Dr David Jenner explains how commissioning in the NHS has changed in England since the 1990s and provides his opinion on the current challenges for commissioners

David Jenner

Dr David Jenner

Read this article to learn more about:

  • why and how the commissioning system has been changing in England
  • the move towards integrated care systems and collaborative care
  • how Guidelines in Practice ‘commissioning messages’ are changing in line with current realities in the NHS.

A recent history of commissioning

The introduction of the internal market in the 1990s

Following the introduction in 1991 of the NHS and Community Care Act 1990,1 commissioning of care in England operated under an internal market system based on a purchaser–provider split model. Health authorities originally acted as the purchasers—followed by primary care trusts (PCTs) and then clinical commissioning groups (CCGs) from 2012—with hospital trusts, GP practices, and other voluntary sector and private companies filling the provider role.

This purchaser–provider system was designed to bring some of the rigours of the market to the NHS and encourage providers to compete for both contracts and patients, driving efficiency, quality, and increased patient responsiveness as a result.

Payment by Results and the National Tariff: the move to fixed-price competition

This model of price-based competition changed between 2003–2008 to one of fixed-price competition through the introduction and implementation of Payment by Results (PbR) and the National Tariff,2,3 which specifies the national prices and payment rules for most secondary care attendances, procedures, and admissions. This tariff was intended to be extended to community and psychiatric services, but never got fully enacted in these areas. The aim of this fixed-price model was to encourage competition for patients based on quality rather than cost; however there has been some criticism of the PbR system, and this is discussed below (see section entitled, ‘Is this the end of Payment by Results?’).

General practice has always been funded differently through a weighted capitation formula whereby resources are distributed based on the relative needs of each area; this funding is made through General Medical Services (GMS), the Personal Medical Services, and the Alternative Provider of Medical Services contractual agreements.4

To complicate issues further, prior to 2009 PCTs often performed a dual role as both commissioners and providers of community and primary care services; therefore, from 2009 to 2011 under the Department of Health’s Transforming community services programme,5 PCTs were instructed to divest themselves of their provider roles to leave them as pure commissioners of care, further strengthening the role and rigours of the internal market in the NHS.

The Health and Social Care Act 2012

Clinical commissioning groups were established following the Health and Social Care Act 2012 and they replaced PCTs on 1 April 2013.6,7 These clinically led statutory NHS bodies are responsible for commissioning services in their local area with the aim of gaining the best health outcomes for their population.

The 2012 Act further drove the move to a market-based economy by extending the remit of Monitor (now part of NHS Improvement) to regulate and stimulate the market, alongside its established role as an independent regulator of foundation trusts.6

With the 2012 Act putting GP practices on the front line as commissioners, this immediately raised concerns over potential conflicts of interest with their role as providers of care.8 The NHS Commissioning Board (now known as NHS England) took over the commissioning of primary care services and also specialised services at that time, but it is now rapidly looking to delegate commissioning of both primary care and the majority of specialised services back to CCGs.9,10

The Five year forward view

In 2014, under the leadership of Simon Stevens—Chief Executive of NHS England—the Five year forward view was published, which signalled a definite shift in policy away from a competition- and market-based model to one built on collaboration and cooperation; however, this was not accompanied by any supporting legislation to fundamentally change the market-based rules the NHS had previously been operating under.11

Commissioning in 2018

As described above, the NHS continues to operate under the same statute but is increasingly being asked to move to a more collaborative system. Many of the rules of PbR and the use of the National Tariff as a contracting currency are progressively being replaced by the creation of sustainability and transformation partnerships (STPs), developed to deliver national targets and a local health service within the confines of a notional budget based on nationally devised allocation funding formulae.12

Is this the end of Payment by Results?

So why is this move to STPs happening? The simple truth is that the PbR system ended up incentivising providers to increase their activity (e.g. outpatient attendances, operations, and admissions), and commissioners did not have the direct authority or ability to limit this. Providers could therefore generate income by referring from one speciality to another, or by admitting more patients from accident and emergency, or simply seeing more people in outpatients or performing more operations.

Therefore, in reality PbR became ‘payment by activity’ and drove production in the NHS at a time when increasingly (and especially since 2011) financial resources to commissioners have been restricted with less and less growth per year. Many commissioners were becoming overspent, leading to the introduction of measures to stem this growth, such as through the introduction of the ‘marginal rate tariff’ in 2010/11 (i.e. only paying 30% of tariff price for any increase in emergency admissions over a baseline level with commissioners retaining the other 70% for reinvestment).13 Conversely, those providers that were unable to stem the flow of such admissions entered financial difficulties too.13

In addition, providers on effective block contracts (e.g. community and psychiatric trusts) or capped budgets (such as GP practices) often saw increased activity without any consequent increase in resources with the investment being driven through PbR to secondary care or other providers. In its publication The anatomy of health spending 2011/12, the Nuffield Trust showed spend on secondary care increased by 40% between 2003/04 and 2011/12 whereas spending on GP services has fallen in real terms by 0.2% per year since 2007/08.14

For most of England, PbR has now effectively been suspended although all the activity is still counted and trusts have been given a ‘financial envelope’ or ‘block contract’ to manage through a year under the STPs and their plans.

The latest planning guidance from NHS England—Refreshing NHS plans for 2018/19—published in February 2018 states: ‘Local systems are encouraged to consider local payment reform… .’15 This clearly heralds the future for integrated care systems (ICSs) working to a ‘system control total’, described in the planning guidance as ‘the aggregate required income and expenditure position for trusts and CCGs within the system, as communicated by NHS England and NHS improvement.’

Are we moving to a system that limits activity?

Contracts are still held between CCGs and NHS England (as the commissioners) and providers such as hospital trusts, private providers, GPs, and community providers, but to an agreed and cash-limited annual budget.

The system is now based on cost limitation, activity limitation, and collaboration, and with even the most earnest efforts to meet quality standards and waiting time targets we are now seeing widespread system failure. This was epitomised in January 2018 when NHS England instructed trusts to postpone all routine surgery and clinics to help manage winter pressures and the impact of a high prevalence of influenza,16 something that was unthinkable only a year ago when managers were being energetically performance managed by NHS England to meet these targets. These now seem temporarily abandoned.

Simon Stevens and others are calling for more funding,17 but as yet this is not forthcoming in the amount requested and required, with the Government insisting it has met the required investments set out in Five year forward view published in 2014 under the leadership of Mr Stevens (this claim is contested by Mr Stevens).

In 2018 there appears to be no appetite to reform legislation that is supporting the NHS as a fundamentally market-driven system; however, the expectation of a move to collaborative systems is clear in policy and there appears to be a real conflict between current policy and the legislation to enact this. Without an effective majority in Parliament and with the continued focus on Brexit there also seems to be no real intention to enact such legislation but almost to introduce accountable care systems (ACSs; previously described by NHS England as an evolved version of an STP) and accountable care organisations (ACOs) covertly.

It should be noted that in February 2018, NHS England through its planning guidance redefined ACSs as ICSs, to more accurately reflect how health and care organisations are working together to provide integrated services for a defined population.15 The term ICS therefore covers the new models of care—such as the PACS (primary and acute care systems), MCPs (multispecialty community providers), and ACCs (acute care collaborations)—that were developed following the publication and vision of the Five year forward view. It could also be argued, however, that the introduction of the umbrella term ‘ICS’ might be a response to political resistance and concern at the apparent move towards US-style ACOs through regulations but without legislation debated in Parliament.

Those with a long memory might quite rightly comment that ACOs and now ICSs look remarkably like the District Health Authorities of old, with local responsibility for delivering health services collaboratively within a locally cash-limited and capitated budget. As they say, ‘What goes around, comes around.’

How do these recent changes in commissioning relate to guidance?

As you will know, NICE guidance comes in various forms but commissioners only have statutory responsibility for making funding available for a drug or treatment recommended in NICE technology appraisals or highly specialised technology evaluations.18

The majority of NICE guidance is therefore just that, guidance, and discretionary for CCGs and now ICSs to fund and enact against other priorities. Although NICE guidance sometimes comes with costing templates, dedicated resources have to be found by providers from their own budgets or by commissioners from their allocations—this now effectively falls to the ICSs where both commissioners and providers come together to discuss and set priorities.

So when guidance is released, rather than ‘commissioning challenges’ we now have to consider ‘system implementation challenges’ for our local healthcare systems.

Guidelines in Practice—supporting you with implementation challenges

To align with the system changes discussed above and the new challenges for local healthcare systems, Guidelines in Practice is replacing its ‘commissioning messages’, which have appeared in its guidance articles for a number of years, with ‘implementation actions’ to support STPs and ICSs with the challenges involved with implementing new guidance at a system level. Our aim is to help you consider how to deliver improvements to health care within the available resources. We are introducing these changes in the article Psoriasis: PCDS treatment pathway provides practical advice for GPs in this month’s issue.

This change in approach matches the reality of the NHS in England and indeed very similar systems in the other devolved nations that have never embraced PbR and the market, but which now face similar challenges. Please also share this list implementation actions with your colleagues in secondary care as a stimulus for thought and change.

If you have any feedback on our proposed changes or suggestions for how we can support you further, please let us know at: ginp@mgp.co.uk.

Dr David Jenner

Part-time principal GP, Cullompton, Devon


  1. National Health Service and Community Care Act 1990. Available at: www.legislation.gov.uk/ukpga/1990/19/section/47
  2. Department of Health. Payment by results—background. The National Archives, 2010. Available at: webarchive.nationalarchives.gov.uk/+/http://www.dh.gov.uk/en/Managingyourorganisation/Financeandplanning/NHSFinancialReforms/DH_077259
  3. NHS England. NHS payment system. www.england.nhs.uk/resources/pay-syst/ (accessed 13 March 2018).
  4. NHS England. GP contract. www.england.nhs.uk/gp/gpfv/investment/gp-contract/ (accessed 13 March 2018).
  5. Department of Health. Transforming community services—demonstrating and measuring achievement: community indicators for quality improvement. DH, 2011. Available at: www.gov.uk/government/uploads/system/uploads/attachment_data/file/215624/dh_126111.pdf
  6. Health and Social Care Act 2012. Available at: www.legislation.gov.uk/ukpga/2012/7/contents/enacted
  7. NHS Clinical Commissioners. About CCGswww.nhscc.org/ccgs/ (accessed 13 March 2018).
  8. Iacobucci G. BMJ investigation finds GP conflicts of interest ‘rife’ on commissioning boards. BMJ, 2013. Available at: www.bmj.com/press-releases/2013/03/12/bmj-investigation-finds-gp-conflicts-interest-“rife”-commissioning-boards
  9. NHS England. Primary care co-commissioning. www.england.nhs.uk/commissioning/pc-co-comms/ (accessed 13 March 2018).
  10. NHS England. Commissioning intentions 2017/2018 and 2018/2019 for prescribed specialised services. NHS England, 2015. Available at: www.england.nhs.uk/wp-content/uploads/2015/12/spec-comm-intent.pdf
  11. NHS England. Five year forward view. NHS England, 2014. Available at: www.england.nhs.uk/wp-content/uploads/2014/10/5yfv-web.pdf
  12. NHS England. Local partnerships to improve health and care—sustainability and transformation partnerships (STPs) and accountable care systems (ACSs). www.england.nhs.uk/systemchange/ (accessed 13 March 2018).
  13. UK Parliament Health Committee. 2013 accountability hearing with Monitor—Pricing. UK Parliament, 2014. Available at: publications.parliament.uk/pa/cm201314/cmselect/cmhealth/841/84107.htm
  14. Jones N, Charlesworth A. The anatomy of health spending 2011/12: a review of NHS expenditure and labour productivity. London: Nuffield Trust, 2013. Available at: www.nuffieldtrust.org.uk/research/the-anatomy-of-health-spending-2011-12-a-review-of-nhs-expenditure-and-labour-productivity (accessed 13 March 2018).
  15. NHS England and NHS Improvement. Refreshing NHS plans for 2018/19. NHS England and NHS Improvement, 2018. Available at: www.england.nhs.uk/wp-content/uploads/2018/02/planning-guidance-18-19.pdf
  16. NHS England. Operational update from the NHS National Emergency Pressures Panel. 2 January 2018. www.england.nhs.uk/2018/01/operational-update-from-the-nhs-national-emergency-pressures-panel/ (accessed 14 March 2018).
  17. Ham C. Simon Stevens speaks out over NHS funding. Editorial. BMJ 2017; 359: j5251.
  18. NICE. Compliance with TA and HST guidance. www.nice.org.uk/about/what-we-do/our-programmes/nice-guidance/nice-technology-appraisal-guidance/achieving-and-demonstrating-compliance (accessed 14 March 2018).