Leading healthcare providers in England, spanning both NHS and independent sectors, have voiced grave concerns over new contractual rules proposed by NHS England for the coming year. They warn that the reforms could introduce “significant commercial risk” for organisations delivering elective care, potentially undermining financial viability and patient choice.
Providers warn mandatory 2026/27 payment caps could undermine patient choice, squeeze margins and force elective service withdrawals. At the centre of the dispute is NHS England’s proposed elective payment model for 2026/27, set to be mandatory as part of the evolved NHS Standard Contract from 1 April. Providers argue that the payment limits within this model are effectively “unsustainable” for independent and NHS providers alike, particularly in light of ongoing inflation, rising workforce costs, and persistent capacity constraints.
Independent sector leaders have been particularly critical, stating that the new payment arrangements are incompatible with existing patient choice rules. They caution that payment caps could restrict competition, forcing providers to cut services or even withdraw from offering certain NHS elective procedures if they cannot cover costs.
The commercial risk is seen as an outcome of broader shifts in NHS contracting, which emphasise fiscal discipline and tighter revenue controls under the Medium-Term Planning Framework. Providers argue that the reforms, which include new activity-based payment assumptions and revised unit prices, could squeeze margins and shift financial risk away from commissioners and onto providers. Some view this as reflecting the emphasis on value-based and outcomes-linked payments in the 10 Year Health Plan.
For private hospital groups, the risk is strategic, with some reportedly considering reducing their NHS elective care portfolios if payment terms fail to meet the true cost of service delivery. They fear losing the flexibility to set prices that reflect current financial pressures, including staffing and capital investment.
NHS trust leaders also share the unease. Operating in competitive markets for subcontracted elective care, they rely on prudent financial planning. The concern is that rigid contract parameters could impede their ability to innovate or optimise services locally, further complicating efforts to meet key performance targets like the 18-week referral-to-treatment standard.
NHS England maintains that the contract reforms aim to strengthen planning certainty, streamline commissioning, and minimise service interruptions. The draft guidance stresses the importance of collaborative commissioning and clear agreement timelines.
However, providers contend that the drive for uniformity, especially in how Activity Management Plans (AMPs) and Indicative Activity Plans (IAPs) are implemented, risks reducing essential local flexibility, given the diverse demand profiles across health systems. They warn that delays or disputes over contract terms could disrupt service delivery and even lead to legal challenges. The debates occur against a backdrop of system-wide financial strain, with trusts and ICBs managing multi-year planning targets and rising operational costs. NHS England has confirmed that consultation on the contract model and payment approach will continue, allowing stakeholders to influence the final arrangements.
Yet, providers remain cautious. They argue that without significant adjustments to risk-sharing provisions and payment mechanisms, the contract changes could create a divide between commissioners’ strategic goals and providers’ financial realities. The unfolding situation highlights a fundamental tension in NHS policy: how to balance financial sustainability with access, choice, and quality of care within an evolving contracting regime.
