Provider to Provider: The Contracting Shift for PCNs and Neighbourhoods

Tara Humphrey
1 day ago
5 min read

At present, there is no national neighbourhood contract. But there are areas across the country developing their own neighbourhood contracts with investment attached. So, for those not yet in that position, how can they move forward?

Provider-to-provider is one route worth considering if you aren’t already one of the areas with a local neighbourhood contract and investment attached.

So it is worth understanding what provider-to-provider actually means, why some areas are turning to it, and where the risks sit.

Defining Our Terms

Commissioner to provider = the route we know

An ICB (the commissioner) pays a provider to deliver a service
The commissioner sets the terms, holds the contract, and moves much of the risk to the provider
It is slower, more formal, and usually involves a procurement process

Provider to provider = money and responsibility move sideways

Two delivery organisations agree the arrangement directly between themselves
For example, a trust subcontracts a service to a PCN or federation
The ICB may have little or no direct involvement in the deal

Subcontracting off a block = the most common version

A trust already holds a large, relatively flexible block contract with the ICB
Rather than ask for new money, it carves out a slice of work and passes it on
Because the funding already sits inside the block, it can move quickly

The new neighbourhood contracts = coming, but not here yet

Single neighbourhood provider (SNP): mapped to the PCN footprint of roughly 30,000 to 50,000 people
Multi-neighbourhood provider (MNP): covering populations of 250,000 or more
Integrated health organisation (IHO): a host provider holds a capitated budget for a whole population and subcontracts services to partners

Why This Is Happening Now

The 10 Year Health Plan, published in July 2025, put the shift of care from hospital to community at the centre of NHS reform, but the contract to deliver it does not yet exist nationally. 2026/27 has been designated a developmental year, with NHS England working alongside a small number of early-adopter areas, and a deliberately non-prescriptive approach that leaves footprints, providers and contractual arrangements to be worked out locally. The financial reform that would properly fund a different model of care also looks minimal for 2026/27, with the bigger changes expected later in this parliament.

The direction is set, but the contract and the funding to deliver it are not yet in place. Provider-to-provider arrangements are one way areas are bridging that, moving resource closer to home using the contracts they already have.

Kent and Medway is the clearest worked example. Rather than wait for a brand new national contract, NHS England approved a local variation to the Network Contract DES, allowing GP-led single neighbourhood care to be delivered through existing PCN arrangements. The mechanism was already there. They used it.

This is the dividing line forming across the country. Some areas have developed local neighbourhood contracts with investment attached, often as early adopters or through local variations. Many others have neither a contract nor the money. For that second group, provider-to-provider arrangements are one of the few levers available to make progress now rather than wait.

There is another reason this route is gaining traction: capacity. Many ICBs are short on time and people; a good number are in the middle of their own restructures, and in most areas the block contracts for the year are already set. Writing a detailed business case and asking a stretched commissioner to find new money can, in that context, be a lot of effort for very little return. So rather than wait, some areas are pursuing provider-to-provider arrangements with the ICB acting as broker and convenor rather than commissioner. The ICB brings the right providers together, helps align resources that are already in the system, and supports the arrangement, without having to commission and fund something new itself.

The IHO model takes the same logic further. As of late 2025, only two organisations qualified to apply for IHO status: Northamptonshire Healthcare and Northumbria Healthcare. Under that model, subcontracting between providers is built into the contract's design, rather than being a workaround.

The Advantages and the Risks

The advantages:

A service can get up and running without waiting for a new contract to be written
A stronger, more active role for primary care, in the room as a partner rather than a subcontracted afterthought
Money moves closer to the front line, using resources that already exist
Local relationships and knowledge shape the service

The risks:

Liability and clinical responsibility can be left vague
Workforce questions, including secondments, pensions and possible TUPE implications, get assumed rather than worked through
Information governance and data sharing rest on goodwill rather than a proper basis
Decommissioning risk, when a service is built on someone else’s block contract
Procurement compliance, because “we did it provider to provider” is not, by itself, evidence that the route was lawful

Legal and Organisational Perspectives

To explore the practical legal and organisational implications, we spoke with Ruth Griffiths from Hill Dickinson, who works with primary care networks navigating exactly these decisions.

Liability and Clinical Risk Still Need to Be Agreed

“Provider-to-provider arrangements can be a genuinely sensible way to get a service moving, but the speed that makes them attractive is also where the risk sits. The same questions a full contract would ask still apply: who is liable, who carries the clinical risk, and what happens to the service when the underlying contract changes,” Ruth observed.

The Procurement Question Does Not Go Away

“Even where money is moving between providers, the Provider Selection Regime still governs how NHS healthcare services are arranged. Understanding whether a direct award, for example using the Most Suitable Provider exemption, or a competitive process is the right route is something to work through at the start, not after the arrangement is already running.”

Build the Form That Secures the Function

“We often advise PCNs and federations that the structure you put in place now shapes what you are able to take on. If you want to be a credible party to a subcontract or a neighbourhood contract, you need a form that can hold it, with governance that gives partners confidence. That work is worth doing before the opportunity lands, not in a rush once it has.”

Ruth Griffiths can be contacted here: ruth.griffiths@hilldickinson.com

What Both Parties Need to Be Clear On

Provider-to-provider will not be an option for every area, but it is one worth exploring. Where it works, it is often the quickest way to get a service running that helps patients, and it keeps primary care in the room as a partner.

All parties in the arrangement should know:

• which contract the money is actually sitting in

• what happens to the service if that contract changes

• where the clinical and legal risk lands

• whether the governance on both sides can carry the arrangement

The areas that do well from this will be the ones that move at pace and do that groundwork first. Provider-to-provider can work, but only if the details are right for both sides before they commit.

This blog is produced in partnership with Hill Dickinson. It is general information and not legal advice.

About us

THC Primary Care is an award-winning healthcare consultancy specialising in Primary Care Network management and the creator of The Business of Healthcare. With over 20 years in the industry, we have supported more than 300 PCNs through interim management, training and consultancy.

Our expertise spans project management and business development across both primary and public sectors. Our work has been published in the London Journal of Primary Care, and we have authored over 250 blog posts sharing insights on primary care networks.