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Sophie Heywood, policy advisor at NHS Providers, explores how the NHS can overcome long-standing barriers to shifting care from hospitals into the community. Drawing on recent policy developments and financial reforms, she argues for a restructured planning and funding framework that supports long-term investment in community-based care.
It has been a long-standing ambition for successive governments to enhance community care, to better support people with complex and chronic health conditions.
Lord Darzi’s report said that the persistent under-funding of community services has for many years derailed plans to shift care out of hospital and into the community. His conclusion: “Too many people end up in hospital, because too little is spent in the community” (Darzi, 2024).
So, what can the 10 Year Health Plan (10YHP) do to bring this pattern of under-funding to an end, and succeed where previous efforts have failed?
Rebalancing funding
For the last two decades, how the NHS budget is used has not supported this strategic shift. Indeed, the opposite has occurred: between 2006 and 2022 the proportion of the NHS budget spent on hospitals increased from 47% to 58% (Darzi, 2024).
More recently, NHS England (NHSE) announced a revised approach to financial and operational planning, giving systems more flexibility to channel investment to support delivery of a smaller set of national priorities (NHSE, 2025). This included the removal of service development funding (SDF) ringfences, which had been used to fund targeted commitments on primary care, children and young people’s health, prevention and mental health. While local flexibility is welcome, trust leaders are concerned that in this instance, combining that with a narrower and mainly acute-focused set of operational priorities could reinforce the under-investment in community-based care.
Capital investment is also vital to support the shift towards more community-based care. Mental health and community trust leaders have felt that there has been a lack of parity for capital investment in their estates over many years: the New Hospital Programme’s focus almost exclusively on acute services is one clear example of this. But community and mental health services share similar challenges to many acute hospitals: outdated and ageing estates, inadequate digital infrastructure and a rising maintenance backlog. Lord Darzi found that the “dysfunctional” NHS capital regime is acting as a real barrier to ensuring community and mental health trusts have sufficient access to capital investment to address these challenges (Darzi, 2024).
Trusts recognise the significant challenges posed by strained public finances, and the competing priorities facing government. In these circumstances, it is unrealistic to expect a big funding boost to support the shift from hospital to community. Therefore, the NHS must make best use of existing resources to make the shift to community a reality.
Incentivising the shift to community care
Given the financial challenges across the NHS, with systems overspending by over £600m in 2024/25, there needs to be a more sustainable solution than simply shifting a proportion of the health budget out of hospitals and into the community. The shift in resources will need to be gradual and ensure hospital budgets can continue to keep up with soaring demand, while also investing in measures to reduce demand for the future.
The current NHS planning system and financial framework is largely focused on a single year. This makes it more difficult to prioritise investment – however sensible and beneficial in the long-term – that does not produce a significant return within the short-term fiscal cycle. When money is tight, it is little wonder that immediate pressures (such as waiting list reductions or improving emergency care) often take priority, typically at the expense of moving resources into the community.
A new multi-year approach to financial and operational planning needs to be introduced – accompanied by a fundamental restructuring of the financial framework. The new system will need to be grounded in long-term thinking, supported by incentives that align with and reinforce the shift—rather than working against it, as is currently the case.
Longer planning horizons would create a clearer incentive to develop plans that look to unlock productivity savings over a period of time, rather than seeking a series of short-term savings that release cash in-year.
New forms of budgetary incentives could be modelled along the lines of the elective recovery fund, with one key difference: instead of focusing on single-year delivery, they would encourage financial planning to support both short-term and long-term operational objectives. A revised payment mechanism that incentivises delivering a greater proportion of care in the community could help break down the structural barriers which have so far halted progress. Taken together, a longer-term planning approach and incentives which prioritise better management of long-term conditions would help reverse the continued short-term prioritisation of resources. If successfully implemented, these measures will reflect a continued commitment to investing in the near term—particularly in reducing waiting times and improving performance in line with constitutional standards – but in a balanced way.
Over time, these reforms could offer a steady and well-managed approach to transitioning to a health system that prioritises treating patients in the right place, at the right time.