Liverpool Clinical Commissioning Group

Health Solutions | Economic & Financial Consulting

August 5, 2015

Stethoscope

When Liverpool Clinical Commissioning Group was looking for ways to improve care for people with diabetes and make it more efficient, we helped create new contracts which aligned providers’ incentives to patients’ needs.

If the NHS is to meet the needs of an ageing population successfully with its limited resources, it will need to be as efficient and well-organised as possible. This challenge is especially demanding in many areas, like Liverpool, where a growing number of people suffer from long-term conditions, such as diabetes.

With poor health outcomes and wide health inequalities between different areas of the city, Liverpool faces significant healthcare issues. In 2014, Liverpool Clinical Commissioning Group faced a specific challenge around care for diabetes patients, because none of the three main sources of care for those patients (the two local hospitals and the community care trust providing local clinics and homes visits) received the appropriate financial incentives to help them meet their patients’ needs.

For the hospitals, their funding was based on the number of patients treated, which meant that they had no financial incentive to help people with diabetes to manage their condition better. Similarly, the community care provider was given a set sum of money for the year, meaning that it was effectively punished financially if it provided more care. So, while most patients want care close to home which helps them to manage their condition and reduces the chances of them needing to go to hospital, the financial system was set up to encourage the exact opposite approach.

The Clinical Commissioning Group therefore asked us to design a contract which would help to ensure that diabetes care would be delivered efficiently, conveniently and cost-effectively.

Our experts worked with a wide range of stakeholders, including clinicians and financial specialists, to identify the specific challenges and apply economic principles to develop possible solutions. We explored how different contract structures would affect incentives to provide care in different ways and undertook modelling to cost up the contract and assess the possible financial impacts on providers.

"Our experts worked with a wide range of stakeholders, including clinicians and financial specialists, to identify the specific challenges and apply economic principles to develop possible solutions."

Underpinning our approach at all times was the need to align the incentives of providers with those of patients and taxpayers. We therefore proposed a single contract covering hospital and community care, with a fixed amount paid over three years plus a payment linked to the achievement of desired outcomes for patients. The contract therefore incentivises the providers to deliver care as cost efficiently as possible and improve outcomes for patients.

Having carried out extensive analysis, we built a consensus around our recommendations, before agreeing on an innovative and pragmatic contract design.

Outcome: Liverpool Clinical Commissioning Group implemented the outcomes-based contract for diabetes care in 2014/15, and the contract is now supporting the delivery of the new integrated, community-based diabetes service for patients.

As a direct result of this work, Camden CCG approached us to develop similar contracts for the delivery of diabetes care in their area.

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