Current NHS support is not enough, we need a transformation fund

The latest figures on the financial performance of NHS providers (foundation and NHS trusts) shows them heading for a deficit of more than £800m in 2014-15.

This is a stark reminder that business as usual in the NHS is unsustainable.

‘The pace and scale of change in the NHS needs to accelerate’

The first steps towards a more sustainable future were made recently when NHS England announced the 29 areas that will be the vanguard sites for three of the new models of care outlined in the NHS Five Year Forward View.

As part of the vanguard programme, NHS England has set aside £200m in 2015-16 as a transformation fund. This is a welcome recognition that change needs to be resourced. 

• New care models explained: How the NHS can successfully integrate care
• Forward view survey: NHS leaders are sceptical of new care model delivery

Ramp up change

2015-16 will see the first stages of implementation of the forward view but if the NHS is to deliver the rapid increases in productivity required to address the funding gap it forecasts, the pace and scale of change will then need to accelerate.

But to ramp up change we will need a transformation fund on a very different scale and its administration will almost certainly need to be very different.

The shift from a small number of innovators to system-wide remodelling of care is profound.

The King’s Fund and the Health Foundation have both argued that the NHS needs a new transformation fund to support the kind of large scale change required by the forward view.

Together we are exploring what level of investment might be required but also the crucial question of how such a fund should operate so that it genuinely supports service change and avoids becoming diverted into propping up existing services.

For this work, we are engaging with people across the NHS and examining a series of case studies from health and other services, such as education, in the UK and beyond. 

Key gaps in support

Our early work has identified some of the key gaps in the existing support available for service change, gaps which look particularly critical to the system wide redesign envisaged in the forward view.

Our analysis highlights three key problems with the existing approach to resourcing change which need to be addressed in any future fund.

First, there are problems with the ways in which individual health service organisations can raise money.

Generally, existing financing methods require a business case in which the NHS organisation can demonstrate how the investment will lead to increased revenue or cost reductions so that it can repay the initial investment.

This makes it difficult for an organisation to raise funds for valuable investments where it will not recoup the benefits itself, either because the benefits accrue to other organisations in the health economy, or where the benefits extend beyond health and are not reflected in the payment system at all. 

Yet the forward view requires changes to services which span multiple organisations and provider types (GPs, acute and community trusts, care homes and other independent sector providers, for example in mental health and community services). 

‘The forward view requires changes to services which span multiple organisations and provider types’

It also requires changes which involve both commissioners of care and providers – for example, there will be a need for substantial investment in commissioning to develop new contracting and payment models.

At present it is extremely difficult to raise finance for changes which span multiple organisations, let alone those which mix both commissioners and providers.

Therefore, while everyone recognises the need for whole health economy planning, the finance system has not yet evolved a matching whole health economy methodology and is still based on an organisation by organisation approach.  

The cost of change

Second, there is the problem that certain types of costs are not supported by any of the existing investment approaches.

In particular, it is difficult to raise funding to manage the process of change from one model to another. This includes provision for so called double running costs as the new model is tested is parallel with current services, or where the benefits of the new model (for example more preventative health care) take time to be realised.

‘The existing range of financial support available is not fit for purpose to deliver the forward view’

It is also necessary to provide support for some of the one-off underpinning enablers of change such as new decision making structures, re-training staff, developing new business processes and clinical pathways.

Overall, our research suggests that the current system appears to be slanted toward tangible investments in new infrastructure rather than the investments in more intangible assets - for example, knowledge, team working, and skills - needed to make major changes to the model of care a success.

Not fit for purpose

Finally, the forward view outlines a programme of system-wide change over many years. 

It does not prescribe a single model but recognises that there will be different solutions in different parts of the country and we do not yet have a fully developed model of what works – the outcomes of the vanguard sites are uncertain. 

But the current NHS funding system does not appear to offer the full range of types of finance needed to support major, uncertain transformation.

‘The forward view outlines a programme of system-wide change over many years’

There is no scope to raise equity finance, and public dividend capital is usually offered only to organisations in financial distress. 

Many existing funds also appear to be very small, piecemeal and short term, providing no long term continuity of investment to give changes time to grow and mature.

Our early work on a transformation fund confirms that the existing range of financial support available for organisations across the NHS is not fit for purpose if we are to deliver the forward view or indeed any large scale system-wide change. 

Specifically, a new transformation fund needs to have three key ingredients:

• it must cross boundaries;
• support all aspects of change – not just infrastructure; and
• better handle the long term and intrinsically risky nature of innovation.

Anita Charlesworth is chief economist of the Health Foundation and Richard Murray is director of policy for the King’s Fund