Conclusion and key principles to inform implementation

NHS leaders are supportive of the direction of travel and welcome the 10YHP’s ambition to shake-up the financial regime to put NHS finances on a more sustainable footing. Overall, the majority of the specific reforms to the financial framework are theoretically sound, however, successful implementation will depend on mitigating a number of key risks. Based on our extensive engagement with NHS leaders since the 10YHP was published, we’ve identified a number of key principles that the government should consider as it begins to implement the reforms outlined in the plan.

1. Establishing a sustainable pace of change and managing transition costs
   
   A sustainable pace of reform is essential to manage significant operational and financial pressures while delivering major transformation. Moving too quickly risks destabilising efforts to restore financial performance, particularly when new community based models are not yet mature enough to deliver the financial and operational benefits on which the reforms depend. Shifting activity out of hospital will not be cost neutral in the short term and diverting resources from already stretched acute services could create gaps in provision and intensify existing pressures.
   
   Reforms to the financial framework therefore need to be phased carefully, with the government providing support to manage the inevitable “double running” costs required to maintain acute capacity while investing in new community and preventative services.
   
   
2. Balancing reforms with affordability challenges
   
   Reforms to the financial framework must be grounded in what is realistically affordable, recognising that the health service cannot incentivise every priority simultaneously within a constrained funding envelope. While trusts are broadly in favour of deconstructing block contract arrangements and moving towards payment mechanisms that are more closely aligned to activity, quality and outcomes, recent experience with ERF shows that even well-designed incentives can become quickly unaffordable when scaled nationally. 
   
   In this context, any new payment mechanisms or financial incentives must be developed with a view to ensuring they remain affordable and do not unintentionally create further financial pressures that will effectively undermine the ambition of the 10YHP to restore the health service to financial sustainability.  
   
   
3. Setting realistic asks to ensure reform can be prioritised alongside delivery
   
   The success of reforms to the financial framework will depend heavily on the government setting out a clear and realistic delivery ask. The health service is being asked to work through implementing sweeping financial reforms at the same time as returning to financial sustainability and delivering against demanding operational priorities. NHS leaders also raised concerns about the cumulative effect of multiple and sometimes competing national priorities. If organisations are simultaneously incentivised to improve urgent and emergency care, increase elective activity, improve access to primary care, deliver neighbourhood health models and shift resources and focus towards a population health management approach, there is a risk that expectations become unrealistic and priorities compete for the same constrained resources.
   
   Setting a realistic delivery ask during a period of extraordinary change will be essential, ensuring all parts of the health service are working towards an agreed set of local priorities that are realistically deliverable within the resources allocated to them.
   
   
4. Establishing the financial flows that will meaningfully drive change
   
   If the reforms to the financial framework are to deliver the ambitions of the 10YHP, they must result in genuine shifts in how resources flow across the system. Incremental changes to funding mechanisms or short-term incentives are unlikely to deliver the scale of reallocation required to support prevention, neighbourhood health and community-based care. For all of the 10YHP’s claims of aiming to shift a greater proportion of resources from hospital to the community, there are no clear financial mechanisms to directly support this ambition. The 2026/27 medium planning framework included a specific commitment from NHS England to explore payment reforms to support the move to a neighbourhood model of care, however, little progress has been made to date.
   
   NHS leaders embrace the vision set out in the 10YHP to deliver more care closer to home, however, to make this happen there is more that can be done to engineer the requisite shift in resources from hospital to community via the financial framework.
   
   
5. Updating national tariff prices to ensure fair and accurate pricing
   
   National tariff prices must reflect the true cost of delivering care. If tariffs are not kept up to date, activity-based payment models risk embedding financial deficits and undermining the financial sustainability of the provider sector. Trust leaders also highlighted the importance of ensuring that there is sufficient flexibility within national pricing structures to account and adjust for regional cost differences. The government and NHS England should re-examine national tariff prices with a view to updating these to more accurately reflect the true cost of delivering care.
   
   
6. Ensuring financial incentives drive value, not volume
   A central challenge in implementing the 10YHP’s reforms to the financial framework will be ensuring that new financial incentives encourage the delivery of high-value care, rather than simply higher volumes of activity. NHS leaders agree that activity needs to be increased to improve access and reduce care backlogs, but poorly designed incentives risk prioritising throughput over improving quality of care, integrating services and improving population health. Financial incentives need to be carefully designed to ensure that clinical value, quality of care and patient outcomes are effectively factored into funding mechanisms in order to deliver the sustainable improvement envisioned by the 10YHP.
   
   
7. Reforming the capital regime to transform the NHS estate
   
   Trust leaders have cautioned that without a mechanism to carry capital forward between years, trusts will remain exposed to strict in-year spending rules that continue to stifle multi-year investment projects. Alongside reforms to the capital regime, the introduction of new public-private partnerships (PPPs) for neighbourhood health centres presents a real opportunity to test and scale alternative funding models for health infrastructure projects.
   
   The lessons from previous private finance initiatives (PFI) must be learned and appropriate safeguards must be put in place to ensure such schemes deliver value for money both now and in the future. We recommend that government publish a comprehensive capital strategy which sets out the infrastructure and technology requirements for the NHS to be able to deliver the vision of the 10YHP.