Outcomes-based payment for mental healthcare: an introduction

A capitated approach to payment for mental health services with outcomes and risk share.

What is a capitated approach to payment for mental health services with outcomes and risk share components?

An outcomes-based payment approach can be used to pay a provider or group of providers for mental healthcare services. Our example can also be used to inform development of outcomes-based payment approaches in other health and social care settings.

The payment approach has three components:

  • a fixed core payment to give providers certainty over a proportion of their income to enable investment in prevention and recovery-focused care
  • an incentive outcomes-based payment to establish clear objectives for effective patient care and focus all providers on delivering these identified objectives
  • a payment mechanism for sharing risk related to gains/losses between commissioners and providers.

A short visual overview of this model

Outcomes-based payments: how the model works

Download a copy of the visual summary.

Considerations for commissioners and providers when adopting an outcomes-based payment approach are:

  • outcomes need to be developed with clinicians and services users so that they are clinically meaningful and reflect what matters most to service users
  • evidence suggests the development of a small number of high-level outcomes is most effective; patient outcomes, clinical outcomes, governance measures and resource use should be included
  • payment linked to outcomes may need to be introduced in phases to ensure the necessary data flows are established and appropriate governance and contract arrangements are in place.

Why payment reform is needed

The Five Year Forward View (5YFV) proposes a fundamental shift in the way that healthcare is commissioned and provided to help support the co-ordination and improved efficiency of services. The ambition of the 5YFV is to establish parity of esteem between mental, physical and community healthcare by 2020.

Currently, the different services a service user may need can be funded by multiple commissioners and delivered by a range of providers. This can result in different payment approaches being employed, and providers having specific objectives and performance goals that do not align with each other or with what is best for service users. This has acted as a barrier to integrating and co-ordinating service user care.

Securing parity of esteem between physical and mental healthcare services requires new payment approaches that support commissioners and providers of health and social care services to work in more co-ordinated ways and to focus on the outcomes service users want and need.

Benefits of this approach

The use of agreed outcome measures in mental healthcare enables commissioners and providers to establish a common vision of how to meet service user needs, and offers a language to support more closely co-ordinated and service user-centred care.

This payment approach will support providers to:

  • identify and share risks as the financial incentives of all mental healthcare providers will be aligned
  • promote care focused on intervention and recovery
  • arrange care for service users that delivers outcomes that are clinically meaningful and reflect service user expectations.

The alignment of financial incentives can support greater co-ordination between providers and more investment in care focused on early intervention and recovery, which may reduce demand for more intensive and costly care. This is good for service users and for the efficient operation of the system as a whole.

Help us refine and improve this approach

Some local health economies have already begun to explore how this capitated approach with outcomes-based and risk share components for mental healthcare services can support improvements in service user care. We’ll refine the payment example as we learn more from the local health economies that implement these new models.

If you’re exploring the use of such a payment approach for mental healthcare services, we’d like to hear about your experiences. Please email us at

More detail on this approach

Our document Mental health: a capitated approach to payment with outcomes and risk share components provides guidance for finance, contracting and commissioning staff on how to approach developing and implementing the potential new payment approach locally.

Published 27 July 2015