Week 9 of 10
Paying for neighbourhoods
Money decides whether a neighbourhood team is a real organisation or a meeting, and the payment models are still being designed.
Money is what turns a team into an organisation
A neighbourhood team can be convened without money. It can meet monthly and share a caseload list without owning a contract or a budget line. What it cannot do without money is employ someone, carry a risk, or promise a patient a service on a date. The mark of an organisation is that it controls a budget and signs for it. The test of the Neighbourhood Health Service is therefore not whether teams exist but whether they hold money, and the shape of that money is being designed while the teams are being built.
How neighbourhood services are paid for now
General practice is the largest single block of neighbourhood activity, and its core contract is not a local instrument. General Medical Services, Personal Medical Services and Alternative Provider Medical Services contracts will continue to be determined nationally and commissioned locally, and so will general dental services, community pharmacy and general ophthalmic services (Next steps on neighbourhood health and new delivery models, 2026). Community health services sit largely on block contracts, and a study of commissioning across four English sites found that block contracts limit the flexibility community services need to provide the proactive care that avoids admission (Bramwell et al., 2025, BMJ Open). The money behind a multidisciplinary team therefore arrives today as several contracts held by several organisations.
One instrument is designed to cross those boundaries. The Better Care Fund is the first and only national policy in England to have legally mandated the pooling of health and social care funds (Harlock et al., 2020, Journal of Health Services Research and Policy). Its legal vehicle is section 75 of the NHS Act 2006, which allows NHS bodies and councils to contribute to a common fund used to commission health or social care related services, with a section 75 agreement a core requirement of the fund (NHS England, 2025). The framework asks integrated care boards and local authorities to confirm how they intend to use pooled funding under the Better Care Fund, respecting national conditions that include required increases in minimum contributions to adult social care over the next three years (Neighbourhood Health Framework, 2026).
Two further streams matter. The framework's minimum basic requirements for 2026 to 2027 include agreeing plans to establish integrated neighbourhood teams for high priority cohorts, including how devolving care budgets could work in their area, and record that outpatient and frailty budget devolution already exists (Neighbourhood Health Framework, 2026). The second stream is the local authority public health grant, described in the 10 Year Health Plan as a nearly 4 billion pound investment in local health outcomes, now carrying a real terms increase for 2025 to 2026 after a trajectory of cuts that were most severe in the most disadvantaged parts of the country (10 Year Health Plan, 2025). Between 2013 and 2017 central funding to local government fell by 33%, or 168 pounds per person, and each 100 pound reduction in annual per person funding was associated with life expectancy at birth falling by 1.3 months for men and 1.2 months for women (Alexiou et al., 2021, The Lancet Public Health). Neighbourhood plans are built on the assumption that this money exists.
One constraint runs through all of it. Where a health and wellbeing board changes public health, adult social care or children's social care services to reflect neighbourhood priorities, that does not alter the accountability or funding responsibilities of local authorities (Neighbourhood Health Framework, 2026). A pooled budget is a transfer of cash, not of responsibility.
The direction of travel is population-based commissioning
The commissioning argument is set out in Fit for the future: towards population health delivery models. It states that commissioning reform will support integrated care boards to become more expert strategic commissioners, moving to a population health approach that aligns incentives, reduces fragmentation and addresses the imbalance of resources (Fit for the future, 2026). It then names three population-based contract models. A single neighbourhood provider contract covers a defined neighbourhood and lets primary care take on services that today's general practice contracts do not cover. A multi-neighbourhood provider contract co-ordinates services across several neighbourhoods. An integrated health organisation contract gives a provider a whole population health budget for a geographically defined population, and is the model meant to become the norm. The document's working assumptions are that a multi-neighbourhood contract would suit a population of around 250,000 and a single neighbourhood contract a population of around 50,000 (Fit for the future, 2026).
The timetable is explicit. NHS England expects integrated care boards to be able to set out how they will have begun implementing some outcome-based contracts within 3 years, with a view to integrated health organisation contracts becoming the norm (Next steps on neighbourhood health and new delivery models, 2026). It also states that 2026/27 will be a developmental year for all three new contracts (Fit for the future, 2026). Two decisions are already made. Integrated health organisation contracts will only ever be held by NHS organisations, with the first designates announced in Spring 2026 and drawn initially from high-performing advanced foundation trusts, and there will be routes for mature neighbourhood providers to lead one by partnering with a statutory NHS organisation (Fit for the future, 2026). Where a neighbourhood team stands in that chain is decided by who holds the contract above it.
The financial logic is a wager on risk. New risk-sharing approaches are intended to incentivise neighbourhood providers to deliver preventive care that reduces avoidable non-elective admissions, and commissioners should move towards new financial flows that may include risk-gain sharing arrangements, initially on an upside basis only (Fit for the future, 2026). The 10 Year Health Plan goes further and describes integrated health organisations that, if they provide high quality care efficiently, will be allowed to keep the savings for reinvestment, secured through longer-term capitation-based contracting, with year of care payments allocating a capitated budget for a patient's care over a year instead of paying a fee for service, and block payments for urgent and emergency care to be deconstructed from 2026 to 2027 (10 Year Health Plan, 2025).
What the evidence says about pooled budgets
The nearest English test of the pooled model is well recorded, and it separates collaboration from savings. A national evaluation of the Better Care Fund interviewed 40 staff responsible for implementation across 16 local sites in 2017 and 2018, and concluded that pooled budgets can lever closer collaboration between health and social care while leaving major cultural, operational and territorial barriers in place, with practical and political difficulty in managing pooled budgets across geographical boundaries (Harlock et al., 2020, Journal of Health Services Research and Policy).
The hospital activity data are starker. A quasi-experimental study used national Hospital Episode Statistics for a cohort of 14.4 million patients and the staggered local uptake of the Better Care Fund to test its effect on hospital use. It found no effect of budget pooling on secondary care use for the whole population, and for patients with multimorbidity the use of bed days increased in the short term by 0.164, or 4.9%, per patient per year (Stokes et al., 2019, Social Science and Medicine). The National Audit Office reached a similar verdict on the first year: the fund did not achieve the planned savings of 511 million pounds from the 5.3 billion pounds spent in 2015-16, and emergency admissions rose by 87,000 against a planned reduction of 106,000 admissions, with no compelling evidence that integration in England leads to sustainable financial savings or reduced acute hospital activity, even though more than 90% of local areas reported that their plan had improved joint working (National Audit Office, 2017).
The international synthesis is more encouraging and less certain. A meta-analysis of 34 economic evaluations of integrated care found a mean cost ratio of 0.944 and a mean outcome ratio of 1.062 against usual care, a 5.6% decrease in cost and a 6.2% improvement in outcome, but the average quality score of the included studies was 65% and the heterogeneity in costs was large (Rocks et al., 2020, The European Journal of Health Economics). Read together, the three findings support one sentence. Pooled money buys collaboration reliably and savings unreliably.
The incentives that keep activity in hospitals
The 10 Year Health Plan states the problem in its own words. Under current funding mechanisms the cost of new and more efficient community based services falls in one part of the NHS while the savings fall in another, typically hospitals, and this disconnect means there is no financial incentive to invest in services that improve patient outcomes and deliver better value (10 Year Health Plan, 2025). The commissioning blueprint reaches the same conclusion from the other direction, describing a misalignment of incentives in which spend incurred in one area leads to savings accrued in another, so that organisations focus on their own part of the picture at the expense of best efficiency for the NHS pound (Fit for the future, 2026).
What happens when money follows activity is not speculative. A difference-in-differences analysis of payment by results, using English foundation and non-foundation trusts against providers in Scotland, found that where the fixed tariff was implemented, length of stay fell more quickly and the proportion of day case admissions rose more quickly, which points to lower unit costs, and that there was some evidence of an association with growth in acute hospital activity, while quality indicators showed little measurable change (Farrar et al., 2009, BMJ). Money that follows activity bought efficiency and volume. It did not buy fewer episodes.
A second literature explains why an outcome-based contract will not automatically fix this. Bevan and Hood analysed the English target regime and found that governance by targets rests on two assumptions, that a part can stand for a whole and that problems of measurement and gaming do not matter, and that both assumptions failed against the evidence they examined (Bevan and Hood, 2006, Public Administration). Applied to a contract that pays on outcomes, whatever is measured becomes the service and what is not measured becomes optional. The community services study supplies a practical version: its participants could not evidence their contribution to hospital avoidance from the data available to them (Bramwell et al., 2025, BMJ Open). A provider asked to hold an outcome it cannot measure is being asked to carry a risk it cannot see.
Who carries the risk, and what is not yet decided
An outcome-based contract transfers risk to the provider, and risk needs reserves. A study of how the voluntary sector is commissioned by the NHS and local government in England found that the hidden transaction costs of contracting, especially tendering and the information and monitoring requirements that follow, are proportionately greater for small organisations and can deter them altogether. Its procurement data for 2020 showed that two thirds of the income from government contracts, 6.2 billion pounds, was secured by voluntary, community and social enterprise providers with incomes above 10 million pounds, a group of just over 500 providers, and that hospices typically drew only 30 to 40 per cent of their funding from statutory bodies (Sheaff et al., 2024, Health and Social Care Delivery Research). Commissioning activity at below its full cost appears unsustainable.
Put that beside the contract architecture and the contested question answers itself in one direction. A contract that pays on outcomes and asks the holder to fund a year of work before the outcome is measured selects for organisations that can wait to be paid. The single neighbourhood contract at around 50,000 people and the multi-neighbourhood contract at around 250,000 are set at a scale a small provider cannot hold alone. The framework's reassurance, that neighbourhoods are not currently single organisations and in many cases will not need to be, is a statement about organisational form (Neighbourhood Health Framework, 2026). Money decides whether it stays true, and the framework is candid that neighbourhood health is expected to be funded by rebalancing existing resources rather than new funding, which makes who absorbs the risk a question about who is left when the money moves.
What is not decided is the payment model itself. Both Fit for the future and the next steps letter end on the same undertaking: NHS England will work with integrated care boards to develop new payment models to support neighbourhood services, including for the high priority cohorts, and will outline the co-designed payment approaches for all boards to consider shortly (Fit for the future, 2026; Next steps on neighbourhood health and new delivery models, 2026). Those co-designed approaches had not been published. So the capitated sum, the size of the upside shared, the treatment of a patient who crosses a boundary, and whether small providers can bid at all remain open. What is settled is the direction: population-based commissioning led by integrated care boards, outcome-based contracts within 3 years, and integrated health organisation contracts becoming the norm. The contested question is who wins that argument. Outcome-based contracts can work at neighbourhood scale for small providers only if the payment arrives often enough and the risk is shared downward, and that design has not been published.
The contested question
Whether outcome-based contracts at neighbourhood scale can be made to work for small providers, or whether they entrench the larger organisations that can carry the risk.
Working across professions
Who carries the financial risk
Pooled money makes professions compete in a way that shared values do not prevent. Give a mixed group a fixed envelope and three competing proposals, one from each of three professions. The task is to reach a funded decision and to write down what the two unfunded groups are promised, and by whom.
For your profession
Written for the groups City St George's trains. Read your own first, then the two nearest to you: the disagreements between them are the working material.
General practice and primary care (including physician associates)
Physician Associate Studies (Pre-Registration) MPAS
What changes for you. Practice income stays with contracts determined nationally, because General Medical Services, Personal Medical Services and Alternative Provider Medical Services are untouched by the new models. What changes is the route to new work. The single neighbourhood provider contract is the only vehicle for services the general practice contract does not cover, and its holder must be able to serve the neighbourhood's registered lists.
The decision on your desk. Whether to bid for or join the single neighbourhood provider contract for the local population of around 50,000, or to stay outside it and sell sessions into a team whose budget another organisation controls.
What goes wrong if this is done badly. If practices stay outside the contract, the neighbourhood budget sits with a provider that does not hold their lists, and the practice absorbs the demand the contract generates without the money that follows it.
Community nursing and district nursing
Public Health and Specialist Community Nursing MSc/PGDip
What changes for you. Community health services sit largely on block contracts, and the week's evidence is that block funding limits the flexibility services need for proactive care that avoids admission. The population-based contracts are the first route by which community nursing could be paid for a defined population instead of a block, and the risk-sharing arrangements on offer start on an upside basis only.
The decision on your desk. Whether to accept payment against a defined neighbourhood population with an upside-only risk share, or to stay on a block contract that funds the caseload but not the shift towards prevention.
What goes wrong if this is done badly. If community nursing takes outcome-based money without the data to evidence its contribution to avoiding admission, it carries a target it cannot demonstrate, which is exactly what participants in the commissioning study reported.
Adult social care
Partner profession: local authority adult social care
What changes for you. The council's share of a neighbourhood budget arrives mainly through the Better Care Fund, the only national policy in England to have legally mandated pooling, delivered under a section 75 agreement with the integrated care board. The framework states that changing council services to fit neighbourhood priorities does not alter the council's accountability or funding responsibilities, so the council pools cash while keeping the legal duty.
The decision on your desk. Whether to pool more than the required minimum contribution into the section 75 agreement, or to hold the statutory minimum and keep the rest of the social care budget under the council's own control.
What goes wrong if this is done badly. If the pooled fund grows while the duty stays with the council, the council carries the financial risk for services it no longer controls, and the audit office's finding that pooled money did not deliver planned savings returns.
Mental health nursing and mental health practice
Mental Health Nursing BSc (Hons)
What changes for you. The contract architecture treats mental health in two ways at once. Community, mental health and acute trusts are all eligible to be designated as integrated health organisation contract holders, so a mental health trust could hold the whole population budget for a neighbourhood population. The blueprint also names mental health, learning disability and autism pathways as candidates for lead provider arrangements.
The decision on your desk. Whether the mental health trust seeks designation as an integrated health organisation and holds the population budget, or stays a subcontractor delivering a mental health pathway inside another organisation's budget.
What goes wrong if this is done badly. If mental health is bought as a lead provider pathway rather than part of the population budget, the money for physical health checks and medicines management for people with severe mental illness sits outside the neighbourhood envelope.
Physiotherapy
Physiotherapy BSc (Hons)
What changes for you. The payment models are pointed at reducing avoidable non-elective admissions for high priority cohorts, and the risk-sharing arrangements tested are upside only, so a provider gains when admissions fall. Physiotherapy treats the falls risk and function in exactly those cohorts, but its work is captured poorly by the activity and cost data the contracts are built on.
The decision on your desk. Whether to take a defined rehabilitation caseload inside the neighbourhood budget with a measured admissions outcome, or to stay commissioned as a service paid for contacts delivered.
What goes wrong if this is done badly. If the outcome measure is non-elective admissions alone, physiotherapy's contribution is invisible, funding follows countable activity, and rehabilitation is bought as contacts rather than as the work that keeps the frailty cohort at home.
Speech and language therapy
Speech and Language Therapy BSc (Hons)
What changes for you. The week explains why payment decides what exists. Under an outcome-based contract whatever is measured becomes the service, and swallowing and communication work is not counted in the activity and cost data that neighbourhood budgets are built on. A therapist whose adult dysphagia caseload sits in a community trust block contract must argue for a place in a population budget.
The decision on your desk. Whether to bid for a defined place in the neighbourhood budget for adult dysphagia and communication, or to remain funded through a block contract that does not count the admissions the work prevents.
What goes wrong if this is done badly. If speech and language therapy is not written into the neighbourhood budget, aspiration and communication risk falls on a team with no funded therapist, and the preventable admissions the contracts are meant to reduce return as activity.
Voluntary, community, faith and social enterprise (VCFSE) partners
Voluntary Sector Leadership and Management MSc/PGDip
What changes for you. An outcome-based contract hands the voluntary sector a defined outcome and a payment that arrives after the work is done. The week's evidence is that the hidden transaction costs of contracting fall hardest on small organisations, that two thirds of government contract income goes to providers with incomes above 10 million pounds, and that commissioning at below full cost is unsustainable.
The decision on your desk. Whether to bid for a neighbourhood contract that pays on outcomes, or to negotiate a grant or staged payment that funds the work before the outcome is measured.
What goes wrong if this is done badly. If small organisations bid without reserves, the contract selects for the larger providers that can carry the risk, and the community capacity the neighbourhood plan relies on is consolidated into a handful of organisations.
Pharmacy (pharmacists and pharmacy technicians)
Pharmacy MPharm (Hons) (awarded by Kingston University, delivered jointly with St George's, University of London)
What changes for you. Community pharmacy contracts remain nationally determined and commissioned locally, so pharmacy is not inside the new neighbourhood contracts as a provider. What changes is administration. Where an integrated health organisation is constituted, its holder takes on local contract management for pharmacy, optometry and dentistry, so a pharmacist working with a neighbourhood team sits under a budget held by another organisation.
The decision on your desk. Whether the pharmacy team joins a neighbourhood provider as a subcontractor for medicines review, or stays contracted nationally and takes referrals from a team it does not invoice.
What goes wrong if this is done badly. If medicines review is bought as a neighbourhood service without a contract for pharmacy, structured review of polypharmacy happens when a crisis brings a patient across the desk, and care home prescribing accumulates without review.
Critical commentary
Where this week is argued with
Full-text commentaries and critical analyses from peer-reviewed journals. The policy column tests the claim against what government actually commissioned. The practice column tests it against what staff can deliver. Read one from each before the contested question.
Policy-facing
An editorial arguing that integrated care is an elastic concept with a mixed evidence base, that the absence of financial integration is a major barrier, and that pooled budgets and population-based payment mechanisms are hard to judge without clarity about their design. It lands with the week's thesis that money decides whether integration is real. Article type: editorial.
Editorial arguing no single payment model satisfies equity, efficiency and outcomes at once, that integrated care's long timescales and mismatched costs and savings make payment design an exercise in second-best optimisation, and that failed approaches return as novelties. It disagrees with this week's confidence that the emerging payment models will settle how neighbourhood teams are funded.
Commentary arguing strategic purchasing and managed competition rarely reallocate resources, that the English NHS substitutes cooperation for competition under austerity, and that commissioning is consensual and political rather than competitive. It disagrees with this week's thesis that population-based commissioning and outcome-based contracts will move money and reshape neighbourhood services.
Practice-facing
A viewpoint tracing one older woman's care journey through home care, hospital and a nursing home, written by a relative who researches integration. It argues that integration fails at the point of delivery because multidisciplinary working, shared goals and communication with families are absent. It lands against the week's optimism that neighbourhood teams cohere in practice. Article type: viewpoint.
Viewpoint arguing the shift to value-based payment is an underappreciated accelerant of consolidation, because budget and outcome contracts demand capital, analytics and regulatory expertise that small independent practices lack. It disagrees with this week's hope that outcome-based neighbourhood contracts can be made to work for small providers without entrenching larger organisations.
Key sources
A quasi-experimental study using national Hospital Episode Statistics for a cohort of 14.4 million patients, exploiting the staggered local uptake of the Better Care Fund in England. It found no effect of budget pooling on secondary care use for the whole population, and for patients with multimorbidity the use of bed days rose in the short term by 4.9% per patient per year, while noting that pooling does appear to stimulate additional integration activity. It is the direct test of whether pooled money changes hospital use.
The first national multi-method evaluation of the Better Care Fund, based on interviews with 40 staff responsible for implementation across 16 local sites in 2017 and 2018. It records that the fund is the first and only national policy in England to have legally mandated the pooling of health and social care funds, that pooling can lever closer collaboration, and that major cultural, operational and territorial barriers remain, with practical and political difficulty in managing pooled budgets across geographical boundaries.
A systematic review and meta-analysis of 34 economic evaluations of integrated care, weighted by an adapted quality checklist. It reports a mean cost ratio of 0.944, a 5.6% decrease in cost, and a mean outcome ratio of 1.062, a 6.2% improvement in outcomes, but the average quality score of the included studies was 65% and the heterogeneity in costs was large. It is the best available estimate of what integrated care buys for the money.
A difference-in-differences analysis of the introduction of payment by results in English acute hospitals, using non-foundation trusts and providers in Scotland as controls across 2002/3 to 2005/6. Where the fixed tariff was implemented, length of stay fell more quickly and the proportion of day case admissions rose more quickly, suggesting lower unit costs, with some evidence of an association with growth in acute hospital activity and little measurable change in the quality indicators used. It is the English evidence on what money that follows activity actually rewards.
An analysis of the English regime that combined targets with sanctions, including star ratings built from around 50 kinds of target. The authors argue that governance by targets rests on two assumptions, that a part can stand for a whole and that problems of measurement and gaming do not matter, and they show that both assumptions failed against the reported successes and the gaming they examined. It is the source of the caution that an outcome-based contract makes whatever is measured into the service.
A qualitative interview study with 40 participants holding management and commissioning roles across four English case study sites, published in BMJ Open. Participants reported that the move from clinical commissioning groups to integrated care boards produced confusion about the commissioning function, that population health and community service data do not support proactive planning, that block contract funding models limit the flexibility community services need, and that community services find it particularly difficult to evidence their contribution to hospital avoidance. It grounds this week's account of how neighbourhood services are commissioned and paid for now.
An NIHR mixed-methods study of how the NHS and local authorities commission voluntary, community and social enterprises in England, identifying a commodified and a collaborative mode running in parallel. Its procurement data for 2020 showed that two thirds of the income from government contracts, 6.2 billion pounds, was secured by organisations with incomes above 10 million pounds, a group of just over 500 providers, and it reports that the hidden transaction costs of contracting fall hardest on small organisations, that hospices typically drew only 30 to 40 per cent of their funding from statutory bodies, and that commissioning at below full cost appears unsustainable. It is the central evidence for this week's contested question about small providers and risk.
A longitudinal ecological study linking local government revenue expenditure to life expectancy across 147 upper-tier local authorities in England between 2013 and 2017. Mean per capita central funding fell by 33%, or 168 pounds per person, and each 100 pound reduction in annual per person funding was associated with life expectancy at birth falling by 1.3 months for men and 1.2 months for women, with the greatest reductions in the most deprived areas and an estimated 9,600 additional deaths under 75. It establishes what is at stake in the local authority public health grant that neighbourhood plans assume.
National Audit Office (2017). Health and social care integration. London: National Audit Office.
LANDING PAGEThe National Audit Office report of 8 February 2017 on the Better Care Fund and the wider integration programme. It found the fund had not achieved the expected value for money from the 5.3 billion pounds spent in 2015-16, that the planned savings of 511 million pounds were not achieved, that emergency admissions rose by 87,000 against a planned reduction of 106,000, and that there was no compelling evidence that integration in England leads to sustainable financial savings or reduced acute hospital activity, while more than 90% of local areas reported that the plan had improved joint working. The page read was the report summary and key findings, so access is recorded as a landing page.
The NHS England publication page for the template and guidance on Better Care Fund section 75 agreements. It states that section 75 of the NHS Act 2006 allows partners, meaning NHS bodies and councils, to contribute to a common fund that can be used to commission health or social care related services, and that section 75 agreements are a core requirement of the Better Care Fund. Only the publication landing page was read, not the linked template and guidance note.
The commissioning blueprint published on 17 March 2026 that sets out three population-based contract models: single neighbourhood providers, multi-neighbourhood providers and integrated health organisations. It gives working populations of around 50,000 and 250,000, states that risk-sharing approaches will incentivise preventive care and that commissioners should move to financial flows including risk-gain sharing initially on an upside basis, restricts integrated health organisation contracts to NHS organisations with the first designates drawn from advanced foundation trusts, makes 2026/27 a developmental year, and promises that co-designed payment approaches will be outlined shortly. It is the source of this week's commissioning argument.
The joint letter of 18 March 2026 that accompanies the framework and the population health delivery blueprint. It asks integrated care boards and local government to confirm how they intend to use pooled funding under the Better Care Fund and how devolving care budgets could work in their area, and states the expectation that boards can set out how they will have begun implementing some outcome-based contracts within 3 years, with a view to integrated health organisation contracts becoming the norm. It supplies this week's timetable.
The framework published on 17 March 2026, whose finances section carries this week's argument. It asks boards and local authorities to confirm how they intend to use pooled funding under the Better Care Fund, makes devolving care budgets a minimum basic requirement for 2026 to 2027, records that outpatient and frailty budget devolution already exists, states that changing council services to fit neighbourhood priorities does not alter local authority accountability or funding responsibilities, and is explicit that neighbourhood health is expected to be funded by rebalancing existing resources rather than new funding.
The plan that supplies the funding diagnosis and the direction of travel used in this week. It states that under current funding mechanisms the cost of more efficient community services falls in one part of the NHS while the savings fall in another, typically hospitals, so there is no incentive to invest; describes integrated health organisations that may keep savings under longer-term capitation-based contracting; introduces year of care payments that allocate a capitated budget instead of a fee for service; commits to deconstructing block payments for urgent and emergency care from 2026 to 2027; and records the public health grant as a nearly 4 billion pound investment. Access is recorded as abstract because this reading covered the plan's funding and incentives material in the on-disk extract rather than the whole document.