Dalton, chief executive of the NHS Confederation’s Mental Health Network, told HSJ he welcomed Monitor’s approach.

“They are keeping the door open on a number of different options rather than being prescriptive,” he said.

“The bottom line seems to be that mental health can’t carry on with block contracts. We need a more sophisticated arrangement, but Monitor isn’t going to prescribe what providers have to do.

“I welcome the flexibility. We need to avoid the trap of talking about a payment system for mental health. A year of care might work for long term conditions but you might want capitated budgets for episodic care or elective [Improving Access to Psychological Therapies] treatments. I think this approach will be welcome with most people.”