Getting costing back on track

by Catherine Mitchell

01 September 2021


The goal of establishing comprehensive patient-level costs to a common standard across the NHS remains the right one. But the costing programme needs to be reset.

Back in 2017, I wrote about the roll-out of patient-level costing (PLICS) across the NHS as part of NHS Improvement’s Costing Transformation Programme. I noted the increasingly detailed information that providers – particularly acute providers – had access to. And I even suggested that the English NHS should ‘hold its head up high’ as one of the few countries in the world with such a comprehensive approach to PLICS.

Four years later, what further progress have we made? The NHS in England has invested substantially in costing to implement the national programme. However, the disappointing reality is that, while NHS trusts are putting a lot of money into the programme, the majority of local health systems have yet to reap the benefits.

Costing teams spend the majority of their time on the annual National Cost Collection (NCC). As a result, they have little time to support clinical teams to use the cost data to improve value. Centrally published cost data is fed back to local health systems too late to be of use, and not in a way that supports systems to deliver improvements in patient care and efficiencies.

The current review of the frequency of the NCC by NHS England and NHS Improvement makes this a good time for HFMA members to set out what they think good looks like for costing. Costing practitioners are unified in recognising the massive potential for costing. But unlocking the potential requires a fundamental reset of the approach to costing in England.

While more frequent cost collections may be of benefit in future, their view is that the greater frequency should not be adopted until 10 tests are met. These include having a single version of cost data that can be used locally and nationally and having local and national costing teams adequately resourced. The 10 tests are spelt out in detail in the HFMA Healthcare Costing for Value Institute’s newly published What does good look like for costing in the NHS?

There is a considerable way to go for the NHS to meet all 10 tests. HFMA members have been calling for some time for a fundamental re-write of the costing standards, stating that the level of resources needed to produce the cost data in the current format is not proportionate to the benefits provided by the centrally collected data. The methodologies should encourage cost accountants to focus primarily on getting the big numbers right and be less prescriptive about non-material items.

Two HFMA Healthcare Costing for Value Institute briefings* published this year highlighted that the quality of activity data for costing is poor in key areas, which has a fundamental impact on the ability of NHS organisations and systems to make good decisions. The institute case study Improving patient-level costing in community services – Gloucestershire Health and Care NHS Foundation Trust  also describes how one trust has worked with clinical teams to improve the quality and extent of community data.

Case studies of how cost data can support improvements in value also exist. Good examples can be found in the institute case study Transforming the PLICS landscape – Leeds Teaching Hospitals and the  Engagement Value Outcome (EVO) pilot reports. But these cases are not widespread. Work published this week, part of MBA research undertaken by Edward Gold, head of costing and income at East Suffolk and North Essex NHS Foundation Trust, shows that many trusts have yet to start using cost data to its full potential.

The goal of establishing a detailed understanding of whole pathway costs at the patient-level remains the right one. However, we need to get back on track. Let’s seize this opportunity to reset costing in England so that it can indeed hold its head up high on the international stage, unlocking the potential of costing.


* Costing and data quality: improving the quality of non-financial data required for costing (hfma.org.uk)

Improving data quality for costing community and mental health services (hfma.org.uk)

For information about your organisation becoming a member of the HFMA’s Healthcare Costing for Value Institute, email stephanie.brown@hfma.org.uk