Complete guide to NHS hospital funding models in the UK — Payment by Results (PbR), Integrated Care Systems (ICS), block contracts, elective recovery fund, and blended payment models.
NHS hospital funding is undergoing major reform — from Payment by Results to Integrated Care Systems. Understanding the new funding models is critical for hospital financial sustainability.
NHS Payment Models
| Model | Description | Use Case |
|---|---|---|
| Payment by Results (PbR) | Per-episode payment based on HRG tariff | Elective admissions, outpatients, A&E |
| Block contracts | Fixed annual payment for agreed service level | Urgent care, community services |
| Blended payment | 50% block + 50% variable activity | Elective care (2026 default) |
| Best practice tariff (BPT) | Enhanced payment for evidence-based care | Stroke, hip fracture, maternity |
| Capitation | Per-person budget for population | ICS population health |
| Elective recovery fund (ERF) | Additional funding for elective activity above plan | Waiting list recovery |
| Quality and outcomes | Payment linked to quality outcomes | CQUIN framework |
Integrated Care Systems (ICS) Structure
- Integrated Care Board (ICB): Statutory body controlling NHS budget for the region
- Integrated Care Partnership (ICP): Broader partnership including local councils
- Place-based partnerships: Local level integration (borough/district)
- Provider collaboratives: Groups of NHS trusts working together
- Primary Care Networks (PCNs): Groups of GP practices serving 30-50K patients
CQUIN Framework 2026/27
| CQUIN Indicator | Weight | Description |
|---|---|---|
| Staff health and wellbeing | 1.25% | Mental health support, healthy workplace |
| Reducing medication errors | 1.25% | E-prescribing, medication reconciliation |
| Digital transformation | 1.25% | EHR maturity, patient digital access |
| Health inequalities | 1.25% | Reducing disparities in access and outcomes |
| Net zero carbon | 1.25% | Carbon reduction initiatives |
Frequently Asked Questions
- What is Payment by Results (PbR) in the NHS?
- Payment by Results (PbR) is the NHS payment system where hospitals are paid per episode of care based on national tariffs and HRG (Healthcare Resource Group) codes. PbR covers elective admissions, outpatient attendances, and A&E. In 2026, NHS is transitioning to blended payment models combining fixed block payments with variable activity-based payments.
- What are Integrated Care Systems (ICS) and how do they affect hospital funding?
- ICS (Integrated Care Systems) are partnerships between NHS organisations and local councils that plan and deliver health services across a region. From 2023, ICSs control hospital funding through integrated care boards (ICBs). ICSs shift from activity-based payments to population-based budgets, incentivising prevention and care coordination.
- What is the NHS tariff for 2026?
- The NHS National Tariff for 2026 sets mandatory prices for NHS services. Key changes: 2% efficiency factor, blended payment for elective care (50% block + 50% variable), new digital transformation incentive payments, and expanded best practice tariffs for high-quality care. Hospitals must use the tariff for all NHS-funded services.