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The crisis in mental health services – does the fault lie with the NHS contracting system?

The recent CQC report on the state of care highlighted that demand for health and adult social care services continues to rise and that services are under huge pressure. However, it identified a serious shortage of acute mental health facilities.

One of the key reasons that there are so few acute mental health beds and preventative mental health services are in decline is the way in which NHS mental health services are funded. Hospitals which treat physical illnesses are reimbursed on a “per patient” tariff, set nationally by Monitor (now NHS Improvement) which sets a price for each procedure delivered by a hospital. In contrast, mental health services are funded under “block contracts” where a limited amount of money is allocated to a mental health trust each year, regardless of the number of patients who are referred to the Trust and irrespective of the complexity of the care needed for each patient. CCGs cannot afford to increase the allocations to mental health trusts because they are under so much pressure from hospital spending, and so mental health services always get short changed. Promises made at the centre of the NHS never lead to changes in the contracting arrangements.

But it was not supposed to be like this. Section 115 of the Health and Social Care Act 2012 requires commissioners and providers of all services to agree a price per patient for the delivery of NHS services. If the service is not one of those specified in the National Tariff, the commissioner and the provider are supposed to go through a complex procedure to fix the "price" to be paid for each health care service provided to an NHS patient. Accordingly, mental health trusts are required by law to be funded by NHS commissioners on a “per patient” basis as opposed to being funded under a block contract, and the "prices" for procedures are supposed to be set following the National Tariff process. Funding on a tariff basis means payment per patient, per procedure and woudl mean mental health trusts could invest in new facilities and staff in order to meet increased demand for crisis and preventative services. That would enable Trusts to expand services to meet demand because each patient that is treated creates the right to send an invoice to the commissioners.

Why has no one challenged this? This is, frankly, a mystery. It may be that the legislation is complex, existing contracting patterns of contracting are well established and this is seen as a dry technical issue as opposed to being one which is critical to the quality of services delivered to mental health patients. NHS Improvement have not effectively policed the contracting systems because either they have misunderstood the rules or not wanted to rock the NHS boat. NHS England have also been more focused on financial stability than making sure that CCGs and Trusts comply with their duties under the legislation.

If mental health trusts insisted on being funded on a per patient basis, as Parliament intended when it pased the 2012 Act, it is inevitable that CCG resources would come under even greater pressure. That may have all manner of potential consequences, but it would at least create equality between physical and mental health services. But no one challenges the existing contracting arrangements (despite them being arguably unlawful) and so mental health continues to be short changed. As long as the present system continues, it seems inevitable that money will be inappropriately biased towards contracts for those who treat physical illnesses and this will always short-change mental health services. 

Nothing is likely to change until there is a fundamental change in the contracting arrangements which allow NHS mental health trusts to expand their services to meet demand, just as NHS cancer, stroke or orthopaedic services can be expanded if demand increases. However who has the courage to demand this form of equality?