5 Innovative Funding Models for Partnerships
With the NHS facing significant budget constraints, alternative funding mechanisms can still enable valuable digital health partnerships.
These models distribute financial risk, leverage external funding sources, and create sustainable collaboration frameworks.
Digital Heathcare Council members are having regular conversations with system partners about innovative funding models.
1. Shared Savings Arrangements
How it works:
- Digital health company implements solution at minimal/no upfront cost
- Baseline metrics are established pre-implementation (e.g., hospital readmissions, hospital discharges, agency staff spend)
- When the solution generates quantifiable savings, the company receives an agreed percentage
- NHS retains majority of savings while technology costs are covered from demonstrated efficiencies
Example:
Propeller Health partnered with Dignity Health in California, where the company's asthma management platform reduced emergency visits and received payment based on documented savings.
Key considerations:
- Requires robust measurement methodologies
- Needs clear attribution of savings to the technology
- Initial contract period must be sufficient for ROI delivery
2. Social Impact Bonds for Healthcare Innovation
How it works:
- External investors (charitable foundations, impact investors) provide upfront capital
- Funds are used to implement digital health solutions
- NHS establishes outcome targets and financial value of improvements
- Investors receive returns only if predetermined outcomes are achieved
- Payment comes from system efficiencies that have been delivered
Example:
The Ways to Wellness program in Newcastle, UK used a £1.65M social impact bond to fund social prescribing for patients with long-term conditions, with investors repaid based on reduced hospital utilisation.
Key considerations:
- Requires sophisticated outcome measurement
- Independent evaluation is essential
- Needs executive-level NHS commitment to honour payment obligations when targets are met
3. Multi-Stakeholder Consortium Funding
How it works:
- Costs are distributed across multiple beneficiaries of the solution
- Participants may include: NHS Trusts, local authorities, ICSs, public health teams, academic institutions, charitable foundations
- Each contributes a manageable portion to the total cost
- Governance structure ensures all stakeholders' interests are represented
Example:
The Dutch Medical Delta consortium combines hospital systems, universities, and local governments to jointly fund digital health innovations across the Netherlands.
Key considerations:
- Requires strong coordination and shared vision
- Clear agreements on intellectual property and data ownership
- Needs equitable distribution of both costs and benefits
4. Graduated Licensing Model with Deferred Payments
How it works:
- NHS licenses technology at nominal initial cost
- Payment schedule increases as predefined usage or outcome milestones are achieved
- Technology company bears initial financial risk
- As solution demonstrates value, payments increase according to an agreed schedule
- Full payment amounts are reached only when the solution is fully adopted and delivering measured value
Example:
Australia's MBS (Medicare Benefits Schedule) has implemented staged reimbursement for several telehealth platforms, increasing payment rates as adoption and outcomes are demonstrated.
Key considerations:
- Requires technology provider with sufficient capital reserves
- Needs objective measurement of usage and outcomes
- May need include caps on total payment amounts
5. Grant-Subsidised Commercial Model
How it works:
- Digital health company secures external grant funding for NHS implementation
- Grants may come from Innovate UK, NIHR or private foundations
- Grant covers implementation and initial operating costs
- After grant period, NHS transitions to commercial arrangement based on demonstrated value
- Initial proof points reduce risk for both NHS and the company
Example:
Ontario Health in Canada regularly uses this approach, with technologies initially funded through provincial innovation grants before transitioning to sustainable commercial contracts based on performance.
Key considerations:
- NHS must commit to good-faith commercial negotiations if outcomes are achieved
- Grant application often requires NHS participation as partner
- Transition plan from grant to commercial arrangement must be established upfront
Conclusion
These innovative funding models demonstrate that "no budget" doesn't mean "no opportunity" for NHS digital transformation. By thinking creatively about financial structures, aligning incentives, and distributing risk appropriately, meaningful digital health partnerships can thrive even in resource-constrained environments. The key is creating frameworks where all parties—the NHS, technology providers, and ultimately patients—can benefit from successful implementation of innovative solutions.