north west london · case study 6: acos within medicare .....41 7. agreeing contract...
TRANSCRIPT
CRITICAL THINKING AT THE CRITICAL TIMETM
13 July 2016
Developing
accountable care
partnerships for
North West London
Finance, contracting and governance
arrangements
Contents
1. EXECUTIVE SUMMARY .............................................................................................................. 1
2. INTRODUCTION ........................................................................................................................ 4
BACKGROUND ......................................................................................................................................... 4 LIMITATIONS TO THE SCOPE OF OUR WORK .................................................................................................... 5 STRUCTURE OF THIS REPORT ....................................................................................................................... 5
3. ACCOUNTABLE CARE PARTNERSHIPS – AN INTRODUCTION ...................................................... 6
WHAT IS MEANT BY ‘ACCOUNTABLE CARE’? .................................................................................................. 6 ACCOUNTABLE VERSUS INTEGRATED CARE ..................................................................................................... 7 ACCOUNTABLE CARE IN THE US .................................................................................................................. 9 ACCOUNTABLE CARE IN THE UK .................................................................................................................. 9 ACCOUNTABLE CARE IN NORTH WEST LONDON ........................................................................................... 11 OUR WORK WITH NWL LOCALITIES ........................................................................................................... 11
West London ................................................................................................................................. 12 Hillingdon ...................................................................................................................................... 13 Hammersmith & Fulham ............................................................................................................... 13 Observations ................................................................................................................................. 14
4. PRINCIPLES UNDERPINNING AN ACP ...................................................................................... 15
INTRODUCTION ...................................................................................................................................... 15 DEVELOPING WORKING AGREEMENTS/PRINCIPLES ........................................................................................ 15
Principles relating to sharing of risks (and rewards) ..................................................................... 16 EXAMPLES OF PRINCIPLES/WORKING AGREEMENTS FROM OTHER ACOS/ACPS .................................................. 18
Case Study 1: West London Whole Systems Integrated Care Heads of Agreement ...................... 18 Case Study 2: NHS England template alliance agreement ............................................................ 18
5. DEFINING THE CONTRACTUAL RELATIONSHIP AND GOVERNANCE BETWEEN ACP PARTNERS 20
CONTRACT COVERAGE ............................................................................................................................. 22 CONTRACT VEHICLE ................................................................................................................................ 23 CONTRACT DESIGN ................................................................................................................................. 24 CONTRACT IMPLEMENTATION ................................................................................................................... 25 FOCUS OF THIS REPORT ........................................................................................................................... 25
6. MANAGING FINANCIAL RISK WITHIN THE ACP ........................................................................ 27
EX-ANTE FLOW OF FUNDS BETWEEN PARTIES ............................................................................................... 27 Overall funding flows between commissioners and the ACP ........................................................ 27 Funding flows between ACP partners ........................................................................................... 30 a) How much of the overall contract value is each provider entitled to? .................................. 30 b) What is the payment mechanism?........................................................................................ 31
RISK-SHARE AGREEMENTS ........................................................................................................................ 33 (1) Agree (where possible) allocation of risks between commissioner(s) and ACP ................ 34 (2) Agree risk share between CCG and provider for “residual risks” ...................................... 35 (3) Agree allocation of risks between providers ..................................................................... 35
(4) Set KPIs for identifying and applying risk share ................................................................ 37 (5) Agree backstop sharing arrangements ............................................................................. 37
CASE STUDIES: CONTRACTING FOR FINANCIAL RISK IN OTHER HEALTH ECONOMIES ............................................... 38 Case Study 3: Kaiser Permanente, California, USA ........................................................................ 38 Case Study 4: Uniting Care contract, Cambridgeshire and Peterborough, UK .............................. 39 Case Study 5: MSK Collaboration .................................................................................................. 40 Case Study 6: ACOs within Medicare ............................................................................................ 41
7. AGREEING CONTRACT GOVERNANCE ...................................................................................... 43
OVERVIEW............................................................................................................................................ 43 CONTRACTUAL JOINT VENTURE (MOU OR ALLIANCE AGREEMENT) .................................................................. 46 CORPORATE VEHICLE (CORPORATE JOINT VENTURES (SERVICE INTEGRATOR OR SERVICE PROVIDER) AND WHOLLY OWNED
SUBSIDIARIES) ....................................................................................................................................... 48 LEAD PROVIDER MODEL ........................................................................................................................... 49 CASE STUDIES: ESTABLISHING GOVERNANCE ARRANGEMENTS IN OTHER HEALTH ECONOMIES ................................ 49
Case Study 7: Alliance contracting in the NHS .............................................................................. 49 Case Study 8: Northumbria Primary Care ..................................................................................... 52 Case Study 9: MSK Partnership Collaboration .............................................................................. 54
8. CONCLUSIONS ......................................................................................................................... 57
LOCALITY SITE EXPERIENCES ...................................................................................................................... 57
APPENDICES ................................................................................................................................... 61
APPENDIX 1 .......................................................................................................................................... 62 APPENDIX 2 .......................................................................................................................................... 63
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1. Executive summary
1.1 The North West London (NWL) collaboration of eight Clinical Commissioning Groups
(CCGs) is currently in the process of transforming the way in which healthcare is
delivered in NWL localities. Key to this transformation is the creation of Accountable
Care Partnerships (ACPs). These partnerships intend to bring together separate
healthcare organisations and, in so doing, encourage greater integration in the
delivery of healthcare between the currently separated providers.
1.2 Greater organisational integration, combined with the appropriate contractual
structures, holds out the prospect of delivering healthcare in ways which reduce the
need for hospital care. In turn, because hospital care, and particularly unplanned
care, is costly and tends to be associated with worse outcomes for patients, this
means that ACPs offer the prospect of delivering higher quality healthcare for lower
cost.
1.3 However, moving from the current pattern of delivery and contractual structures to
new ACPs is not straightforward. It requires changes to models of healthcare delivery,
underlying contracts and, perhaps most fundamentally, a reallocation of risks within
the healthcare system. A further complication is that within any healthcare system
there are a raft of different stakeholders, each with differing objectives and
underlying interests.
1.4 Given the overarching objective of moving to ACPs, NWL commissioned FTI Consulting
LLP (FTI Consulting) and DAC Beachcroft LLP (DAC Beachcroft) to assist with six
specific topics that NWL considered its constituent organisations were having
problems resolving in the transition to ACPs. These six areas related primarily to
financial and governance issues.
1.5 At the outset of our work, however, it became clear that, in practice, the NWL
localities were not at a stage of ACP development to consider, in a meaningful way,
the six issues that we were commissioned to assist on. Hence, we had to flex our
approach to focus on issues that were relevant to the three specific health economies
in the NWL region – Hillingdon, West London, and Hammersmith & Fulham (H&F) –
with a view to moving the debate forward.
1.6 This report presents our findings. As well as focusing on the specific issues in each
locality we also set out our views on the six issues we were originally commissioned to
consider.
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1.7 Our key findings are:
Before the localities can engage in meaningful discussion of the detail of the six
specific areas that are the focus of this engagement, further substantive
preparatory work is needed. This has two key aspects – first commissioners
need to clarify, specifically and unambiguously, the service they wish to
commission through the ACP and, second, they need to specify the nature, level
and proportion of risks within the system that will be reallocated to the ACP.
Whilst a great deal of preparatory discussion has been held with a wide group of
stakeholders in NWL, and there have been benefits to this in terms of raising
stakeholder awareness and understanding, it seems to us that this is rapidly
reaching the point of diminishing marginal benefits.
Instead, our very firm view is that each locality should move forward with a
“proof of concept” live running of an ACP and, most importantly, the underlying
contract to support the ACP. Only by actually working through the issues in
developing an ACP contract for real is any substantive progress, in our view,
likely to be made.
The localities that we worked with now appear ready to take this step – having
identified, at an initial level, the cohort of the population that they wish to be
served by an ACP. As such, we have developed a detailed work plan to enable
the localities to understand the steps that they need to take to deliver an ACP to
serve that cohort of the population. Our expectation is that, when the costs and
risks of serving that cohort of the population are fully identified, there may well
be a need to adjust the associated risk and cost profile. However, this in itself
will be a useful learning exercise.
1.8 There were three issues that arose in each of our locality discussions that are worth
emphasising in this executive summary:
First, there was extensive discussion of the need to develop a “model of care” to
deliver integrated care under a new contractual structure. There were some who
strongly advocated that this needs to be done prior to establishing the
appropriate contractual form. A significant advantage of this approach is that it
encourages clinical engagement in the new care model from the outset.
However, it became increasingly clear that the opposite approach may be
preferable in some circumstances. Indeed it can be argued that that the
contractual form is a prerequisite to move to an ACP, whereas the model of care
will, by necessity, evolve over time both in the run up to contract go-live and over
the course of the contract. The obvious and significant risk of requiring a fully
developed integrated model of care to be active prior to contract go-live is that
this goal is never agreed by the stakeholders and, hence, derails the whole
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process of moving to an ACP. By contrast, once the contract is in place,
development of a model care is financially incentivised and therefore much
more likely to deliver agreement by stakeholders. In short, a new contractual
form can be an important “agent of change” in the system to deliver a new
model of care.
Second, there was also discussion of “shadow running”, in which an ACP is
developed and the financial consequences in some way imagined what might
have happened had the contract actually been in place. The view proposed by
us and generally agreed upon was that this is potentially counterproductive for
two reasons. First, running a shadow programme means that incentives under
the new contract will not actually “bite”. This means that, in practice, the
contract cannot be the required “agent of change” to deliver the new model of
care. Second, and worse, because there are no new incentives in the system to
deliver new models of care, there is a risk that at the end of the shadow
programme when no improvement has occurred an incorrect conclusion is
drawn that ACPs are likely to be ineffective. Hence, running a shadow
programme risks derailing the entire ACP process. In short, there has to be
material change in the risks and financial flows around the system to deliver
change. A shadow programme, by definition, cannot do this.
Third, there will need to be greater understanding of each individual set of
stakeholders’ current financial status, risk appetite and likely impact of the
changes. For example, acute care providers might need to have financial
safeguards in place as activity reduces. Equally, the different contractual
financial position of GPs will need to be taken into account and to encourage
participation upside and downside risks may need to be adjusted
commensurately.
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2. Introduction
2.1 This report has been prepared by FTI Consulting LLP and DAC Beachcroft LLP for the
NWL collaboration of CCGs. We have been asked to advise on the development of
thinking in relation to ACPs. We set out our instructions in more detail below.
Background
2.2 The eight CCGs in North West London are aiming to commission via ACPs from 2018
(see paragraph 2.7). As such, there has been substantive consideration of some of
the financial and governance arrangements that would be used to underpin these
Partnerships.
2.3 FTI Consulting and DAC Beachcroft have been jointly commissioned by the NWL CCGs
to help three particular localities within the North West London area to develop
further their thinking on ACPs. We have been asked to consider six specific areas.
These are:
Internal funding flows and 'internal commissioning';
Risk and reward arrangements;
Collective decision-making (e.g. voting rights) and dispute resolution procedures;
Holding members of the partnership to account for both quality and outcomes;
Contribution of people/resources to manage the ACP; and
Liabilities of individual organisations should the ACP not succeed.
2.4 Considering these six areas for the three localities has allowed us to draw together
thinking that should be useful for other areas in England that are beginning to
consider commissioning via ACPs. This report summarises that thinking. Where
relevant, we include case studies and examples from our work with NWL and also,
case studies from other parts of England and internationally.
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Limitations to the scope of our work
2.5 This report has been written using work developed in assisting the three localities in
NWL in thinking about developing ACPs. It is not intended to be a comprehensive
guide to developing an ACP and our work has been limited to considering the six
areas commissioned by NWL.
Structure of this report
2.6 This report has six further sections. It is structured as follows:
Section 2: Accountable Care Partnerships – an introduction;
Section 3: Principles underpinning an ACP;
Section 4: Defining the contractual relationship and governance between ACP
partners;
Section 5: Managing financial risk within the ACP;
Section 6: Agreeing contract governance; and
Section 7: Conclusions.
2.7 Our report also has two Appendices:
Appendix 1, which sets out a high-level roadmap for establishing finance and
governance arrangements for an ACP; and
Appendix 2 details a workplan for establishing finance and governance
arrangements for ACPs.
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3. Accountable Care Partnerships – an introduction
3.1 This section introduces the concept of ‘accountable care’ and describes how it differs
from integrated care. We then discuss the development and nature of accountable
care organisations in the US and UK. Finally, we describe the development of ACPs in
NWL and how our work has supported this process.
What is meant by ‘accountable care’?
3.2 Under ‘accountable care’ a provider organisation (or group of organisations) that is
able to influence the type and volume of care delivered to patients undertakes – via
contractual arrangements with commissioners of healthcare – to deliver a set of
health outcomes for a defined population. This contrasts to other types of healthcare
commissioning which might, for example, contract for specified services (‘inputs’)
(often to an unspecified population).
3.3 By contracting for outcomes (rather than inputs) a provider organisation (or group of
organisations) that is able to influence the type and volume of care delivered to
patients is thus incentivised to stop providing unnecessary or duplicative services
that do not contribute towards the improvement of (contractually specified) patient
outcomes. A reduction in activity coupled with the development of preventative
interventions thus has the potential to reduce the cost of care while maintaining or
enhancing the quality of care provided to patients and improving the overall health of
the population.
3.4 Accountable care is typically underpinned by an outcomes-based contract (OBC) (also
referred to as a value-based contract (VBC)) for a specified population. This
population may be the entire population in a specified geographic area or a subset of
that population segmented by a characteristic of that population (such as age) or by
condition (such as diabetes) or both. Selecting appropriate outcome metrics for
inclusion in the contract is paramount to the success of the model to avoid placing
undue emphasis on costs and financial delivery of the accountable care organisation.
Including outcome measures allows commissioning organisations to measure delivery
of quality standards in addition to financial performance.
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3.5 Providers working within an accountable care framework can take different
organisational forms. In the USA, so-called Accountable Care Organisations (ACOs)
are typically integrated organisations led by primary care physicians and supported by
secondary and community care. In Valencia, Spain, Ribera Salud Grupo, which
operates Hospital de la Ribera in Alzira, is an integrated, population health
management organisation delivering under a 15 year capitated contract. The ‘Alzira
model’ retains the public nature of the health service by contracting out the running
and management of the health service to a concessionaire while retaining public
property, public financing and public control.
3.6 While the precise organisational form of accountable care organisations will vary,
most organisations will have a formalised structure that enables them to build
leadership, introduce governance, and pursue a joint strategy to serve the needs of
the cohort or population that they are responsible for. The organisations do not
necessarily merge or create new entities, but rather change the way in which they
work together to deliver healthcare services to meet the needs of the population that
they are responsible for and, importantly, the way in which they are reimbursed.
3.7 In North West London, the concept of an ACP has developed. This term describes a
group of organisations coming together to deliver care to a specified cohort of
patients under a capitated contract, whilst maintaining their separate organisational
forms and identities. We discuss the NWL vision further later in this section.
Accountable versus integrated care
3.8 While integration is a common element of accountable care, provider organisations
working within an accountable care framework are not equivalent to Integrated Care
Organisations (‘ICOs’). ICOs are care providers who deliver a wide range of health
services including primary, secondary, and community care through a single
organisational structure. ICOs are expected to deliver better quality care more
efficiently by integrating services and avoiding duplication and delays that may be
caused by hand-overs between multiple providers operating along the same patient
pathway. ICOs have typically been formed through vertical collaborations or mergers
of previously separate organisations offering distinct services. ICOs do not necessarily
operate under an outcomes-based or value-based contract. It is possible that the
formation of an ACP is a step towards creating an ICO that holds an outcomes-based
or value-based contract.
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3.9 One of the defining features of accountable care organisations is therefore
contractual responsibility and accountability for patient outcomes for a specified
population and payment based on achieved outcomes. In addition to a (vertically)
integrated model, subject to governance and scale, such organisations could also
take the form of an alliance, lead provider, or joint venture model, as illustrated
below.
3.10 Figure 1 illustrates the degree of integration associated with different organisational
forms. Importantly, whether an organisation is an accountable care organisation or an
ICO depends on the degree of accountability for outcomes adopted by the provider
organisation (subject to scale and governance arrangements).
Figure 1: Spectrum of organisational form within accountable care
Source: FTI Consulting.
Notes: ACO is used to denote any provider organisation working within the accountable care
framework (rather than an American-style ACO only). Alliance may also denote a
federation or a network. Prime provider may also denote a lead provider. A Managed
Care Organisation (‘MCO’) combines the functions of a provider and commissioner of
care in one.
Prime
provider
Joint
venture
Independent
providers
Vertically
integrated
provider
?
Providers
Providers
AllianceMCO
ACO(s.t. scale)
Prime
provider
Prime
provider
Accountable
for a defined
population
Value-based
contract
Fee-for-
service
ACO(s.t. gov.)
Federation
Federation
ICO(s.t. gov.)
ICO(s.t. gov.)
ACO
ICO
ICO
ACO
ICO
ICO
Degree of integration
Ac
co
un
tab
ilit
y fo
r o
utc
om
es ACO
(s.t. gov.)
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Accountable care in the US
3.11 Accountable care has received most prominence in the US, where ACOs developed in
the late 2000s and following the implementation of the Affordable Care Act (2010),
which encouraged the formation of ACOs to take on the care of Medicaid patients.1
However, models sharing some of the characteristics of ACOs (particularly managed
care) had been in use previously. American ACOs tend to be integrated organisations
led by primary care physicians and supported by secondary and community care
working within the accountable care framework. Primary care physicians have
typically been heavily involved in the development and management of ACOs given
their ‘gatekeeper’ role in delivering healthcare in the US.
3.12 Many ACOs have achieved improvements in care quality and reductions in costs. A
review of the Alternative Quality Contract (AQC) in Massachusetts, an ACO that
predates the Affordable Care Act, found a 2.8% saving in the first two years of the
programme in comparison with the control group driven by shifting procedures to
lower cost settings and reducing the overall utilisation of services and tests.2 The first
public performance report on ACOs established after the implementation of the
Affordable Care Act found that all pioneer ACOs were successfully meeting the
required quality measures; 25 had lower risk-adjusted admission rates compared to
the benchmark rate; and 18 out of 32 ACOs generated savings for Medicare.3
3.13 However, challenges for strong performance across the ACO cohort remain. Small-
scale ACOs have found it difficult to achieve economies of scale, spread overheads,
and achieve savings. Successful ACOs have been developing complex care
management approaches to address high care costs experienced by the frail and
elderly, patients with multiple chronic conditions, and those with mental illness, which
other organisations have been unable to replicate. Communication, cooperation, and
effective use of data analytics and IT have also been critical to the performance of
successful organisations.
Accountable care in the UK
3.14 In the UK, accountable care is a relatively new concept that builds on the vision to
deliver a more integrated, patient-centred NHS. The Five Year Forward View (2014)
set out a number of New Models of Care to help meet the changing needs of patients
1 See Case Study 6 in Section 5.
2 The Kings Fund (March 2014) Accountable care organisations in the United States and England:
Testing, evaluating and learning what works.
3 Ibid.
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and deliver more personalised, integrated and preventative care. These included
models that encouraged both service integration and increased provider
accountability, such as:4
Multi-specialty Community Providers (MCPs). MCPs are expanded GP practices
providing integrated out-of-hospital care, expected to run outpatient
appointments and ambulatory care pathways. MCPs could evolve to take on
delegated responsibility for managing NHS budgets for their population.
Primary and Acute Care Systems (PACS). PACS are vertically integrated
organisations that provide GP and hospital services, together with mental health
and community care services. PACS could form through the evolution of MCPs;
hospitals opening their own GP lists; or from the formation of US-style ACOs that
take accountability for the health needs of a population.
3.15 It is envisaged that in the UK commissioners (i.e. CCGs) and providers will work
together to introduce gradually more aspects of accountable care into current NHS
commissioning and contracting structures. In particular:
Commissioners will be responsible for developing the outcomes-based contract,
including the scope of the contract, the payment structure and the outcome
components;
Commissioners will be able to determine how much financial risk should be
transferred to the provider(s), and how to reward ‘success’ (i.e. meeting the
contractually specified metrics);
Commissioners will develop a way of monitoring the outcomes-based contract,
although they will not be expected to intervene in the day-to-day running of
service delivery;
Accountable providers will be contractually responsible for delivering agreed
health outcomes to a patient population over a period of time, within a financial
envelope;
As providers, they will have the ability to influence the type and volume of care
delivered, and can develop preventative interventions or integrate services to
reduce the cost of care. In this way, they are able to manage the financial risk
and cost of providing care; and
Accountable providers will be measured against contractually agreed outcome
metrics to ensure they do not restrict access to care or compromise on the
quality of services.
4 NHS England (October 2014) Five Year Forward View.
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Accountable care in North West London
3.16 In North West London, organisations have come together to evolve the way in which
care is delivered to patients. In 2014, organisations across NWL shared knowledge
and developed ideas to as to how to implement whole systems integrated care,
culminating in the development and publication of the Integration Toolkit. In 2015, an
additional ‘Toolbox’ providing a blueprint for implementing key elements of ACPs was
developed.5 The aim of implementing ACPs is to make a first step towards introducing
accountable care in the area.
3.17 The eight localities across NWL are now making the first steps towards developing
accountable care contracts, with a number of localities hoping to ‘go-live’ with a new
ACP-style contract in April 2017.
3.18 This is in line with commissioning intentions shared by NWL with providers in Autumn
2015 which stated:
“We believe that high quality, integrated services can best be delivered by
accountable care partnerships which have developed appropriate models of
care for their population; which are commissioned to deliver clear outcomes for
the different segments of the population; which share accountability for
achieving those outcomes and which share financial risks and benefits through
a capitated budget.
We do not believe that it is possible to move directly from a PbR environment to
a whole population capitated budget across an ACP. We wish to achieve the
latter by April 2018 at the latest, in line with our 5 year strategy.”
3.19 Each of the localities is now working on developing their response to NWL’s
commissioning intentions.
Our work with NWL localities
3.20 In light of the above context, FTI Consulting and DAC Beachcroft were commissioned
by NWL to support three localities in developing their approaches to ACPs. The three
localities who responded to NWL’s request for expressions of interest were:
Hammersmith & Fulham, Hillingdon, and West London.
5 The Integration Toolkit and Toolbox are available at:
http://integration.healthiernorthwestlondon.nhs.uk/chapters.
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3.21 These ‘early adopter’ localities in NWL had clearly spent a great deal of time focusing
on integrated care clinical models and the development of the concept of
accountable care, through work under the Whole Systems Integrated Care
programme. Whilst many of the financial, commercial and legal issues were
addressed in the Whole Systems Integrated Care Toolkit, such issues had not been
tackled to date in detail by any of the three early adopter localities. It was therefore
clear that the six areas of focus for the purposes of this report could not be
addressed in detail in the context of the three localities. We therefore flexed our
support to meet the needs of each locality, and their developmental need to take
the next step towards creating an ACP.
3.22 In this section, we touch upon the status of each early adopter that we worked with,
and areas where we consider they have developed as part of the support received in
this project.
West London
3.23 West London CCG has a number of different contracts in place with individual
providers that underpin two integrated hubs.6 This contracting model has developed
organically to ensure that integrated working can take place. This is a GP led model of
care for over 65s, with 23 GP practices contracted to deliver additional services.
Outcomes and evaluation work has been undertaken by West London including the
addition to and localisation of the NWL outcomes framework. However, the concept
of moving to a broader outcomes-based contract, whereby all of those services sit
within one contractual framework, and the providers are given one capitated budget
to deliver, and organise the delivery of services, had not been explored in detail.
3.24 On that basis, our support involved considering the types of services that West
London might focus on, as well as the challenges to providers to move from the
current contractual arrangements, to an Accountable Care Partnership model.
Consideration of the detailed steps that West London would need to take, as well as
different contractual options to enable an Accountable Care model were discussed in
depth, and a work plan setting out these key areas was produced, in order to
expedite progress.
6 The hubs work with the individual’s GP and home carers, who sit in the GP practices, and the
wider multi-disciplinary team to deliver the right interventions at the right time and in the right
setting
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Hillingdon
3.25 Providers in Hillingdon’s proposed Accountable Care Partnership have clearly
preferred ideas about the organisational form that they would like the ACP to take,
therefore the focus of development in Hillingdon was to find the critical path to an
outcomes based contract for particular services to be commissioned, and for the ACP
to be in a state of readiness to respond to the same.
3.26 One of the key issues that Hillingdon resolved during this engagement was to decide
which population cohort they would focus on for the purposes of contract coverage.
Whilst the clinical model for diabetes was most advanced, it was not considered
broad enough as a focus for the ACP. We understand that a great deal of work has
been undertaken to date with regard to the financial modelling for the over 65s
population, and therefore all parties agreed that this should be the initial focus for
the development of the ACP in Hillingdon.
3.27 There is a sense that Hillingdon would like the pace of ACP development to be faster.
As such, we developed a detailed work plan setting out the various steps and
decisions that need to be made, and assigned these to organisations, and where
possible, individuals.
3.28 Pending the resolution of national issues relating to the use of corporate joint
ventures and VAT recovery issues for NHS bodies, Hillingdon has decided to pursue
an alliance contracting model. This will allow for governance arrangements to be
contractually documented, as well as working through the detail of how providers will
work together, and the role of the CCG. Moving to an alliance contracting model is
seen as a natural stepping stone towards the utilisation of a corporate joint venture
with membership of each of the four providers in the ACP.
Hammersmith & Fulham
3.29 Hammersmith and Fulham made it clear at the outset that they are not yet in a
position to consider some of the six issues that are within scope of this report in any
detail, and wished to use this engagement as an opportunity to continue developing
relationships between providers. A Memorandum of Understanding (MoU) has been
signed between the GP Federation and Imperial College Healthcare NHS Trust, and it
is expected that Chelsea and Westminster Hospitals NHS Foundation Trust will also
sign up to the principles of a revised MoU soon. The MoU sets out aspirations of how
the parties will work together and some high level objectives and principles. Terms of
reference for an H&F Integrated Care Programme Board have also been agreed and
the partnership has agreed a methodology for agreeing which pathways should be
prioritised for re-design.
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3.30 We consider that H&F are in a position where they are deciding how best to test their
shared vision and principles in an applied manner, as a preliminary step to
considering how they can formally collaborate and respond to an opportunity to
become an Accountable Care Partnership. On that basis, H&F worked with us to
create a development session in order to explore issues focussed on how the
organisations will work with each other, how to address any potential barriers and
consider what success would look like, as a collaboration.
Observations
3.31 In each of the localities, there was a sense that the providers seeking to collaborate
did not have a clear idea as to what they were responding to, in terms of what was
going to be commissioned from them. This made it difficult for them to take detailed
conversations about risk and reward to the next level – as conversations were taking
place without a detailed contract proposal / tender process to respond to. The
responsibility to develop the contract proposal and/or tender process sits with the
commissioners.
3.32 We also noticed that there did not seem to be any “softer” enablers of integrated
working between the parties from the early adopters. For example, in other local
health systems, we have seen collaboration between providers being encouraged by
commissioners by agreeing collective performance incentives that wrap around
providers’ existing individual contracts for services. Such incentives are generally
released on the basis of the collective achievement of certain metrics, and allow
providers to build up trust and working relationships in a relatively safe environment,
in terms of risk exposure.
3.33 In general, there are some important decisions and agreements that must be made
early on, before organisations undertaking an ACO or ACP approach dive into the
detail on the issues described in this report. These early decisions will govern how
organisations relate to each other and interact over the life of the contract and are
important to get right. We discuss these in the following section of this report.
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4. Principles underpinning an ACP
Introduction
4.1 Before moving forward with detailed development of a new working partnership,
providers and commissioners will need to decide how to they wish to relate to one
another and agree working principles.
4.2 In addition, the role of the commissioners will need to change. Commissioners need
to clarify, specifically and unambiguously, the service they wish to commission
through the ACP and specify the nature, level and proportion of risks within the
system that will be reallocated to the ACO/ACP. As the ACO/ACP takes on
responsibility for population management, the CCG should look to manage the
ACO/ACP on the basis of the agreed outcomes enshrined in the ACO contract. As a
result this means that the CCG (and other commissioners involved in commissioning
from an ACP, e.g. the local authority) will become less involved in specifying inputs
and holding providers to account based on those inputs, in respect of services, and
instead take a role where they are involved in strategic oversight when
commissioning services. Understanding the principles that govern interaction
between the commissioners and the ACP is therefore also important and must be
agreed at the outset before detailed discussions about the ACO/ACP commence.
4.3 Clearly how the organisations in and outside an ACP interact with one another will
evolve over a time, as it would for any newly formed partnership. The purpose of
agreeing working principles upfront is to set expectations for how organisations will
relate to one another, in ways that support the goals of the ACP.
Developing working agreements/principles
4.4 We have set out in Figure 2 below some typical areas that should be covered when
setting working agreements and principles.
4.5 In our discussions with NWL localities we have seen varied levels of agreement on
principles, but all localities were clear on the need to get these agreements in place
before embarking on such an ambitious programme of work.
16
Figure 2: Agreeing working principles – areas for agreement
4.6 In particular, these principles should state how providers intend to manage risks, as
one of the defining aspects of an ACP is the fact that it is taking on aspects of the
management of commissioning services for a cohort of patients, and therefore, most
likely, increasing the financial and clinical risks that it has responsibility for. How the
ACP responds to these increased risks will be a key factor in its success or failure.
Given the importance of this area, we have set out below some more detailed
principles that an ACP may wish to adopt in relation to financial and clinical risk.
Principles relating to sharing of risks (and rewards)
4.7 Detailed agreement on risk-sharing principles should be established at an early stage
before the commissioners and the ACP attempt to make detailed decisions as to
where the contract risks will fall. Some key principles relating to risk-sharing are set
out in Figure 3 and explained further below.
Agreeing working
principles
Evidence-based
decisionsSharing of risk
Transparency
Accountability
Integrated
delivery of care
Achieving cultural
change
Achieving better
outcomes for
patients
Open
engagement &
communication
17
Figure 3: Risk-sharing principles
4.8 First, a key principle should be that risks, and the necessary resources to manage
are given to those best placed to manage them. The rationale for this is that this
incentivises the parties bearing the risks to manage it in an optimal way. This is the
overriding principle of an accountable care contract and will govern which risks the
commissioners pass to the providers. For example, in the case of an over-65s
contract where partners are targeting improvements in primary care provision to
prevent secondary care admissions, both the primary care and secondary care
providers will need to work together to deliver this improvement. Therefore the
commissioners choose to pass responsibility for the relevant services to the ACP
formed of the two primary and secondary care providers.
4.9 Second, where costs and benefits might arise through the operation of the ACP, it will
be important to agree ex ante how to share out such benefits and costs. For
example, it might be that the operation of an ACP leads to a surplus earned on the
contract through, say, an anticipated reduction in non-elective acute care as a result
of increased spending on community care. The benefit might be shared out on the
basis of costs incurred in provision or, potentially, in relation to revenues foregone
due to changes in the pattern of care. In any event, it will be important that all parties
understand what the likely financial flows that might occur will be and how these
will be allocated as this, in turn, is likely to influence behaviour of the parties within
the partnership. The converse, in which there is ambiguity on the way in which costs
and benefits are shared (and liabilities arise) will inevitably heighten the risk of non-
delivery within the partnership.
Key principle:
Risks should sit with
those best placed to
manage them
1
Key principle:
Risks and costs should
be shared to support
mutual accountability
and responsibility for
ACP goals
2
Key principle:
Incentives are aligned
across the system, not
only with the ACP
3
18
4.10 Third, the agreement to share the costs and benefits arising within an ACP should
ensure that, overall, incentives are aligned appropriately across the system. For
example, given some acute care costs are likely to be fixed in nature, it is likely to be
the case that the benefits of a reduction in activity will need to be passed, in part, to
the acute provider to ensure the ongoing provision of the fixed costs of acute care are
still funded. The corollary, in which the acute provider’s financial position was
worsened as a result of the reduction in the volume of acute provision (as revenues
to the acute provider fell by more than the costs of provision) might serve to
undermine the financial viability of the provider.
Examples of principles/working agreements from other ACOs/ACPs
4.11 As part of our work with NWL and other health economies, we have researched the
principles and working agreements made by different health systems. We set out
below some relevant examples that can help guide UK health and care economies as
they form working relationships to support ACO/ACP development.
Case Study 1: West London Whole Systems Integrated Care Heads of Agreement
In West London, an integrated care system has been developed, focusing on improving
care and outcomes for the over-65s population. As part of this, a detailed ‘Heads of
Agreement’ has been developed which describes a set of behavioural commitments as
to the organisations involved will relate to one another. This Heads of Agreement was
signed by the CCG, primary care providers, community and mental health providers,
acute providers, social care and third sector organisations. The agreement was
supported by patients.
The main behavioural commitments agreed within the Heads of Agreement are:
Co-operation and innovation;
Sharing of information;
Disclosure of conflicts of interest;
Collective sharing of risks and opportunities; and
A ‘best for the delivery of care’ approach, governing future recruitment of partners.
Case Study 2: NHS England template alliance agreement
Alliance contracting is one of a number of legal forms that could be implemented as
part of an ACP (see section 6). Even if alliance contracting itself is not adopted, some of
the principles of alliance contracting may be relevant and/or useful for providers
seeking to collaborate.
19
As set out in NHS England’s guidelines for alliance contracting, alliance principles “sit
at the heart of alliance contracting and define the relationship between alliance
members”7.
The template contract includes some draft principles that can be adopted by
organisations seeking to enter into an alliance contract. These are as follows:
Take responsibility to make unanimous decisions on a Best for Service basis;
Always demonstrate the service users’ best interests are at the heart of Our activities;
Adopt an uncompromising commitment to trust, honesty, collaboration, innovation
and mutual support;
Establish an integrated collaborative team environment to encourage open, honest
and efficient sharing of information, subject to competition law compliance;
Adopt collective ownership of risk and reward, including identifying, managing and
mitigating all risks in performing our respective obligations in this Agreement; and
Co-produce with others, especially service users, families and carers, in designing
and delivering the Services.
7 NHS Standard Contract Guidance to Template Alliance Agreement. Draft 1, August 2015, NHS
Standard Contract Team
20
5. Defining the contractual relationship and governance between ACP
partners
5.1 Before project commencement, the NWL localities were asked to identify the key
issues relating to ACP contracts and governance that they were interested in
considering further. In practice, it is important to consider these items in the context
of the contract as a whole. Therefore whilst pursuing the six items described further
in Sections 5 and 6 of this report, we also set out our overall approach to developing
a new contract for an ACO/ACP.
5.2 Management of accountability within the partnership requires contractual structures
to be defined between each of the ACP partners. It is important to define the contract
in terms of:
(a) the relationship between commissioners and providers;
(b) the relationship between ACP partners; and
(c) the relationship between ACP partners and any sub-contractors.
5.3 These relationships are depicted in Figure 4 below.
Figure 4: Three contractual relationships to be defined
5.4 Our discussions with the three NWL localities focused on relationships (b) and (c) i.e.
contractual relationships between providers. However, defining the relationship
between the commissioning entities and the providers is the key first step in
developing the overarching contract structure. This relationship, in terms of the
nature of the fixed payment (e.g. capitated or block payment, amount of payment
Comm-unity
Commissioners
AcuteGP
Fed.
Mental health
Other providers
(b) How do the ACO/ACP providers contract with one
another?
(c) What is the contractual relationship between the ACO/ACP
and any sub-contractors?
(a) What is the contractual relationship
between the commissioner(s) and
the ACO/ACP?
a
b
c
21
dependent on outcomes) has been considered by NWL in detail as part of its Toolkit
for Whole Systems Integrated Care.8
5.5 For each of these contractual relationships, there are a number of decisions that
have to be worked through, with the input of providers and commissioners. A
framework we have used successfully in other health economies is set out in Figure 5
below. This framework covers all three contractual relationships, as we believe that
they should be considered holistically in order for the ACO/ACP to understand the full
contractual landscape. We also used this framework in our discussions with
Hillingdon and West London.
Figure 5: Key decisions to be made in order to agree the contractual relationships
between all ACO/ACP partners, including commissioners
5.6 The above diagram sets out the four main areas of the contract and the sub-
questions that need to be considered when agreeing a new contract for an ACO/ACP.
In the remaining part of this section we outline these four areas in more detail –
namely:
details of contract coverage;
contracting vehicle;
contract design; and
contract implementation.
88 See chapter 8: http://integration.healthiernorthwestlondon.nhs.uk/chapters
Which outcomes?
Which patients are
covered?
Who are the
contracting parties?
Contract duration
Contract
design
What is the high-level
payment structure?
What is the detailed
payment mechanism?
How will funds flows
between parties?Contract
vehicle
Contract
coverage Which services are
included?
1
3
a
b
c
a
d
a
c
d
How is the contract
being procured?
b
What is current cost of
in-scope services?
b
What are the govern-
ance arrangements?
c
Contract implementation – i.e. what practical issues need to be resolved?
2
4
How will risks & gains
be shared?
d
22
Contract coverage
5.7 Contract coverage is the first part of the ACP contract that needs to be agreed. Once
the ACP partners understand commissioning intentions and the overall vision for the
delivery of health (and, possibly, social care) services, detailed work can begin as to
who and what services the ACP will cover. Deciding which patients will be served by
the ACP and what services will be provided must be completed before detailed work
on the rest of the contract e.g. contract value, can take place. This is not a
straightforward decision as there may be a range of factors influencing the decision
on contract coverage e.g. who are the priority groups, what financial value do
commissioners want the contract to be?
5.8 The main decisions that need to be taken to agree contract coverage are:
Which outcomes do commissioners want to achieve as part of the contract?
The outcomes framework is a key part of the overall contract structure and will
be the main tool that commissioners use to hold the ACP to account for delivery
of quality for patients. As such, agreeing the outcomes to be delivered up-front is
key. NWL has already developed an outcomes framework for an over-65s
contract. Each outcome will also need to be supported by a metric (that allows
commissioners to measure whether progress has been made) and a target (that
is considered achievable by commissioners and providers).
Which patients will be covered by the contract? Deciding which patients will be
covered by the contract needs to be one of the first steps in the contractual
process. There are a number of different ways of segmenting the population –
NWL has created eight population segments. The contract will need to specify
which segment is included in the contract and how those patients are defined. In
the case of an age-segmented contract (such as those being discussed in NWL),
patients will be defined by age group e.g. over-65s. However, other ACPs are
developing for disease-specific cohorts such as cancer or other long term
conditions. It is also possible to define a cohort by age and condition – for
example, over 65s with one long term condition. In any event, providers and
commissioners need to ensure that the population is specified, unambiguous,
and identifiable. Many Vanguards are seeking to adopt a whole population
budget.
Which services are included in the contract? Defining which services the ACP
is responsible for delivering under the contract also needs to be undertaken at
an early stage so providers understand which of their current contractual flows
will be absorbed into the new contract. This also allows providers to begin
planning their service model for future care delivery. This will become
particularly important when valuing the contract and paying providers to ensure
that services are not paid for twice i.e. once through the capitated payment and
again through a payment for a specific service or treatment. As such, included
services should be specified at as granular level a level of detail as possible e.g.
by HRG for acute providers. It may be that other services are included in the
23
contract by way of variation, over the course of the contract term.
What is the duration of the contract? A longer contract length offers security of
income for providers. This has the benefit of the ACP having greater certainty
about future revenue streams for a longer period of time, which might, in turn,
provide the ACP greater opportunities to invest resources in activities that might
improve outcomes for patients or reduce costs in serving the patient cohort over
a longer payback period. However, it locks the ACP and the CCG into greater
financial risk (albeit on the upside and the downside) – for example if costs were
to be significantly lower than anticipated, the extra revenue would fall to the
ACP. The pros and cons of a longer contract length (for both commissioners and
providers) should be considered and agreed up-front9. Typically, contract
durations are likely to be a minimum of 3 years and can extend to 7 or 8 years.
Contract vehicle
5.9 The contracting vehicle and related arrangements will depend on a number of factors
including legal requirements. Agreeing the contract vehicle will include deciding the
organisational form, as well as detailed governance arrangements for the ACP.
Providers need to consider the organisational form that they wish to adopt – this is
not a matter for commissioners to specify as part of any tender process, as to do so
may be discriminatory.
5.10 The main factors that need to be considered here are:
Who are the contracting parties? Whilst new members may join the ACO/ACP
over time, initial parties to the agreement will need to be agreed early on so that
progress can be made with deciding relevant contractual issues.
How is the contract being procured? The commissioners will need to decide on
a procurement route, taken into account relevant NHS and EU procurement
law10.
What are the governance arrangements? The governance arrangements will
allow the ACP to run effectively, enable parties to be clear on their roles and
responsibilities and allow decisions to be taken and disputes resolved. The
governance arrangements, to a large extent, will be informed by the proposed
9 For a review of the various considerations in deciding on the optimal duration of the contract,
please see the FTI Consulting report prepared for Monitor “Review of Multi-year tariff cycles”
31 March 2014. While this report considered the merits of a shorter and longer duration in
relation to the national tariff, many of the arguments are relevant in the context of ACP contract
design also.
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/381608/Multi
YearTariffFTI.pdf
10 NHS (Procurement, Patient Choice and Competition)(No. 2) Regulations 2013 and the Public
Contracts Regulations 2015.
24
legal form of the collaboration between organisations. Governance
arrangements are explored in more detail in Section 6.
Contract design
5.11 The design of the contract includes the financial value and the flow of money
between ACP partners. This is where financial risks will be assigned to different
contracting parties. The areas set out below are difficult to consider in isolation from
each other as, for example, the overall contract value will have an impact on how
much risk the ACP parties are willing to take on. Therefore the contract design will
only be finalised once parties have reached agreement on each of the issues set out
below:
What is the high level payment structure? How will the ACP be paid? Whilst a
capitated payment structure has been selected by NWL as the most appropriate,
there are other payment mechanisms available including bundled payments and
block payments. The commissioners should also determine whether a
proportion of the contract value will be paid on achievement of outcomes. While
the amount that should be linked to outcomes will need to be considered
carefully, it is clear that it needs to be sufficiently material to ensure that it is
impacts on the behaviour of the ACP. In particular, it should be sufficiently high
to counteract any potentially perverse incentives (for example to reduce cost at
the expense of patient outcomes) that a block payment alone might create.
What is the contract value? The contract value will be negotiated between the
ACP and the commissioners. The historical cost of included services can be used
as a starting point, but other considerations must also be taken into account.
For example, costs might be expected to increase over the course of the
contract due to standard inflationary pressures or for epidemiological reasons
anticipated with that specific cohort of the population. Equally, offsetting
efficiency gains might be expected. Furthermore, a new model of delivery might
be expected to reduce the overall costs of serving the population and, under
certain circumstances, it might be deemed appropriate to claw back some of the
cost saving over the duration of the contract itself.
What is the detailed payment mechanism? The detailed payment mechanism
will describe the full mechanics of payment flows under the contract under a
range of different outcomes. For a capitated payment this needs to include how
the outcomes element of the payment will be determined e.g. how is the
outcomes payment element calculated? Are payments made for individual
outcomes or for achievement of all outcomes? Is achievement greater than the
outcomes target financially rewarded?
How will funds flow between the ACP members, and any sub-contractors?
This question relates to how the contract payment is shared between parties
within the ACP. Although it is likely to vary on a case-by-case basis, a working
assumption is that the overall payment structure (between the commissioner
25
and the ACP) should, as far as possible, be replicated between the ACP
members and also between the ACP and any subcontractors so as to ensure
that all parties are equally signed up to the overall risks of the contract. We
explore this in more detail in Section 5 below.
How will risks and gains be shared? Agreeing and documenting how risks and
gains will be shared is vital to success of the ACP. This includes risk share
between commissioners and providers and between providers within the ACP.
We explore this in more detail in Section 5 below.
Contract implementation
5.12 As well as the issues set out above, there will be a number of other points of detail
that commissioners and providers will need to ensure is set out and documented
before contract go-live. This typically includes:
Ensuring that the new contractual arrangements operate effectively with other
contracts that are already in place. In particular, it will be important that there
are no gaps or overlaps with other contracts to mitigate against the risk of non
or overpayment;
Ensuring that data capture protocols are in place to capture data for both
activity and outcomes as this will feed into the payment and monitoring process
for the contract;
Developing a framework to evaluate the effectiveness of the contract; and
Defining performance thresholds that provide “step in” rights for the CCGs or
some providers in the case of poor performance.
Focus of this report
5.13 As part of this work for NWL, we have been asked to focus on a sub-set of the key
decisions set out in Figure 5 above. The rest of this report sets these area and
potential responses out in more detail, categorised under the headings “Managing
financial risk” and “Agreeing contract governance” as set out below:
Managing financial risk (Section 5):
Ex ante flow of funds between parties;
Risk and reward arrangements;
Agreeing contract governance (Section 6):
Collective decision-making (e.g. voting rights) and dispute resolution
procedures;
Holding members of the partnership to account for both quality and
outcomes;
26
Contribution of people/resources to manage the ACP; and
Liabilities of individual organisations should the ACP not succeed.
27
6. Managing financial risk within the ACP
6.1 In this section we set out how ACPs should consider two key finance and contracting
aspects that need to be agreed before ACP contracts become operational11. These
are:
Ex-ante flow of funds between parties.; and
Risk/gain share agreements.
Ex-ante flow of funds between parties
6.2 As described earlier in this report, there is a hierarchy of payment flows between
parties in an ACP. These are:
first, the overall funding flows between commissioner(s) and the ACP i.e. the
high-level payment structure of the contract;
second, funding flows between ACP partners; and
third, funding flows between the ACP and any sub-contractors.
6.3 In this subsection we describe some of the key issues that will need to be considered
in each of these topics.
Overall funding flows between commissioners and the ACP
6.4 The aim of the new partnership arrangements is to deliver changes in the pattern of
delivery that are beneficial to patients. The funding flows will therefore need to be
arranged in such a way to support this overall objective. Without this, the funding
flows would act as a barrier to changes across the system rather than an enabler
to the changes. The diagram below sets out how the current funding arrangements
act as a potential barrier to the integration of services.
11 As discussed earlier in the report, because of different demands in each locality most of the
issues discussed in this section were not actually raised in our discussions with them.
28
Figure 6: Current funding arrangements
6.5 All things being equal and temporarily ignoring clinical imperatives, the contractual
incentives arising from current funding arrangements serve to incentivise acute
providers to deliver more care, and community and primary care providers to
deliver less care. That is to say that an activity-based contract e.g. Payment by
Results (PbR), encourages delivery of more care, whilst a block contract encourages
providers to perform less care. Given that primary care and community care tend to
be providers of preventative care that is cheaper to deliver and acute care is reactive
care applied when patients fall sick and more expensive to deliver, it is easy to
construct an argument that says that the current financial arrangements across the
system do not fully support the best interests of patients as it incentivises the
provision of more expensive care to patients when they get sick rather than provision
of cheaper care to patients before conditions worsen.
6.6 Changing to a fixed payment for care delivered in all care settings can align
contractual and clinical incentives, and support delivery of integrated care. As set out
in the diagram below, a fixed payment attempts to change fundamentally the
financial incentives created under a traditional payment mechanism, incentivising
providers to work together and focus resources in the most effective part of the
pathway to support best delivery of care for patients and overall improvement in
population health.
Late stagePrimary
careCommunity care Acute care
GP
contractBlock contract Pay by activity
Reduce
activityReduce activity Increase activity
Care
setting
Typical
contract type
Incentive
Diagnosis
District
nursing
services
Mental
health
services
Outpatient Inpatient
Cheaper More expensive
Falls
management
Better for patients Worse for patients
Cost of
healthcare
Patient
experience
29
Figure 7: Funding arrangements under an ACP contract
6.7 As discussed in Section 2, this fixed payment contract must also make provision for
an amount of money to be paid on the basis of achievement of outcomes. The
inclusion of an outcomes-based payment embeds quality within the contract and
creates a safeguard against the financial incentive of a fixed payment to drive down
costs (and potentially quality as a result).
6.8 NWL has already undertaken a great deal of work with key stakeholders to develop a
set of outcomes that could be included in a ACP contract for over-65s care. These are
available as part of the NWL toolkit.12 We do not discuss development of outcomes in
this report but do emphasise its importance for ensuring both quality and financial
management are delivered through the new contract.
6.9 The fixed payment can take a number of forms. In the context of NWL, we are aware
that commissioning intentions are to pay via a single capitated payment and
therefore the options described below are predicated on a capitated payment
arrangement.
6.10 Clearly before the flow and share of funds between ACP partners can be established,
the commissioner(s) and ACP partners will have to agree an overall contract value.
This is a key part of the contracting process and will normally be iterative, as partners
analyse different scenarios regarding risk and outcomes achievement, and negotiate
the contract over a number of months.
12 http://integration.healthiernorthwestlondon.nhs.uk/Images/upload/MoC%
201e%20Outcomes%20menu.pdf
Primary
careCommunity care Acute care
Fixed payment (with ACP)
Reduce more costly activity
Care
setting
Contract type
Incentive
Early stage
Cheaper More expensive
Better for patients Worse for patients
Cost of
healthcareCheaper More expensive
Patient
experience
Diagnosis
District
nursing
services
Mental
health
services
Outpatient InpatientFalls
management
30
6.11 Agreeing a whole population budget is a complex undertaking, made easier by
following a set process and ensuring regular and open communication between
commissioner(s) and providers. NHS England and NHS Improvement are working
intensively with six Vanguards to develop a ‘Whole Population Budget Handbook’ to
support local health economies undertaking this process. This is expected to be
published in autumn 2016.
6.12 For the purposes of this report, we assume that a budget for the ACP has already
been agreed and below we set out how the partners within the ACP should then
decide how funds should flow between them.
Funding flows between ACP partners
6.13 Once the nature of the overall fixed payment to the ACP has been established, the
ACP partners will need to agree the nature of the funding flows between themselves.
Agreeing these funding flows ex ante ensures that each provider is clear on the
financial envelope available to them and consequently the risks that they are
responsible for managing.
6.14 There are two main items to be considered:
a) How much of the overall contract value is each provider entitled to?
b) What is the payment mechanism?
a) How much of the overall contract value is each provider entitled to?
6.15 The overall contract value for the ACP should reflect the costs of the anticipated
service provision by each of the constituent ACP entities, and any relevant sub-
contractors. As described above, this value should be built up in conjunction with the
commissioning bodies.
6.16 The amount that each entity is entitled to, is however, not simply a product of the cost
of its current service delivery. The ACP will need to consider a number of other
potential costs in order to determine the available contract funds for each entity.
These issues are set out below:
What is the anticipated cost of service delivery by each provider within the ACP? A
factor to consider here is whether fixed costs need to be funded over a period of
time with the contract, even if activity is expected to decrease.
What are the known changes to the current cost of service delivery? e.g. demand
profile over contract period, cost inflation, national efficiency requirements,
demographic changes, impact of other reconfigurations.
Are providers expected to make any savings as part of the contract?
Are there existing CIP plans in place that reduce the funding requirement over the
contract period?
Is any investment required in order to change services provided by each provider?
31
Is the ACP required to hold any contingency and if so, are individual providers
required to contribute to that contingency?
Are there any historical deficits, related to the relevant services, which require
funding?
6.17 Each of these questions should have been considered as part of setting the overall
contract value and therefore, should also be taken into account when deriving the
contract value for each of the providers within the ACP partnership.
b) What is the payment mechanism?
6.18 As far as possible, the flow of funds should support delivery of the contract aims, and
therefore allow providers to manage the risks that sit with them. As such, we set out
the following flowchart for considering the correct flow of funds for each party.
Figure 8: Flowchart for considering flow of funds between parties
Is the provider part
of the ACP?
Split costs as per
agreed contract value –
all accountable for
delivery of outcomes
1
Y
N
Is the provider
active in meeting
ACP aims?
2
Y
Split costs as per
agreed contract value –
including relevant
outcomes
N
It is a material
contract?
3
YDevelop contract that
can share value of
activity reductions
N
Pay on activity
basis, if possible
Capitated/block
payment with outcomes
Capitated/block
payment if possible,
including relevant
outcomes
Activity-based contract
with risk-share/volume
limiting agreement
RationaleSuggested payment
mechanismKey factor
32
6.19 In general, the ACP should look to share responsibility for achievement of outcomes
between ACP partners so that all partners are bought into achieving the same goals.
This is particularly relevant where outcomes are related to whole population health
improvement, such as is the case with the NWL outcome measures for over-65s that
have been developed. Whilst particular ACP parties may have more influence over
some of these measures than others, the ACP will want to foster a sense of
collaboration and shared accountability. In general, the ACP contractual relationships
will want to reflect the overall ACP contractual relationship i.e. partners receive a fixed
payment according to their costs, along with a payment that varies based on ACP
outcomes achievement.
6.20 This rationale also holds true where a service provider is not part of the ACP
agreement, but is still key in delivering the aims of the ACP. Ideally, if a provider is key
to delivering the aims of the ACP, that provider would be part of the ACP. Where this is
not possible, any provider integral to delivering ACP goals should be incentivised in
the same way i.e. paid on a fixed basis and held to account for delivery of outcomes.
An example of this may be where social care is not part of the ACP but holds an
important role in changing the way that care is delivered to an over-65s population
cohort.
6.21 In some cases, providers outside of the ACP may not be willing to put some of their
contractual payments at risk. In this case, the ACP partners will need to jointly take
a decision as to how much of the risk they are willing to retain and how important
incentivising that provider to collaborate is to achievement of the ACP goals. It is
important to emphasis here that, the outcomes targets set between the
commissioner(s) and the ACP should not entail significant risk for providers, but
should be set at an achievable yet challenging level. This principle should also ideally
apply to agreements made within the ACP and with sub-contractors. The outcomes
payment is to guarantee quality, not to drive cost-cutting and discourage providers
from participating in the ACP.
6.22 For all other providers i.e. those who are necessary to service provision but not
necessarily integral for delivery of ACP goals, the ACP should try to manage the
financial risk it is exposed to by agreeing fixed payments, or capped payments where
possible. This may extend to providers that react to activity, rather than being able to
exercise control over demand e.g. out of hours providers. Any such agreements will
require negotiation with the relevant sub-contractors and in some instance, local
modifications to payment and therefore agreement with the appropriate regulatory
body i.e. NHS Improvement.
33
Risk-share agreements
6.23 One of the key determinants of success for the ACP will be its ability to manage the
financial risk that it takes on as part of the capitated payment structure. Under this
arrangement, the ACP is signing up to managing all (or at least some) of the care
needs for a particular cohort for an agreed length of time. As such, if the costs of
caring for that population are greater or less than income received through the
capitated payment, the ACP will be responsible for that additional cost or surplus.
6.24 This risk is separate to the financial risk related to the achievement of outcomes. The
risk discussed here is that related to delivery of the services within the
established financial envelope. Under current contractual arrangements, each
individual provider, in conjunction with the commissioner(s) are responsible for their
own financial management and for delivering services within an agreed envelope.
Different providers will face different levels of risk, depending on the nature of the
payment mechanism e.g. block contract or activity-based contract.
6.25 Under a new capitated contract, the providers will agree to share the risk that the ACP
takes on by accepting a fixed payment (that varies only by the number of people in
the contract). Providers and commissioner(s) will therefore need to agree how
financial risks are allocated between them. The below diagram and following sub-
section sets out a process by which the commissioners and the ACP can seek to
allocate contractual financial risks.
6.26 This must be done before contract go-live so that all parties understand the risks that
they face and can put appropriate risk mitigation strategies in place. Each
organisation must understand the risks that it is agreeing to accept as part of the ACP
contracting process.
Figure 9: Process for allocating financial risks
Set KPIs for identifying and
applying risk share
Agree backstop sharing
arrangements
Agree (where possible)
allocation of risks between
CCG and provider
Agree risk share between
CCG and provider for
“residual risks”
Agree allocation of
risks between providers
1 2 3 4 5
34
(1) Agree (where possible) allocation of risks between commissioner(s) and ACP
6.27 Under current contractual arrangements, the commissioners retain the majority of the
risks of financial overspend, particularly in relation to acute activity. If acute activity,
for example, is greater than planned, then the CCG is (in most cases) obligated to
cover the additional expenditure13. Under a new capitated payment, some risks (such
as demographic change) might remain with the CCG but a number of other risks
would move to the ACP to manage. The ACP therefore, needs to be clear as to the
risks that it is taking on in order to ensure that they are managed appropriately.
6.28 As an example, we have set out some of these risks in the figure below, along with
indicative risk owners. This will all be subject to negotiation and agreement between
the commissioners and provider.
Figure 10: Example risks to be borne by commissioners and providers
13 We note that such over-activity normally forms part of the contractual negotiation process and
both commissioners and providers are likely to take on parts of this over-expenditure in practice.
Cohort is larger
and/or older
than expected
Example risk Causes Suggestion as to owner of risk?
People within
the cohort are
more/less
healthy than
expected
Unexpected
extreme event
(e.g. severe flu
outbreak)
Average cost
per unit of care
is higher/lower
than expected
Demographics – Increase caused by
exogenous factors (e.g. migration).
Patient care – Better care results in
less mortality and a larger/older
population than expected.
Patient care – The level of care
received by providers will influence
the health of the cohort.
External factors – Other public
health factors will influence the
health of the cohort.
External factors – These are
unpredictable and exogenous events
(e.g. very severe winter, epidemic).
Provider efficiency – The unit cost
of care can be influenced by
providers.
External factors – Other variables,
such as general inflation, which are
outside of the control of providers
Commissioners – Demographic
changes can not be influenced by
providers, and providers should be
financially rewarded for better care.
Providers – Providers can influence
the health of the cohort by providing
more preventative and integrated
care.
Commissioners and providers – As
providers have limited ability to
control costs resulting from these
events, risk should be shared.
Providers – Providers can influence
the cost of care by improving
efficiency. As part of receiving the
benefits derived from a longer
contract, the providers may also
agree to take on external risks such
as inflation.
3
1
2
4
35
6.29 At this stage, the commissioners and providers will seek to agree where the potential
risks will fall and codify this agreement in the ACP contract. For example, if the
commissioners agree to take on financial responsibility for changes to the
demography the ACP contract will make specific provision for increasing payment in
the event of demographic change e.g. through paying via a capitated rather than a
block payment.
(2) Agree risk share between CCG and provider for “residual risks”
6.30 At this stage of the contractual process, it is unlikely that the parties will be able to
identify all of the potential financial risks that might arise and make detailed
provisions. It will therefore be necessary to agree how any “residual risks” (or
benefits) might be allocated. In practice, this means making explicit agreement as
to how much risk the commissioner(s) are willing to be exposed to, in order to
incentivise providers to take part in the ACP arrangements.
6.31 In the early years, providers may be concerned about the risks of taking on population
management for an entire cohort for a significant period of time. As such, the
commissioner may wish to make provision to absorb some of the overspend should
the ACP fail to live within its financial envelope. As a quid pro quo of this risk share,
the CCG might demand that a share of any underspend be passed back to it. Again, it
is essential that this agreement is made ex ante to prevent disputes once the ACP is
up and running.
6.32 Whilst this ‘risk-sharing’ may have some benefits in terms of encouraging provider
participation in the new arrangement it is important to note that it comes at the cost
of dampening the incentives created by the new contract structure. Any agreement
made by the commissioner should therefore be to mitigate some of the financial risk
and not to remove the incentives created by an accountable care contract entirely.
(3) Agree allocation of risks between providers
6.33 Once the ACP partners are clear on the financial risks that must be managed within
the partnership, agreements can then be made as to how these risks are shared
between them. This means deciding what sort of costs providers will be responsible
for themselves and which will be subject to sharing between the ACP partners. For
example, if a provider has a cost overrun relating to its over-65s services, is it
responsible for that cost overrun or will the providers share the costs between them?
The answer to this question is not straightforward as shown in the example below.
36
Figure 11: Cost expenditure scenario for an ACP
6.34 In the scenario shown above, ACP providers had initially estimated a contract spend
of £62m on in-scope services, split between the acute and community provider as
shown. However, the actual costs were £65m with the acute provider spending £35m
- £5m more than planned and the community provider £2m less than planned. There
are a number of reasons why this may have occurred, including (a) that the acute
provider was inefficient or (b) that the community provider’s new service model did
not work and as a result caused an increase in acute activity. Under either case, the
ACP must be clear as to how the increased costs will be allocated between
providers.
6.35 As set out in Section 3, the principle of shared risk will be a key underpinning of the
ACP. As such, making each provider solely responsible for any contract losses runs
contrary to the shared values of the ACP. However, it is important that providers are
still incentivised to provide cost effective care and minimise inefficiency.
6.36 As such, it will be necessary to establish guidelines for which costs are shared and
which are borne by the provider that incurred them. In the example above, ACP
partners may determine that any costs caused by “inefficiency” should be borne by
the provider that incurred them, but any costs caused by failure of the jointly agreed
ACP service model should be a cost to the ACP. These guidelines may be difficult to
establish but will set expectations within the ACP as to how costs will be assigned and
managed over the course of the agreement.
6.37 In the early years of the ACP, the partners may wish to set simpler rules such as that
overruns up to a certain value are met by individual providers and then met jointly by
the ACP. We cover this sort of arrangement in ‘(5) Agree Backstop sharing
arrangements’ below. This sort of arrangement can help encourage joint
accountability but can also create perverse incentives, as discussed below.
AcuteComm.
providerACP partners
Forecast cost of
ACP services£30m £32m £62m
£65m
Total
cost
Actual cost ACP
services£35m £30m £3m
Over-
spend
37
(4) Set KPIs for identifying and applying risk share
6.38 Once guidelines have been set, detailed KPIs will be needed to allow the ACP to
establish which costs fall into which category of expenditure e.g. to be borne by
individual providers or to be borne by the ACP. In order to make these
determinations, it may be useful for the ACP to establish regular cost information
sharing, allowing ACP partners to monitor overall contract expenditure. This will also
allow the ACP to make any necessary risk mitigation plans as issues arise.
6.39 Each ACP will monitor contract expenditure by ACP providers differently, but we have
set out below some example KPIs.
Area Description Metric
Service line
expenditure
Providers service line
expenditure is as expected i.e.
reflects agreed service model
Expenditure/Planned
expenditure
Capital expenditure Providers have invested in
capital expenditure in line with
agreed profile
% of Capex invested vs
planned expenditure
Workforce expenditure Provider’s pay costs are as
expected with no significant
expenditure on temporary staff
e.g. agency staffing
Pay costs, temporary
staffing as a percentage of
pay costs
Cost savings Provider has made cost
savings in line with agreed
profile
Savings as a % of agreed
plan
6.40 These KPIs will allow the ACP to monitor expenditure for each of the partners and
then inform the decisions as to whether the expenditure should be met individually or
by the ACP.
(5) Agree backstop sharing arrangements
6.41 In reality, there are likely to be costs (or benefits) where it is not easy to determine
how the established rules should be applied and therefore which party is responsible
for those costs. We refer to these as ’unallocated costs’. In these instances, the ACP
should have ‘backstop’ arrangements in place which allow the ACP to share out these
costs without resorting to escalation/dispute resolution processes.
38
6.42 These arrangements should be considered to be a ‘backstop’ as it is important that
ACP partners are incentivised to share risks as per the original agreement and not
rely on contingency arrangements. As such, it is important that these arrangements
do not create perverse incentives. For example, if the ‘backstop’ arrangement was
that all ‘unallocated’ costs were paid out of any risk-pool or contingency fund, then
providers might be incentivised to try and label as many costs as possible as
unallocated.
6.43 As such, the ACP may want to agree that each provider first bears an initial amount of
the ‘unallocated cost’ before funds from the risk pool are accessed. For example,
providers are responsible for bearing the first £250,000 of any unallocated cost, any
additional amounts are paid out of the risk pool/contingency monies.
6.44 Clearly a rule such as this can also create perverse behaviours i.e. once an
unallocated cost greater than £250,000 has been accumulated, there are no
incentives to minimise expenditure. However, the parties have access to escalation
and dispute resolution processes if they believe that any one party is failing to share
the values that have been agreed within the partnership.
6.45 The aim of these arrangements is to make sure that there are means of setting any
financial risks that have not been fully assigned. As such they should be documented
in the initial contractual agreements.
Case studies: Contracting for financial risk in other health economies
6.46 As part of our work with NWL and other health economies, we have researched the
contractual funding flows and financial risk management arrangements made by
other health systems. We set out below some relevant case studies.
Case Study 3: Kaiser Permanente, California, USA
Kaiser Permanente is a non-profit, nongovernmental managed care organisation
(‘MCO’) founded in 1945 and based in California, USA. It operates in nine states and
the District of Columbia and has 8.7 million members.14
As an MCO, Kaiser Permanente operates a health insurance plan (the Kaiser
Foundation Health Plan) as well as health care provision through its Private Medical
Groups (PMGs) and Kaiser Foundation Hospitals. Its innovative contracting, delivery,
reward, governance, and information arrangements have enabled it to improve the
quality of care and reduce cost as compared to other health plans.
14 Porter and Kellogg (2008) Kaiser Permanente: An Integrated Health Care Experience, RISAI
(1:1).
39
Contracting for required medical services within Kaiser Permanente is done by the
Private Medical Groups, which share incentives with the Health Plan to keep members
healthy and the costs of care low. The entities are underpinned by mutual exclusivity,
meaning that the Private Medical Groups do not practice medicine under other health
plans and the Health Plan does not directly contract with other medical groups.
Clinical decisions are made by doctors instead of the Health Plan. (Notably, PMG
physicians have often advocated a comprehensive benefit package in the Health Plan
as this allows them to more easily coordinate an individual’s care.) PMGs deliver
outpatient and primary care and refer patients for secondary and specialist care.
Kaiser Permanente owns and operates its own hospitals in California, Oregon, and
Hawaii and contracts with community hospitals in other regions. It has 14,000 doctors
and 160,000 employees and runs 421 medical office buildings (for ambulatory care)
and 32 medical centres (hospitals). Health services are often co-located, encouraging
integration between different service lines.
PMGs receive a prepaid amount (per member per month) from the Health Plan to
deliver outpatient care. This is used to pay market-based salaries for doctors and
bonuses of up to 10% if the programme performs well against quality, access and
service measures.
Case Study 4: Uniting Care contract, Cambridgeshire and Peterborough, UK
In November 2014, Uniting Care Partnership LLP, a limited liability partnership (LLP)
between two NHS Foundation Trusts, entered into an innovative contract with
Cambridgeshire and Peterborough CCG. The contract was for the provision of all
community care for patients over 18 years old and acute emergency care for patients
over 65 years old together with older peoples mental health. It was novel for the NHS
as it required integration of services and a significant proportion of the payment was
based on outcomes.
The 5 year contract (valued at £725m) commenced on 1 April 2015. However, in
December 2015, the contract collapsed for financial reasons. While all parties to the
contract agree that it was the right approach for the provision of the services, NHS
England in its review identified a number of issues for the failure of the contract, a
number of which relate to financial risk.15 These include:
Insufficient information about the cost of providing existing community services;
Resistance to a ‘risk and gain share’ arrangement by the CCG while shortlisted
providers found it very difficult to accept the proposed level of risk;
15 NHS England Review of Uniting Care Contract, April 2016, Publications Gateway Reference
05072.
40
Unforeseen VAT cost that was avoided under the NHS VAT arrangement but for which
the LLP did not qualify;
Lack of agreement on the final contract value at the time of commencement;
An insufficient mobilisation period that failed to enable the planned financial savings
that were required in the first year of the contract; and
Failure to obtain financial guarantees from both Foundation Trusts.
Case Study 5: MSK Collaboration
The providers established a risk pool, based on including the margins received on the
contract value (i.e. only paying the providers their costs plus overheads).
Treasury management functions were undertaken by a joint venture vehicle (for a
percentage of the contract value), and this involved ensuring that all partners and other
sub-contractors were paid for service delivery. The treasury management function also
involved the retention of the risk pool, and the provision of working capital if required in
the early stages of the contract. A support contract for treasury management services
was drafted and entered into by the lead provider and treasury management services
provider.
Furthermore, each of the partners invested £250k as working capital at the outset of
the contract, and provisions were included in the contractual arrangements as to what
would happen to such amounts on exit.
Of the providers involved, those provider who provided the services, and who were
ultimately able to influence the demand for the services, shared the lion’s share of the
risk relating to the management of cost overruns under the contract.
41
Case Study 6: ACOs within Medicare
In 2011, the US Department of Health and Human Services (HHS) working with the
Centers for Medicare & Medicaid Services (CMS)16 published new proposals to support
providers of health care services to improve the quality and coordination of care for
Medicare patients through the formation of ACOs.17 In particular, The Medicare Shared
Savings Program (SSP) was set up to reward ACOs that lower health care costs while
meeting performance standards on quality of care and putting patients first.18
In this context, CMS described an ACO as “a group of health care providers in a care
delivery system who agree to accept joint responsibility for the medical care and
management as well as the cost and quality outcomes of a designated population of
patients”.19 An ACO transforms the organization, delivery, and financing of care by
replacing fragmented, uncoordinated care with an arrangement in which providers
work together to achieve shared goals of better care at a lower total cost. An ACO also
preserves the ability of patients to choose and form an active partnership with the
providers that best meet their own needs.
In practice, an ACO working with Medicaid is a separate legal entity capable of servicing
a minimum of 5,000 Medicare patients. While primary care physicians are locked into
a single ACO, secondary and specialist care providers can simultaneously participate in
multiple ACOs. An ACO must have its own governing body with representation from all
participating entities and include a community stakeholder and a Medicare beneficiary.
Once approved by Medicare, ACOs contract with the Medicare Shared Savings
Program.20 The contract includes quality initiatives predetermined by CMS, with a
concentration on primary care and mandatory inclusion of patient satisfaction scores.
16 CMS (part of the HHS) covers 100 million people in the USA through insurance programmes such
as Medicare, Medicaid, and the Health Insurance Marketplace. The strategic goals of CMS are: to
offer its beneficiaries high quality, coordinated, effective, efficient care in order to reduce costs;
to improve access to affordable health insurance options for all Americans; and to improve the
health of all Americans through the wide use of preventative benefits and necessary health
services. See: (1) CMS.gov. <https://www.cms.gov/>; and (2) CMS Strategy: The Road Forward
(March 2013), Available at: <https://www.cms.gov/About-CMS/Agency-Information/CMS-
Strategy/Downloads/CMS-Strategy.pdf>.
17 News release (31 March 2011) Available at: < http://wayback.archive-
it.org/3926/20140108162229/http://www.hhs.gov/news/press/2011pres/03/20110331a.ht
ml.
18 Ibid. See also: Shared Savings Program, CMS.gov. <https://www.cms.gov/Medicare/Medicare-
Fee-for-Service-Payment/sharedsavingsprogram/index.html?redirect=/sharedsavingsprogram/>.
19 ACO: Accelerated Development Learning Sessions (ADLS). CMS.gov. Available at:
<https://innovation.cms.gov/initiatives/ACO/ADLS/index.html>
20 Shared Savings Program ACO Agreement. CMS.gov. <https://www.cms.gov/Medicare/Medicare-
Fee-for-Service-Payment/sharedsavingsprogram/Shared-Savings-Program-ACO-Agreement.html>
[Accessed 12 May 2016].
42
Regulations allow an ACO to choose one of three reimbursement tracks. The first track
is a ‘shared savings only’ arrangement available to the ACO for the duration of the first
and second agreement periods. The second and third tracks allow the ACO to share in
savings and losses for the duration of the agreement in return for a higher share of any
savings generated.21
When an ACO succeeds both in delivering high-quality care and in reducing its own
spending, it will share in the savings it achieves for the Medicare program. Eligibility for
shared savings is determined by comparing the ACO’s outturn expenditure to its own
specific updated expenditure benchmark. ACOs that choose to participate in a two-
sided performance-based risk model (i.e. those that are accountable for sharing gains
as well as losses) will repay Medicare for a portion of losses (expenditures above the
ACO’s updated benchmark by a specified percentage).
21 Summary of the June 2015 Final Rule Provisions for Accountable Care Organisations (ACOs)
under the Medicare Shared Savings Program (March 2016) ICN 907404. Available at
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-
Payment/sharedsavingsprogram/Downloads/ACO_Summary_Factsheet_ICN907404.pdf
[Accessed 12 May 2015].
43
7. Agreeing contract governance
Overview
7.1 In addition, we have explored some key aspects of contract governance which must
also be agreed ex ante. The governance arrangements, to a large extent, will be
informed by the proposed legal form of the collaboration between organisations.
7.2 As referenced earlier, the early adopter localities in NWL are seeking to move towards
a position where they are ready to formally collaborate with each other, in order to
hold a capitated budget and deliver integrated services on a population basis. In
some of these localities, work is required to build relationships alongside clinical and
operational strategies, prior to being in a position to consider legal documentation to
underpin a collaboration.
7.3 When groups of providers are ready to consider a formal collaboration, there are a
range of different legal options that they may wish to pursue (for ease of reference,
we refer to these as “legal forms”). These include:
Contractual joint venture model (MoU or alliance agreement);
Corporate vehicle (service integrator22, service provider or wholly owned
subsidiary); and
Lead provider model with sub-contracts.
7.4 An illustration of the different legal forms and different legal agreements involved in
each is set out below:
22 A service integrator is typically an entity that is set up to undertake functions to help integrate
various services being provided, rather than providing services itself. It might undertake
functions that are similar to commissioning management functions.
44
Figure 12: Integration spectrum
45
7.5 The four areas of contract governance that we have been asked to consider are as
follows:
Liabilities of individual organisations;
Holding providers to account for quality and outcomes;
Collective decision-making and dispute resolution; and
Contribution of people and resources to manage the ACP.
7.6 There is significant synergy between documenting the contribution of people and
resources to manage the ACP and detailing how to split liabilities of individual
organisations, and therefore we consider those two issues together in this report.
7.7 For each of those areas, we have set out the generic issues that providers need to
consider before reaching a recommended solution:
Contract
governance
issue
Key questions to be addressed
Liabilities of
individual
organisations
/ contribution
of people and
resources
What are the
providers contributing
to the collaboration
(e.g. workforce,
estate, IT, back office
services)?
What are the risks
associated with the
resource being
contributed (e.g.
employment tribunal
claims, information
governance breaches,
etc.)
How can those risks be
mitigated, and what are
the likely liabilities
associated?
Can those liabilities be
shared between
providers, and if so, in
what proportion?
Holding
providers to
account for
quality and
outcomes
Will individual
providers be
contracted to meet
certain specific
outcomes / parts of
outcomes, and how
measurable is this?
Have KPIs and
monthly reporting
against targets been
agreed? Are providers
operating on an open
book basis?
Consider frequency of
intra-provider reviews,
and what information
needs to be shared to
monitor the same.
Ensure that timely,
reliable information
about performance is
analysed and discussed
at relevant governance
forum between
providers.
Include contractual
mechanism allowing for
provider to provider
performance
management, where
certain trigger points
have been reached (e.g.
certain thresholds for
quality have been
breached)
Collective Where contractual Consider whether Where decisions cannot
46
decision
making and
dispute
resolution
collaborations are in
place, what authority
do representatives of
any “Provider Board”
have to bind their
organisations?
Where a corporate
joint venture is in
place, decision
making can be
constructed and
designed with more
flexibility.
decisions are to be
made by (for example)
(i) unanimous
agreement (ii) votes
from various providers.
It is possible to agree
upon a mixture of these
two options, and
reserve certain
decisions for
unanimous approval by
the providers.
be made and there is a
deadlock, or a dispute
arises, a clear process of
escalation should be
included within the
contract / corporate
documentation. This
typically involves local
resolution, followed by an
alternative dispute
resolution procedure,
such as mediation or
arbitration.
7.8 In order to document principles in respect of the different contract governance
issues, the legal form being utilised has an impact upon the approach. We have
analysed each of the contract governance issues for each of the legal options within
our three different case studies below.
7.9 We have also considered each of the legal forms and the relevant contract
governance issues at a broader level, as follows.
Contractual joint venture (MoU or Alliance Agreement)
7.10 When setting up a contractual joint venture between providers, no new legal entity is
being formed, and each individual organisation remains. When seeking to create an
ACP, and with the objective to integrate care, the boundaries between individual
organisations need to be ignored in some circumstances. However, each of the
providers needs to clearly agree the terms of its participation from a legal
perspective, as each individual organisation will remain accountable for its acts
and/or omissions. A failure to clearly agree such terms may lead to a failure with
regard to contract performance, or indeed a breakdown of relationships between
those providers within the ACP.
47
7.11 Under a contractual joint venture, the resources that each of the provider parties will
be contributing must be documented within the relevant contract. Where providers
are working under a light touch MoU (e.g. where certain incentive payments are
released for the achievement of certain performance metrics), it may be that there is
very little extra resource required – it may simply be extra staff to manage the
collaboration. The liabilities of each individual organisation will really depend upon
the resources that they are contributing to the collaboration, and what the exit
arrangements are.
7.12 Under an alliance contracting model a change is required to the traditional
commissioner-provider relationship in order that the commissioner allows the
collective of providers to develop the detail of how services are provided, within
certain parameters, rather than specifying, and holding providers to account for
inputs. When considering a full alliance contracting regime with multiple provider
organisations, there may be a range of resources that will be contributed by different
parties at the outset. This may include the costs of extra staff, estate, IT solutions
and third party contracts. There are also opportunities for the sharing of back office
functions, and potential efficiencies from collaborating and creating shared services
between the providers. Where there are long term contracts in place, the contract
should also anticipate how resources may change over time, and how the parties will
deal with it.
7.13 It may be the case that one of the providers agrees to “host” these resources, i.e.
employ all of the staff, enter into third party contracts on behalf of the alliance, etc.
From a legal perspective, providers would seek to set out a range of protections, such
as indemnities. See our case study on Alliance Contracting for further information.
NHS England has commissioned an example Alliance Contract to be drafted, with
accompanying guidance notes. This is available, in draft form, from
[email protected] and the principles included within it are referred to in
section 3.
48
Corporate vehicle (corporate joint ventures (service integrator or service provider)
and wholly owned subsidiaries)
7.14 The set-up of corporate vehicles in the NHS for clinical service provision has not been
widespread to date. There are some models, such as pathology services, where
corporate joint ventures are more commonplace, however such services are relatively
discrete in scope. Recently, we have seen a corporate joint venture, Uniting Care LLP,
set up by two NHS Foundation Trusts for the provision of all community care for over
18 year olds, acute emergency care for the over 65s together with older peoples
mental health services in Cambridgeshire and Peterborough (see Case Study 4 in
section 5 of this report). The contract collapsed after 9 months of being in force, and
NHS England’s recent review acknowledged the VAT issues, which had not been
resolved by the time that the contract had been entered into. This relates to the
recovery by NHS bodies of contracted out services VAT, and is an issue being
discussed between Department of Health and HMRC, as part of the Vanguard
programme.
7.15 Whilst as a result of the current legal blockers and potentially the risk appetite in the
NHS, there are not a significant number of live examples of corporate joint ventures
for clinical services in operation in the UK. The set-up of a corporate vehicle (whether
as a corporate joint venture or wholly owned subsidiary) would still involve a number
of contractual interfaces between various collaborating members.
7.16 The corporate vehicle itself could be delivering services, employing staff, leasing
premises, holding CQC registration, etc. Alternatively it may be holding a head
contract with Commissioners and providing a service integrator role (similar to
commissioning management) to manage the flow of services that fall within the
capitated budget given to the ACP.
7.17 One of the key attractions of setting up a new corporate joint venture are that in most
cases, the liability can be ring fenced from other organisations. It can also engender
the sense of something “new” being created amongst partners, with separate
governance arrangements, rather than having numerous separate sets of governance
arrangements as part of an alliance arrangement, for example.
7.18 There are also opportunities to use corporate vehicles to set up a wholly owned
subsidiary of NHS Foundation Trusts, allowing a separate legal entity, wholly owned
by the FT, to focus on particular services. We have set out an example of the legal
mechanics of how this can work in our case study on Northumbria Primary Care,
below.
49
7.19 It should be noted that there are many examples of GP providers setting up corporate
joint ventures for a range of different purposes, from services delivery to providing a
service integrator function. GP providers are not established under statute and are
therefore not subject to the same regulatory regime as, for example, NHS Trusts.
Lead provider model
7.20 Aside from contracting with individual organisations, the lead provider model is the
most tried and tested way of contracting for clinical services in the NHS. This model
involves one nominated organisation holding the relevant commissioning contract on
behalf of the ACP, and sub-contracting services to other providers.
7.21 This model does not generally include the set-up of a new corporate entity (though it
could involve a new corporate entity as lead provider), and therefore liabilities of
individual organisations are defined by the contractual obligations that they enter into
for the purposes of the ACP. On that basis, the lead provider will be liable for all of the
obligations set out in the head contract with commissioners, and sub-contractors are
likely to have to discharge some of these obligations by the lead provider “flowing
down” obligations in sub-contracts.
7.22 It is possible for a lead provider model to involve a contractual joint venture
agreement, often called a partnership agreement, as there may be many areas that
providers (both lead provider and sub-contractor) wish to take a partnership approach
to. We have set out details as to how providers hold each other to account, how
decisions are made and disputes are resolved, in our case study on the MSK
Partnership Collaboration, below.
Case studies: Establishing governance arrangements in other health economies
Case Study 7: Alliance contracting in the NHS
An alliance comprised of an acute NHS Trust, a mental health and community services
NHS Trust and GP Federation ("the Providers") were chosen as the preferred providers
in one of the first alliance contracting regimes in the NHS, for community based
elective care services.
This involved commissioners (two CCGs) and provider organisations working
collaboratively to ensure the delivery of services across two large CCG areas. In this
case study, we collectively refer to the commissioners and Providers as the "Alliance".
Key features
The alliance contract is for a 7 year term and included all of the Alliance as parties to it.
The key aims of the Alliance were to:
50
•Develop integrated ways of working across the Alliance based on a shared risk and
reward framework, unanimous decision making, aligned objectives and a requirement
to act in a way that was 'Best for Project';
•Ensure that community based elective care is delivered in the most clinically
appropriate setting;
•Remove duplicate or unnecessary steps in existing patient pathways and improve
communication across health organisations within the region;
•Increase value for money of existing services and achieve cost savings across the
local health economy; and
•Make better use of existing real estate and facilities.
Looking at each of the relevant issues to this report in turn:
Contribution of people and resources to manage the ACP and liabilities of individual
organisations
The main resources that various Providers contributed were staff and equipment. The
Alliance Contract included specific provisions setting out how Providers would
indemnify each other in respect of any of the acts of their own staff in connection with
the Alliance. This is necessary to protect each of the Provider’s positions in terms of
acts and omissions of staff from other organisations, and fits with the insurance
arrangements of each Provider, as well as the concept of vicarious liability (i.e. each
employer is vicariously liable for those acts and omissions of its staff in the course of
their employment). There are also a range of staff related indemnities included in the
NHS Standard Contract between Commissioners and individual Providers, which
cannot be amended.
In terms of the use of equipment, an agreement was entered into by the acute NHS
Trust as agent for the Providers and one of the CCGs on behalf of the Commissioners,
which details the terms on which various assets owned by the CCGs and third parties
are leased to the respective Provider(s) delivering the services. This set out payment
terms as well as a range of warranties (e.g. as to how the state of the equipment and
how it will be used) and indemnities (e.g. in relation to issues arising from the use of
such equipment).
Holding providers to account for quality and outcomes
51
In order to incentivise delivery of cost savings in line with the Alliance Objectives, the
model included an opportunity for incentive payments to be released where it can be
shown that the cost of providing particular services (utilising the NHS costing guidance)
is less than the amount paid under the National Tariff, with such incentive payments to
be re-invested into the services. This encouraged all of the Providers to work
collectively to achieve the best outcome for the Alliance, aligned to the best outcomes
for the population.
Separate KPIs were also included in the Alliance Contract that would require all of the
Providers to meet them in order for the performance incentive to be released to the
Providers. Again, these incentives included in the Alliance Contract fostered a collective
approach to service delivery amongst the Providers. The performance incentives were a
relatively small proportion of the overall contract value (less than 5%).
There are also levers in place whereby Providers have agreed a process to deal with
poor performance, involving the Commissioners who have the ability to issue
“rectification notices” or, where remedial action is not possible, an exclusion notice
(effectively ending their involvement in the Alliance, on notice). This would also mean
that the individual NHS Standard Contract held by that particular Provider would be
terminated at the same time.
Collective decision making and dispute resolution
An Alliance Leadership Board was set up amongst the Providers, tasked with
managing, directing and leading the Alliance in accordance with the Alliance Principles
(defined in the Alliance Contract) and setting overall strategic direction in order to meet
the Alliance Objectives (defined in the Alliance Contract).
The Alliance also involves an Alliance Management Board, whose role and remit is to
be responsible for the day to day management and support of the activities of the
Alliance in accordance with the Alliance Principles in order to meet the Alliance
Objectives. The various members of the AMB each had one vote and must exercise
such vote in a manner consistent with what is “Best for Project”.
Each of these governance structures involve representation from each of the Providers,
and the Alliance Contract includes defined responsibilities for both the ALB and AMB.
For example, the ALB is responsible for making decisions on matters of intra-Provider
performance, as to whether, based on review of performance, a particular Provider’s
performance is such that it needs to be escalated to the Commissioners, who would
then decide whether or not to effectively expel that Provider from the Alliance.
52
An escalation process to resolve disputes between Providers was included within the
Alliance Contract. This included reference to the ALB in the first instance for resolution.
If no resolution was found at that forum, it would be escalated further to the Dispute
Resolution Panel. That DRP has the ability under the Alliance Contract to resolve the
dispute or put the dispute forward for mediation or arbitration for resolution.
Lessons learned
It is still relatively early in the term of this alliance contract, therefore it is not possible
to analyse the effectiveness of the arrangements in detail. However, initial feedback
from those involved in the operation of the alliance is that clarity on the Alliance's
goals, objectives, investment fund and KPIs (including the consequences of succeeding
or failing to deliver them) is crucial in order to minimise conflict between them and any
commissioners' rights to override the 'Best for Project' requirement in certain
circumstances.
It was also noted within the project that GP engagement is crucial and continues to be
challenging as the structure and organisations of primary care continues to change
with GPs belonging to an increasing range of organisations.
Case Study 8: Northumbria Primary Care
Northumbria Healthcare NHS Foundation Trust ("Northumbria") has created a wholly
owned corporate vehicle, Northumbria Primary Care Limited (“NPC”) in response to a
request from the local primary care market for support, creating a new model for the
delivery of primary care. In March 2015 Northumbria was selected as a Vanguard to
integrate primary and acute care systems (PACS) for Northumberland, with the aim of
creating closer ties and working relationships with primary care medical services. The
success of NPC will help to facilitate the progress of the PACS vanguard project.
Key features
The NPC project was built on a foundation of years of successful collaboration between
primary and acute care in Northumberland and North Tyneside, with fully engaged local
GPs. NPC provides strong clinical leadership and support to help GPs with meeting the
everyday challenges facing local practices.
This support allows for bespoke packages to be created, meeting the individual
requirements of different GP practices, which includes:
53
Management support: providing general practices with back office support, expertise
and resources to reduce practice costs and place the practice in a stronger position to
win contracts and generate new income streams, allowing the practices to focus on
their clinical provision and improved outcomes for patients. This includes quality
governance and compliance, payroll management, financial services, human resources
and organisational development and estates maintenance; or
Full support: providing the full clinical service under the practice's primary care
commissioning contract by way of a sub-contract between the practice and NPC, with
the consent of NHS England.
NPC allows GPs to access substantial corporate expertise from Northumbria as a
successful Foundation Trust, but also retain control over the level of service they need
in order to run their practice effectively.
Contribution of people and resources / liabilities of individual organisations
Staff are the most important resource involved in this collaboration. Under the NPC
model, it was essential to clearly and concisely set out the "employment deal" for staff
once GPs and practice staff transferred to the employment of NPC. GPs in particular
required detailed information about the impact on income tax and national insurance
contributions, and any impact on pensions.
Holding providers to account for quality and outcomes
Under this model, the individual sub-contracts from GP providers’ core primary care
contracts to NPC set out the mechanism by which GP providers can hold NPC to
account for services delivered. These arrangements provided both the GP providers
and the overall commissioner (NHS England) with the assurance required.
Collective decision making and dispute resolution
The governance aspects required detailed planning as to the delegation of authority for
certain decisions. There were also matters to be considered relating to reporting lines,
holding to account and decision making between Northumbria as parent and NPC as
subsidiary. These matters were resolved within an Operational Agreement between
Northumbria and NPC, setting out the parameters within which NPC operates.
Escalation of risk management issues and the management of conflicts of interest
were also key governance areas to tackle and these were documented in the
Operational Agreement, with an escalation procedure to resolve any disputes arising.
Lessons learned
A key challenge within the project was the fact that NPC is not an eligible body to hold a
GMS Contract, therefore the design of a contractual structure that complied with the
GMS Contracts Regulations was key (see above regarding the sub-contractor model).
54
Northumbria and NPC had to work hard on the perception challenge in the region to
ensure that GP Practices did not view NPC as a route for secondary care to "take over"
primary care. It is very much a partnership and collaborative approach. It was also
crucial to ensure NHS England were involved in the journey and were on board with the
concept.
Outcomes
As a result of the management support provided by NPC, early results have been very
impressive with one member practice recording a 76 % improvement in routine access
times. Another practice has saved £6,000 in monthly expenditure.
Case Study 9: MSK Partnership Collaboration
A primary care federation, Community NHS Trust, Foundation Trust and third sector
provider collaborated to provide an integrated, multi-disciplinary musculoskeletal
("MSK") service, under an outcomes based contract. Each of the participants held a
different role in contributing to the delivery of integrated MSK services.
The parties won a competitive process in order to take on the outcomes based
contract, and developed the details of their collaborative arrangements in the later
stages of the process.
Key features
•The primary care federation agreed to hold the head contract with the commissioners
on behalf of the MSK Partnership. It sub-contracted various clinical services to its
partners in the collaboration
• The providers within the MSK partnership entered into a partnership agreement
setting out how they will work collaboratively, and governance for joint decision making.
•Specific contracts for support services from individual providers were required. For
example, one of the providers agreed to provide treasury management services and
working capital for a period of the contract term
•The collaboration involved various organisations with different governance structures
and different commercial interests, but all focussed on seeking to integrate care, to
deliver care beyond organisational boundaries, and to create single teams with shared
purpose, single management structures and single performance frameworks
Contribution of people and resources / liabilities of individual organisations
55
The providers had set out high level detail in their bid documentation as to how the
various organisations would work together to deliver the MSK services. On drilling in to
the detail as to how this would work in practice, further work was required to agree and
subsequently document the contributions.
The main resources in this project were staff and management from the primary care
federation and Community Trust, treasury management skills and the provision of
working capital from a joint venture company set up by the FT and third sector
organisation. Each of these contributions required documenting in the partnership
agreement (at a high level), and with more detail in individual support / sub-contracts.
Holding providers to account for quality and outcomes
The key services outcomes in this project were flowed into all sub-contracts (both
within the collaboration, and with those providers that were not part of the
collaboration, but were providing aspects of the MSK services). By including all of the
relevant KPIs and quality requirements in those sub-contracts, all providers were held
to account for delivering the same outcomes.
Within the collaboration of the providers, there were provisions whereby performance
between the providers would be monitored and discussed at Provider Board level, with
expulsion provisions included (though this was subject always to the consent of the
commissioner, given the terms of the NHS Standard Contract).
Collective decision making and dispute resolution
The providers agreed to document decision making in a jointly agreed scheme of
delegation. They also agreed certain key decisions that required unanimity of all or a
certain majority proportion of the Providers to agree before the decision would be
binding.
The providers set up a “Provider Board” where each of the providers was represented
with equal voting rights, though there was a commitment for the providers to reach
consensus where possible. The Provider Board was the forum for various decisions to
be made about the operation of the collaboration and management of the head
contract with commissioners.
Where there was a deadlock at Provider Board, a dispute resolution process was
entered into. The same dispute resolution process applied for other general disputes
between the providers. This involved the escalation of the issue to senior members of
each organisation for resolution. Where resolution could not be undertaken at that
level, the matter would go to mediation (by a CEDR nominated mediator). Following
that, there was one further step of escalation to expert determination, depending on
the type of dispute. Where the dispute related to the interpretation of the terms of the
partnership agreement, expert determination could be invoked.
56
Lessons learned
Many of the critical discussions between providers, relating to risk share and
governance, took place after the tender had been won by the collaborative. This meant
that there was a great deal of pressure on the parties to reach decisions on potentially
significant risk areas at a late stage in a tender process, putting at risk the proposed
services commencement date, as well as straining the relationships between the
providers. It would have helped providers had they have agreed a number of the
headline issues at an earlier stage in the procurement process and documented them
in relatively detailed heads of terms.
57
8. Conclusions
8.1 Our work with NWL covered a range of contractual and governance issues that
providers and commissioners will need to resolve before making detailed agreements
for forming ACPs.
8.2 Whilst there are relevant learnings from other health economies that can be drawn,
there is much that is new and innovative about these plans and therefore localities
will wish to carefully build up their plans, examining a number of possible scenarios
and outturns for the ACP.
8.3 The role of the commissioners is key. Whilst the role of the CCG will change and
evolve over time when commissioning from an ACP, in the early stages it is imperative
that commissioners are clear about what they want to commission, how they propose
to commission it and what their expectations are in terms of outcomes for patients.
8.4 Providers too must change behaviours and learn how to take decisions together,
focusing on best outcomes for patients rather than organisations. This is a difficult
area particularly given procurement law obligations of commissioners and
competition law obligations upon providers.
Locality site experiences
8.5 The tables below summarise the journey, challenges and next steps for each of the
localities that were part of this work process.
58
West London
The journey The project confirmed
the objective of
focusing on the
successful WS IC
programme i.e. to
continue ‘Primary Care
led service delivery
focus in WL’ with
emphasis on ‘improving
integrated care across
organisational
boundaries’
We recognised
transformation change is
not achieved through
contracts but through the
development of
relationships; hence WL
approach to growing the
existing service delivery
model
A 4 week Journey of
discovery. We now
have shared
understanding of
process. And a
recognition of: ‘hard
questions’ and ‘lot of
work’
Challenges To move all parties
forward at same rate,
and to ensure system
wide leadership
To integrate GPs given the
GMS / PMS contracts with
NHS England for essential
services
To tender or not: risk
management, whilst
continuing the
dialogue with
partners, and
iterating a new
outcomes based
specification (patient
quality and
experience)
Next steps Having confirmed
patient cohort (over
65s?) produce data set
and confirm services
Once data set and services
are confirmed, carry out a
financial analysis of
services at HRG level
Present to individual
Boards of each
organisation for
approval of next steps
Hammersmith and Fulham
The journey The real benefit of focussing the project on the development session was
creating an opportunity for the leadership of the provider and commissioner
partners to discuss the principles of their planned, joint endeavour.
This served to reinforce the alignment of vision between provider partners and
crystallised the areas of consideration that are advanced (commitment to
whole population approach in the long term, primary care at scale, priority
pathways for proof of concept) versus those that will require considerably more
time (organisational form options, outcomes based contracting models,
59
workforce development)
Undertaking the project jointly with commissioners helped provider teams to
gain assurance that the long term vision for whole population health
management by ACPs was shared, but raised questions about the robustness
of plans to transition to that model over time.
Challenges Securing sufficient transformational funding to resource change at
pace and scale
Articulating the role of Local Authorities and other health providers in
the system
Developing and executing consistent commissioning plans across
CCGs
Defining a meaningful role for commissioners once ACPs are
commissioned and agreeing transition plans that run in parallel with
extant contractual frameworks
Ensuring buy-in to change plans across all levels and disciplines of
provider organisations
Next steps Scope and execute proof of concept based on improving care for
“familiar faces” frequently attending A&E, followed by a gateway
review
Potential acceleration of the Payments, Pricing & Incentives work
stream
Develop and implement communications & engagement plan
Continue to develop patient and public involvement plans
Hillingdon
The journey Hillingdon have already got a foundation of strong relationships between the
CCG and the four providers who are seeking to work together in an ACP. The
four sessions were very well attended by the providers and CCG.
The greatest value of the engagement came in the final session when a much
wider group of representatives from the CCG attended and where the
opportunity for both provider and commissioner partners to discuss the cohort
and challenges of the next steps was discussed.
The lack awareness of the ACP development in some areas of the CCG was
60
highlighted and the need for both commissioning integration was raised.
Challenges Financial scope of the contract continues to be an issue, with the
challenges of moving to the full capitation for the over 65’s
Lack of detailed information/data for understanding & separating
the current cohorts and modelling of the future
Gap in contract values and the Trust’s actual spend on the cohort
Defining the cohort and how to manage the overlaps in client groups
e.g. in long term condition and the over 65’s.
Need for awareness of the ACP goal and a consistent commissioning
plan across all parts of the CCG
Capacity of both CCG and the providers to resource change at pace
and scale
Risk share and especially the role of primary care GPs, their current
contracts and how they can become equal partners with less
individual risk
Defining the role for commissioners once ACPs are commissioned
and agreeing transition plans that run in parallel with extant
contractual frameworks
Ensuring buy-in to change plans across all levels and disciplines of
provider organisations
Keeping social care engaged whilst not full signed up partners
Defining measurable outcomes that give confidence in service
delivery and VFM.
Next steps CCG to work with providers to clarify the expectations in detail of
commissioning intentions for April 17
Provider awareness and sign up to the detail of the goal for April
2017 and what we would actually implement in October
Agree Heads of Terms to document shared commitments of the
providers
Use the draft FTI Consulting project plan into a PMO structure with
individuals taking accountability for each part
61
Appendices
Appendix 1 – High-level roadmap for establishing finance and governance arrangements for an
ACP
Appendix 2 – Detailed workplan for establishing finance and governance arrangements for an
ACP
62
Appendix 1
A high level roadmap for establishing the financing and governance arrangements of a new contract is shown below. This
timeline is over a 1 year period, however, this could be shortened significantly, depending on the resources available and
the size of the contract being agreed.
Months 1-3 Months 4-6 Months 10-12
Agree contract
coverage
Develop outcomes and detailed
metrics
Modelling of prospective contract value
Detailed contract design (payment mechanism & risk-share)
Final
nego-
tiations
3 clinical and
financial
workshops
typically required
Clinical reference group to
agree on outcomes –
commissioners and
providers
Finance teams
of relevant
providers
Fin
an
cia
l a
nd
co
ntr
ac
tin
g
arr
an
ge
me
nts
Go
ve
rna
nc
e
arr
an
ge
me
nts
Months 7-9
Establish parties to
contract and outline
governance
Legal set-up
Finalise contracts (reflecting agreements above)
Consider legal implications
Other legal responsibilities
63
Appendix 2
A detailed workplan for establishing the financing and governance arrangements of a new contract is shown below. We
note that there are other workstreams that are necessary to formulating an ACP e.g. clinical model of care development,
organisational design, communications etc. These are not described here.
Workstream Work area Tasks Owner
Finance &
contractual
arrangements
Determine
contract
coverage
Review the different options for contract coverage
Review current services being provided to over-65s
across all care settings
Establish by relevant currency e.g. HRG for acute
providers, which elements of the service are in scope
Identify which patients are in scope and assess ability of
GPs and other organisations to flag and monitor patients
Compare contract options against contract objectives
e.g. frail vs elderly
Propose contract coverage
Clinical provider
group
Propose
contract
duration
Articulate pros and cons of different contract duration options.
Propose contract duration
Commissioner(s)
64
Workstream Work area Tasks Owner
Finance &
contractual
arrangements
Estimate
contract value
Gather latest cost and expenditure data for each relevant
provider for at least the last 3 years of spend.
Apportion cost to relevant population cohort i.e. over-65s,
including relevant support services (where applicable).
Agree assumptions between providers and commissioners
regarding:
Likely demand
Demographic change
Cost inflation
Efficiency
Likely activity reductions
Reflect known allocation changes
Overlay any known changes e.g. ongoing QIPP/CIP schemes
Calculate forecast cost
Model scenarios as to flow of funds under different attainment of
activity reductions
Agree final contract value with ACP providers (see later slide for
further factors to be incorporated before final value is agreed).
Allocation growth
Clinical provider -
group (amended
membership)
Finance group
65
Workstream Work area Tasks Owner
Finance &
contractual
arrangements
Discuss
additional
contract
negotiation
points
How will historical deficits be dealt with?
How will the ACP resolve any structural deficit issues that
currently exist in the system?
How much contingency should the system hold?
Which organisations should hold it?
Will the contingency be built over time or is there initial funding
available?
Are there incremental running costs for the ACP?
How will residual running costs of existing organisations be
affected?
Will the ACP need ‘one-off’ funding in the first year to cover
transition costs? Where would this funding come from?
How will existing savings plans be affected?
Can these saving plans be augmented?
Are any savings double-counted given activity reduction plans for
ACP?
Commissioner(s)/
Providers
Finance &
contractual
arrangements
Develop
contract
outcomes
Establish outcome indicators through a working group for
relevant contract cohort
Test outcomes measures with patient groups
Establish which metrics can be measured now, and which will
require improved data capture.
Establish targets and time profile based on current local
achievement.
Clinical provider
group
66
Workstream Work area Tasks Owner
Finance &
contractual
arrangements
Agree payment
mechanism
Agree detailed payment mechanism as to how the capitated
payment will be structured. This includes:
How much will contingent on achievement of outcomes?
Should the reference contract value be paid for baseline
performance, or should some progress be required?
How large should the performance-linked element be?
Should performance greater than 100% of target be
financially rewarded?
Should performance worse than baseline be financially
penalised?
Should payments be calculated for individual outcomes,
or should an overall payment be made based on an
index?
Should payments be calculated on a continuous scale or
as discrete steps?
Commissioner(s)
Finance &
contractual
arrangements
Develop risk-
sharing
arrangements
Agree where possible allocation of risks between CCG and
provider i.e. seek to define some “non- controllable” risks ex ante
that should be borne by CCG e.g. capitation numbers,
epidemiological reasons
Agree risk share between CCG and provider for “residual risks”
Identification of non-controllable risks only likely to be
approximate and therefore will need to consider ways in which
cost under and overrun shared
Model different outturn scenarios and options for risk-sharing
arrangements e.g. upside only risk for some providers
Consider respective ability of providers to take on and manage
risk
Agree rules for identifying and allocating costs
Establish performance indicators for each party that, if there are
cost overruns, indicate whether the provider should take higher
share of cost
Agree final sharing arrangements for un- allocated costs and
benefits.
Joint finance group
67
Workstream Work area Tasks Owner
Functions &
form
Establish
parties to
contract and
outline
governance
Constitute/Re-purpose necessary sub-groups
Agree the objectives and principles of the ACP
Agree what services (and types of contract) are initially envisaged
to be commissioned from the ACP
Agree the role of the CCG as a party to the ACP
Establish governance arrangements between the provider
organisations that will be party to the ACP (e.g. decision making
and dispute resolution)
Agree which party will be responsible for various matters (for
instance, will one of the parties hold funds received from the CCG
on trust for the others and act as “banker”?)
Agree how clinical governance is managed between the parties to
the Alliance
ACP shadow board
Functions &
form
Legal set-up Review options for organisational form and begin set-up
Review the proposed contracts that are envisaged to be
commissioned from the partnership organisation
Draft the partnership agreement for review and consideration by
CCG and providers
Agree what conditions need to be met prior to the partnership
agreement coming in to legal effect
Incorporate feedback into a revised partnership agreement for
signature
ACP shadow board
Functions &
form
Consider legal
implications to
existing
arrangements
Alliance to consider what other services can be added to the
partnership agreement in due course
ACP to consider what other organisations it wishes to be part of
the ACP and/or contract with more generally to deliver services
Implications of/interactions with other contracts
Implications of/interactions with other possible changes to
contracting? e.g. urgent care
ACP shadow board
68
Workstream Work area Tasks Owner
Functions &
form
Other legal
responsibilities
CCG to consider its procurement obligations, in light of 2015
regulations
Providers to consider their competition law obligations
Co-design of outcomes for inclusion in the services contract
Providers to set up company and consider what it can be used for
pending the removal of certain legal barriers (e.g. contracted out
VAT recovery)
Commissioner(s)
Providers