Integrated Health Organisations: Risk and Gain Contracts Explained

At THC Primary Care, we provide resources for primary care network leaders. This post looks at Integrated Health Organisations, and the risk and gain share contract that will sit at the heart of them.

What is an Integrated Health Organisation?

An IHO is a new contract type introduced through the 10 Year Health Plan. The host must be an NHS foundation trust, and only "the very best" trusts are intended to hold one.

Once designated, the host takes on a single pooled budget covering acute, primary (with the exception of nationally commissioned contracts), community, mental health and neighbourhood services for a defined population, and can subcontract delivery to partner providers, including general practice, PCNs and federations.

The single-pooled budget excludes the General Medical Services (GMS) contract, because nationally commissioned contracts sit outside the IHO's scope by design. PCN DES is expected to follow the same protection, though this hasn't yet been confirmed in writing.

What is a risk and gain contract?

The mechanism that makes an IHO different from how NHS money moves today is the contract underneath it, which is risk-weighted and capitated: a fixed sum per patient, agreed in advance, to cover a population's care needs for a whole year, regardless of how much care ends up being used.

That's a different logic from how most NHS money moves today.

Block contracts pay a fixed sum for a defined service regardless of activity.

Activity-based payment pays per episode of care delivered.

Neither is tied to the actual cost of caring for a population.

Under a capitated contract, if the actual cost comes in under that agreed sum, the host keeps some or all of the difference and can reinvest it into better care, capital projects, digital transformation, or new partnerships. If it comes in over, the host absorbs some or all of the loss. Exposure runs both ways, tied to outcomes rather than volume of activity.

When multiple organisations manage a collective budget: what to watch for

The clearest illustration of a lesson to be learnt when multiple organisations come together to manage a collective budget is UnitingCare Partnership in 2015.

Two NHS foundation trusts in Cambridgeshire formed a joint partnership to hold an £800 million, five-year contract for older people's and community services. It collapsed after eight months.

The National Audit Office's investigation into what went wrong points to things worth being mindful of any time this kind of arrangement is being set up:

• The structure itself can create a cost nobody's priced. The trusts formed a separate legal partnership to limit their own exposure. That took it outside NHS VAT arrangements, adding a cost nobody had built in.

• Internal assumptions can differ from the external position. The partnership bid low to win competitively, then two months later, one of the same trusts submitted an internal business case, assuming it would need over 20% more, information never shared with the commissioner.

• The underlying cost has to actually be known, not assumed. The services being taken on had only ever been priced as a block contract, so the true cost per patient had never been broken out.

• Momentum can override open questions. They signed with 71 questions still unresolved because delaying would have disrupted staff due to the transfer on a fixed date.

• Safeguards agreed on paper need to actually be included. Legal advice to include a parent guarantee, making the trusts liable if the partnership failed, was never acted on, which let the financial risk flow back onto the commissioner instead of staying with the provider.

• Oversight can check every piece and still miss the whole. One regulator reviewed the risk to one trust; the other trust's involvement was small enough to self-certify with no real scrutiny. No single body held a view of the whole arrangement.

It's not the same as an IHO, but it's worth a closer look to see what we can learn from this partnership.

Where it's worked better: Northumberland. Northumbria Healthcare, one of the two trusts just been designated as the first IHOs.

The King's Fund uses it as a reference case for the model working well. Northumberland built the capability over years; UnitingCare tried to create this arrangement in one hit.

What shapes the terms of a risk-gain contract?

Please note that this list is not exhaustive.

• What's inside the pool. The nationally commissioned carve-out protects GMS and likely PCN DES. Other enhanced services may or may not sit inside it locally.

• Gain-share versus incentive payment. If general practice carries no downside because GMS sits outside the pool, does it still get a share of any upside? Genuine risk-gain share ties gain to the exposure taken. Or will general practices you be pursuing an incentive/ bonus payment?

• Governance. NHS Confederation members are asking for true co-design, long-term incentives, transparent governance, and mechanisms that balance short-term pressure against long-term population health goals.

• Which body holds you to account, and for what? ICBs manage the contract; NHS England's regional oversight sits separately and can apply different metrics. NHS Confederation has flagged the risk of providers being performance-managed by two bodies against two different sets of numbers.

In summary

This post has covered what an Integrated Health Organisation is and who can hold one, what a capitated risk and gain contract actually means in practice and how it differs from block and activity-based payment, what's needed to make one work well, what to watch for when several organisations manage a collective budget together, and the specific terms, from what's inside the pool to who holds you to account, that shape what any given local arrangement actually looks like.

In reality, many areas will be some distance from designing and implementing a risk and gain contract. For most, the starting point is likely to be developing outcomes-based contracts. I hope this blog provides some food for thought.

For those of you on the journey, I would love to hear from you. Please contact admin@thcprimarycare.co.uk for you to share your lessons learned so far.

Facilitation Support

If your network would benefit from a neutral voice for those tricky discussions, we provide in-person facilitation.

Contact admin@thcprimarycare.co.uk to discuss the support you may need.

About the Author

Tara Humphrey has supported over 300 primary care networks across England, providing interim PCN management, training, events and facilitation.

Tara also holds an MBA in Leadership and Management in Healthcare and has written over 300 blogs and hosted the Business of Healthcare Podcast, which has published over 370 episodes.

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