The plans - confirmed in an NHS England response to a consultation on digital first primary care - could take effect from April 2020 subject to talks with the BMA and the government.
NHS England has ruled out scrapping out-of-area patient registration, despite calls from the BMA for the removal of this mechanism - and confirmed the level of payment for out-of-area patients would remain unchanged.
Officials have also ruled out changing a new patient registration premium - which currently means practices receive 46% on top of basic funding for the first year in which a patient registers.
Questions had been raised over whether the fee should change after a significant proportion of patients who switched to Babylon GP at Hand subsequently quit the service after a short period of time.
NHS England said it would not alter current arrangements on the new patient premium because of concerns including potential to destabilise 'existing practices with high churn'.
The NHS England consultation response says there was 'broad agreement' from respondents that opportunities for new digital first providers to set up should be focused on 'areas of greatest need e.g. under-doctored areas'. NHS England said it would now press ahead with this move, with providers awarded contracts to be required to set up physical premises in deprived areas and to demonstrate that they would bring in 'additional GP capacity' to the areas.
Over the 2020/21 financial year NHS England will set up a list of potential providers, and contracts will be awarded on a national basis 'to avoid creating additional burdens on local commissioners and minimise transaction costs'.
New business models and GP contracts director Ed Waller told the board meeting: 'Where a provider registers lots of patients outside their catchment area there should be a threshold at which that list is broken up to return patients to a practice list that is registered in their own CCG and allows those patients to be delivered integrated care with other providers.
'Above 1,000 patients we are going to take forward a proposal to disaggregate large contracts that have registered out-of-area patients and new APMS lists will be established in the CCGs where more than 1,000 patients are residing and those new APMS providers will be required to join local PCNs.
'In the first instance that means a single list in Hammersmith and Fulham CCG will turn into 17 lists, one in Hammersmith and Fulham and one in 16 other CCGs where more than 1,000 patients are registered.'
Babylon GP at Hand's response to the consultation warned that a move to force providers to set up physical premises in areas where they had 1,000 patients was unsustainable.
A Babylon spokesperson welcomed the decision not to cut funding for digital-first providers and pledged to 'expand our digital and in-person services'. The spokesperson said it was 'looking at a number of new sites' and would soon open additional clinics.
However, the spokesperson said the company did not expect to open premises in every CCG in which it had 1,000 patients, despite new contracts being created in each area.
Babylon highlighted a statement in NHS England's consultation response that says: 'We would normally expect premises to be established under each new APMS contract, unless the local commissioner (who holds the new contract) agrees otherwise based on guidance likely to be based on reasonable travel times.
'This may lead to agreement that no premises are required, for example in particularly urban areas where premises are easily accessible in a neighbouring CCG.'
Babylon's spokesperson added: 'NHS England has established that 40 minutes is a reasonable maximum travel time to a Babylon GP at Hand clinic and we expect this to form the basis for future guidance.'
BMA GP committee chair Dr Richard Vautrey said: 'Continuing with the out-of-area registration arrangements that allows a practice to cherry pick healthier and wealthier patients will simply widen inequality and while services such as GP at Hand will now have significant new premises costs under these arrangements, to impose a whole host of new APMS practices on CCGs and PCNs will not be welcomed by practices just beginning to work together within their areas.
'Rather than making matters worse through these plans what’s really needed is for NHSE to commit to, fund and deliver the necessary IT equipment and infrastructure so that every practice is able to provide new ways to access services.'
The BMA has warned that using digital providers to plug gaps in underdoctored areas risks creating a two-tier NHS service, short-changing patients in those areas.