In the media

How ICSs can take a population-based approach to financial planning

By Shaun Hobbs, James Glossop


Aug 16, 2022

This article was first published in LocalGov

The key objectives for Integrated Care Systems (ICSs) are improving population health outcomes and reducing health inequalities. To achieve this improvement and greater equity in outcomes, we need a shift of resources and mindset towards new more proactive and preventative care models that address underlying causes and wider determinants of poor health.

However, most Integrated Care Boards’ (ICBs’) financial plans for 2022-23 and five year financial strategies remain traditionally financially focussed with limited alignment to the overall ICS strategy and priorities. There are three key reasons why ICSs aren’t currently taking a population-based approach to financial planning. These are:

1. Lack of linked data and proper costing to understand current and future costs. Many systems lack linked data to understand the full cost of segments of the population across acute, primary, community, mental health and social care. This means that we typically only understand the costs of different population groups when they use secondary care, and we struggle to apply risk-based approaches to understand the likely future costs of those who do not use secondary care today but are likely to do so in the near future. In addition, outside of the acute sector, there is limited costing data meaning that we are reliant on tariffs as a proxy for the costs incurred, which can create misaligned incentives.

2. The time horizons and scope of NHS financial planning are not well aligned with the strategic objectives. The ICB financial plans are five-year plans, with particular focus placed on year one. But population health management investments can take a number of years to payback, particularly those focussed on prevention. Currently the scope of financial planning is principally NHS budgets, excepting the Better Care Fund, but the drivers of population health outcomes are mainly wider determinants of health at the intersection of healthcare, local government and local community-based services. The current scope is also typically focused on technical efficiency – as indicated by the focus on efficiency targets and productivity – rather than allocative efficiency with limited or no measurement of whether resources are being put in the right places.

3. Lack of sufficient buy in from system partners to population based planning. Every organisation is feeling squeezed. It is harder to make the case for movements of resources when each individual organisation is facing a significant financial challenge. For this reason in particular, as a wider system, we don’t have the full commitment of contributing organisations to use resources in each system in service of the best value based care for populations – agnostic of organisations. This often means that many of the initiatives where there is a strong return on investment – such as making better use of voluntary sector resources or strengthening out of hospital models – are overlooked or deferred.

What can be done to better support population based financial planning

There are four critical points that need to be addressed to support the move towards more population based financial planning for ICBs.

1. The policy environment. If improving population health outcomes is the objective of ICBs then the policy framework and planning guidance needs to reflect the requirement to plan around populations. Costs and resource planning need to figure in ICB financial plans as a requirement. This will require ICB leaders, organisational leaders and regulators to shift the mindset from an organisational one to a population and organisational one. The policy framework could also support greater integration of budgets to bring the wider determinants more into scope of ICB planning. This could be achieved through a refresh of the Better Care Fund objectives and initiatives, or through new policy or financial instruments. A more multi-sector and multi-professional approach, involving local government, the VCSE sector and community leaders, could be proposed to support new approaches to resource planning.

2. Tools for population based analysis, linked data and costing. There is a golden opportunity with the development of the Federated Data Platform and ICS Intelligence Functions to shift the dial on the available data to support this approach. Developing a clear roadmap for population based analytics, a focus on data sharing processes and information governance arrangements, and providing supporting tools and capability is a critical task for ICSs. There are also a number of useful data and information such as the place based funding tool, Health Inequalities dashboard and the Population and Person Insight dashboard published by NHSE England which would benefit from improved awareness in the systems and further practical guidance around how the tools can be leveraged.

3. Use of evidence. The evidence base for preventative, proactive and integrated interventions is growing across academic literature, national and international research, and local examples developed through system’s population health management initiatives. Consolidation and spread of this evidence base, supported by interventions models will help give the senior finance community more robust quantitative planning inputs that can be tied into financial models. Construction of whole population based financial planning models is a critical next step for systems.

4. A health economic approach. Financial measures alone are not sufficient to measure the value that different care models and system configurations will generate. There are measures of health economic value, recognised by the treasury, such as the use of quality adjusted life years (QALYs), which can help us quantify improved outcomes and understand the true value a system is generating through its decisions and not only the money it is spending. It will be critical to ensure that these types of outcomes measures are incentivised more strongly. We would advise that these metrics are adopted rapidly and implemented into accountability arrangements and options assessments alongside traditional financial, performance and quality metrics. These four strategic levers will be critical to driving a more population and value based approach to system planning, and creating a step change against the initial ICB strategies in the near future.

Moving forward, there is work to do at a policy level and on strengthening local strategic planning with the right tools, evidence and approaches if we are to align financial strategy and resource planning activities with the objectives of ICSs.

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