Why there’s no longer any value in activity based contracts

2 August 2018

By Chris Mahony

It was Oscar Wilde who defined a cynic as someone who knows the price of everything and the value of nothing.

If he was right, any cynics lurking within NHS management should be looking over their shoulders: the idea of value is on the march as population based contracting seeks new ways of measuring the impact of healthcare and related services.

PCC is planning events to guide commissioners as they seek to move from block and activity-based contracts with individual organisations to agreements spanning whole systems. Under such contracts, success is measured by defined outcomes for specific patient groups and entire populations that demonstrate good value for them and for taxpayers.

Developing workable metrics for such complex contracting arrangements has been one of the challenges facing those embracing this brave new world. Former GP, Dr Rupert Dunbar-Rees will be addressing that issue at the events, setting out the most recent work of Outcomes Based Healthcare (OBH), the organisation he founded in 2013, who specialise in population health outcomes measurement.

Earlier this year OBH launched a new set of outcomes measures that use a data-driven population segmentation approach to visualise the flows of people through increasing health needs over a life course. The measures reflect the age at which people enter a period of significant ill health in their lives. Being able to measure this in near real time means a new focus on extending the period that people are in good health: increasing people’s healthy lifespan – or “healthspan” – as a proportion of overall lifespan.

“The system is joining up data in a way it never did before – with the vanguards leading the way. We can use that to develop services and approaches that keep people in the healthy group for longer.

“Until now we have focused on measuring the impact of services on specific groups with long term conditions, or other serious, chronic conditions such as frailty. It is obviously important that they receive good services but now we can also focus on the currently healthy population, and prevent or delay the development of disease.

“We have not previously measured the things that keep people healthy and that will have a significant impact on both quality of life of millions of people, and the cost and sustainability of the health service.

“Our new healthspan metrics allow local commissioners to assess the healthy lifespans of their population by combining datasets from multiple care settings.”

Such measurement can ultimately help make the case for under-resourced public health services and measures to tackle the wider determinants of ill-health – including deprivation, poor education and poor housing.

“It challenges the assumption that healthcare alone can keep people healthy,” Dunbar-Rees says.

That could truly motivate integrated care systems and sustainability and transformation plan leaders to embrace the widest possible approach to commissioning for healthcare.

Dunbar-Rees says some progress has been made over recent years.

“In many places people are attempting to measure outcomes at a system level and everyone else accepts the need to do that. People are looking for ways of overcoming the barriers to measuring outcomes for populations. When I speak at events like those we’re planning with PCC, people are no longer asking if we should be doing this, but how we should do it and what progress has been made elsewhere.”

Dunbar-Rees emphasises that “population segmentation”, while it may not be the most intuitive term, will continue to provide the foundation for such approaches.

“Before you can measure the outcomes, for people who share similar needs, you have to determine the denominator population and that means population segmentation. Healthcare systems have been talking about segmentation for about a decade but that has focused on identifying the top percentage of their population who use the most NHS resources, commonly referred to as ‘risk stratification’.

“That doesn’t help commissioners much in terms of assessing outcomes because those people often do not have very much in common. We’ve developed metrics to understand outcomes for population groups with similar needs, by using longitudinal datasets and common patient identifiers to understand what outcomes people are experiencing. That in turn helps commissioners understand their population.”

While the latest thinking on segmentation and metrics is likely to be of great interest, the thorny issue of welding all these relatively new-fangled ideas into a serviceable contract remains a challenge for many.

Hill Dickinson partner Robert McGough will set out to participants some of the potential pitfalls and opportunities that STP leaders and integrated care systems (ICS) need to consider.

He says: “The move towards ICS and place-based commissioning gives a big push towards the capitation system and the outcome drivers in a value based contract that has system-wide measurement. We know that many areas are struggling with block contracts so it’s clear that a system based on tariffs or payment by results is unlikely to be the way forward.”

The service redesign and new delivery models everyone agrees are needed depend on new financial flows. They also depend on the contracts that enshrine both those new funding models and the metrics that confirm outcomes.

Find out more

Paying for what matters most: the future of outcomes based payments in healthcare https://bit.ly/2Mqtpku


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