Performance management can involve the potential for gains if aspirational targets are met, and for real losses if a minimum threshold is not reached.
The working group of providers, commissioners and lay partners felt a promising mechanism for commissioners to reward a provider network is to allow the provider network to keep a greater proportion of savings realised when it achieves higher aggregate outcome scores. This incentivises provider networks to increase quality of care while reducing costs.
Rewarding poor performance with financial penalties can be counterproductive. This is because turning around a failing system often requires additional resources. However, shielding provider networks from penalties in the event of poor outcomes can mean that the interests of service users might not be reflected by the incentives. It could also mean that once a provider network is sufficiently far away from reaching the aspirational targets, they no longer have any incentive to perform well. Underperformance should therefore be dealt with by a mixture of peer support, training and financial penalties in the case of substantial underperformance. There should also be a mechanism for penalising management directly, in extreme situations, for underperformance in order to avoid moral hazard while protecting the ability of provider networks to care for service users.