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Models for paying providers

This series of briefings has been designed to help you understand the different ways in which providers can be paid for seeing and treating patients. Block contracts have been widely used throughout the UK, and continue to be the main payment system for hospitals in Scotland, Wales and Northern Ireland.

In recent decades NHS payment systems have evolved, particularly in England, where the national tariff (‘payment by results’) currently dominates payments made to the acute sector. But increasing emphasis on new, integrated models of care means that other ways to pay providers, such as through capitated budgets, may become more dominant in the future.

  • Block contracts

    A block contract is a payment made to a provider to deliver a specific, usually broadly-defined, service. For example, a hospital could be given a block contract to undertake acute care in a particular geographical area.

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  • Capitation

    Capitation is a payment system where lump-sum payments are made to care providers based on the number of patients in a target population, to provide some or all of their care needs. Crucially the capitation payment is not linked to how much care is provided.

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  • The national tariff

    The national tariff currently dominates payments made to the acute sector in England. Diagnosis-related groups (DRGs) are used to determine the pricing for health care services.

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  • Payment for performance

    Payment-for-performance schemes refer to payment arrangements where providers are financially rewarded for achieving high performance or quality. Each scheme rewards providers in a unique way.

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