So, the season is upon us again. Not the festive season, despite the adverts that have sprung up on TV – but the contracting season. Commissioning intentions, QIPP plans, capacity and demand modelling, affordability envelopes, the impact of system redesign. Add to this the uncertainty of general election and the usual delays in the guidance and there’s a lot for Santa and his elves to fit into his sack this year.

It seems only yesterday we were working with clients to help them set contracts and sort out the usual bones of contention between provider and commissioner, but here we are again, discussing the same challenges. Finances are as tight as ever, demand is still up, referrals continue to grow, the waiting list backlog isn’t going anywhere, and same day emergency care is continually redesigned in the vain hope that winter won’t be so bad this year. Add to this the developing future state of integrated care systems and now primary care networks and we have a heroic set of challenges to deal with.

But agreeing your acute contract doesn’t have to be the prolonged, tortuous and combative experience it always seems to be. We have worked with health economies who have grasped the opportunity to change their dynamic, setting their plan realistically and accurately, and in doing so transformed their contracting relationship, moving it from adversarial to collaborative and paving the path to integration.

From this experience of working with the NHS to set and deliver contracts here are the five key things that can improve the contracting relationship in your area, make joint-working a reality, and move the system forward into the brave new world of collaborative contracts.

  1. Work as a system – strategically we’re all pulling in the same direction; sometimes, however, this joint working is hampered by obstacles and behaviours at the operational level. When we learn to share our plans and expectations early, and commit to working together, then there’s more chance of getting though the contracting round with a productive outcome, a stronger relationship, and a deeper understanding of the challenges facing the health economy.
  2. Be brave, be honest – both sides of the commissioning relationship need to challenge each other about the contentious issues. A short-term approach to problem solving when finances are tight (as they always seem to be) can lead to CCGs trying to QIPP their way out of a financial hole, or trusts secretly planning to trade their way to balance. If the baseline isn’t affordable, don’t set yourself up to fail. We know from our experience the only way forward is to be honest about reality – being clear on the cost of acute care, both under PbR and in relation to a trust’s overall cost base, and then understanding how much money is actually available to pay for it.
  3. Use the truth to unlock innovation – and that truth is that you need to do more with the money available to you. This is why contracting is changing in the NHS. Our experience of aligned incentive contracts and similar contracting models is that, once provider services understand it’s not about maximising income anymore, it’s about maximising value, these type of contracts provide the opportunity for services to be really innovative: clearing follow-up waiting lists through paper reviews, triaging patients virtually, doing more see-and-treats, starting discharge planning earlier, increasing access to diagnostics, getting more patients through within the same financial envelope and the same cost base, integrating acute and community pathways, and ultimately keeping services sustainable without bankrupting the health economy.
  4. Use the contract as a lever – we are often asked to help resolve disagreements between finance teams in providers and commissioners caused by a disconnect between what's in the contract and the senior teams' expectations around transformation, particularly for CCG governing bodies. What is often over-looked in these health economies is that the contract is actually a lever to deliver and embed change. It’s the agreement to work together, provider and commissioner, a pact to deliver the best you can for the patient, and an opportunity to describe the future in real terms within a formal and enforceable document. Where we have seen the contract play a key role in supporting system working the planning teams and services are involved in the contracting process, describing what their plans mean for delivery and funding and then enshrining that within the contract. And then both commissioner and provider continue to work together in-year, holding each other to account, not just for the delivery of the contract, but for the aspirations and intentions behind the contract itself.
  5. Single version of the truth – in our experience the most important thing by far is transparency over numbers and a shared-understanding of the rationale for those numbers. It’s not easy to get the numbers right, and it’s even harder to get the plan right, both the finances and activity. Assurance over the plan and its methodology will give executive teams confidence in the future and will flush out the risks to delivery. Equally important is agreeing a process for aligning in-year forecasts between providers and commissioners. This will turn the contract from a set of unrealistic expectations which just causes dispute and distrust, into the single version of the truth for every organisation, signed off by exec teams and followed with confidence by the whole health economy.

The best contracts reflect reality. Get your activity baseline right, have the difficult conversations about affordability with the system and then the regulator, accept that cost per case doesn’t work anymore, agree the financial envelope, and set an activity plan that reflects the innovation and aspirations of the health economy. And then stick to the plan, together, confident in outturn.

Because now is the time to do this. Contract for the future, not just last year with a few fudges. And do it together.