About capitation

While it may operate slightly differently in each area, all IPC sites will be working towards a capitated budget for their chosen cohorts. Sites will develop and test a blended funding model that brings together all the NHS and social care funding for a defined target group.

A capitated budget is based on the needs of an identified population providing a per-person, average cost for a range of services over a fixed period of time. The budget generally covers all care for a group of people, including acute, community, mental health and social care costs.

Capitation is not new and IPC will build upon a wealth of international learning as well as the work of the Long Term Conditions Year of Care Programme. The Kings Fund has concluded that all of the world’s high performing integrated care systems use capitated budgets for almost all care.

NHS funding systems have traditionally focused on isolated episodes of activity and outputs, such as the number of procedures completed or appointments made, rather than longer-term packages of care planned proactively around the needs of the individual. This is particularly problematic for people with complex and longer term care needs who make regular and ongoing use of health and care services.

Current methods of payment can get in the way of delivering person-centred, coordinated care as they tend to reward NHS and social care activity and crisis services rather than outcomes for individuals. The use of capitated budgets enables a commissioning approach where integrated pathways and individually identified outcomes can be incentivised.

IPC sites will need to make a number of important decisions about who is being covered and for what services, how the budget is calculated in the first year and subsequent years, and how risks and any savings are shared with providers. In order to calculate a full capitated budget, it is essential to collect granular activity and cost data. However, it is possible to phase in a capitation programme without having already collected the necessary data.

A shadow-capitated budget can be created based on initial estimates and projections. In the first year, payments continue as normal with actual cost and activity data compared against the shadow budget to allow fine-tuning of the capitation before it goes live.

Through IPC, capitated budgets will enable personalised care and support planning alongside improvements in commissioning as people choose services and other supports that suit them best. Elements of the capitated budget will be made available at an individual level for those people who might benefit from a personal health and/or social care budget. This is likely to involve freeing up resources from contracts with NHS and other providers to enable the money to be spent differently, in line with individual plans, and with the development of new models such as individual service funds.

The benefits of capitation can include:

  • Improved outcomes, such as more time living independently at home, reduced readmissions and improved access to care
  • Improved experience of care as care is less fragmented & better coordinated
  • Improved choice so that individuals are not limited to generic and predefined services and able to make decisions that fit better with their lives
  • Reductions in bureaucracy and administration from managing multiple contracts
  • Better alignment of care pathways and processes with outcomes
  • Improved value for money, defined around people’s outcomes