Feature / A focus on quality

Good cost data has a major role to play in supporting the drive for higher quality, cost-effective services, and a recent HFMA conference suggests there is growing recognition of this in the NHS. Steve Brown reports

When HFMA president Tony Whitfield told HFMA’s annual costing conference in May that costing was starting to be the ‘glamour’ function within NHS finance, it was only slightly tongue-in-cheek. The Salford Royal NHS Foundation Trust finance director is a long-standing and passionate advocate of the value of costing in the NHS. And he believes this view is entering the mainstream.

‘Detailed cost data underpins decision making in the commercial world,’ Mr Whitfield told the conference, chaired by John Graham, chair of the HFMA’s Costing Practitioner Groups and finance director at the Royal Liverpool and Broadgreen University Hospitals NHS Trust. ‘And I believe we are at a moment in history, if we continue the fantastic work we’ve been doing, to enable costing in the NHS to make a similar contribution to managing and improving our patient services.’

Mr Whitfield was clear. ‘The NHS does not and cannot do costing for the sake of costing,’ he said. ‘We only do costing to enhance the value of what we do for patients. But if we want to make patient care safer and better, it is essential we know how resources are deployed.’ And with tariffs currently based on submitted cost data, costing had a key role to play in creating as level a playing field as possible, he suggested.

The change in mood that Mr Whitfield detects around costing has not come about overnight. It has involved significant efforts by the HFMA working closely with the Department of Health and Monitor over the past few years. But he suggests that the service is now at a tipping point, both in terms of understanding the value of costing and being able to deliver increasingly meaningful data to support service improvement.

Nigel Campbell, head of tariff delivery at Monitor, agrees that costing has a major part to play in supporting change. ‘We need really good costing data for pricing,’ he told delegates. ‘But very good cost data is also essential for individual trusts and for the NHS as a whole.’

The need for improved cost data was illustrated by a payment by results evaluation published at the start of 2012, which found that more than 40% of prices set under PBR changed by 10% or more each year. According to Mr Campbell, for a service whose costs are governed by pay, this was ‘on the high side’. ‘Better costing will help us find ways to increase value and improve services for patients,’ he said.

The HFMA is supporting the production of patient-level costs through the development of the Clinical costing standards. Monitor has backed this approach but has stopped short of mandating the standards in the short term. Instead it is encouraging acute providers to take part in a voluntary patient-level cost submission over the summer, in addition to the mandatory reference costs submission.

Some 93 trusts (the vast majority being acute providers) have already implemented patient-level costing and information systems (PLICS), and more than 50 others are implementing systems. Mr Campbell said the apparent choice was between waiting for comprehensive coverage or creating a sample. Instead, the regulator is encouraging as many trusts as possible to submit data this year. ‘I want as much data as possible – so we can understand the quality and what we can do – rather than creating a subset for collection,’ he said.

Mr Campbell said Monitor was ‘delighted’ with the HFMA’s work on standards to date and its planned work programme. Assurance processes are being improved, including the fully revised materiality and quality score (MAQS) template released alongside the standards and an improved self-assessment checklist within the reference costs return. He added that the regulator would continue to conduct ‘further research on sampling’ although ‘for pricing, we want as big a sample as possible’. He also indicated that, if a sample was constructed, the regulator was unlikely to take a voluntary approach – the approach initially taken in the German health system.

By the conference in early May, 34 providers had indicated they would take part in the PLICS collection and just six had ruled out participation. Mr Campbell stressed the potential offered by the ability to take a patient-level view, including informing currency design and opening up options for pricing. For example, he pointed out that from a sample of costs for 1.1 million patients already analysed, while 71% had just one or two spells per year, 11,000 (1%) had more than 10 spells.

 ‘This could be a rich data set, both for the work developing year-of-care tariffs for long-term conditions and for trusts’ own purposes,’ he said.

He added that the ability to break down costs into defined cost pool groups would have a lasting effect on both data quality improvement and understanding of variation. For example, data already analysed showed that operating theatre costs ranged from 80% of all costs to around 10% for cataract operations. While the real benefit comes in analysing variations of cost breakdown between different patients, a voluntary breakdown of reference costs by the same specified cost pool groups will get people used to the approach and give more understanding of the make-up of average costs and tariffs.

Mr Campbell was questioned over plans to collect PLICS data from mental health and community trusts. ‘We are aware the plans are acute focused,’ he said. ‘But we do want to get any data available on mental health and community informed by the HFMA standards.’

Department support

Despite price setting and the underpinning cost collection responsibilities shifting to Monitor and NHS England, the Department of Health remains fully involved in the costing process. It has retained a specific role in undertaking the reference cost collection, acting in effect as Monitor’s agents.

Sarah Butler, the Department’s deputy director of NHS finance (PBR operations) stressed this joint effort in her presentation to conference. Ensuring cost data is fit for purpose is a common goal, she said.

But she underlined that, while the centre’s role was important in terms of providing support and tools, costing improvement was really down to local practitioners.

Ms Butler highlighted key changes for the 2012/13 collection. In addition to the non-mandatory collection of cost pool groups, providers will this year be required to net off some non-patient care costs (rather than the traditional approach of netting off income) – starting with private patient income.

Ms Butler said the Department had considered, but decided against, a mandatory approach to cost pool groups. But she urged organisations to submit this breakdown if possible. She also told the conference there would be an audit programme around reference costs this year. This will form part of the wider PBR assurance framework, undertaken by Capita, which will look at clinical coding in a sample of acute trusts, while also having a mental health programme.

In a workshop, Capita’s Howard Davis gave further details of the reference cost work, which builds on previous work by the Audit Commission in 2010/11. ‘We intend to audit 50 acute trusts in the autumn,’ he said. ‘Forty of the sites will be chosen on the basis of a risk assessment taking account of previous audit results and follow-up work, while 10 will be selected at random.’

The work will look to provide assurance and support to the organisations involved in the audit, while also providing some national assessment of the quality of reference cost data. It will collate key learning points in a national report. And it will look to identify any areas where data should not be used in the tariff calculation. It will also examine the impact the adoption of PLICS has had on reference cost data. ‘We will undertake a number of deep dives in audited organisations, where we will not just look at the data and arrangements but attempt to get under the skin of costing,’ Mr Davis told the conference.

Mr Davis also unveiled plans to involve costing practitioners in the audits. This will deliver some elements of peer review into the audit – an area that Monitor was initially interested in pursuing – but it will also help address concerns about auditors’ practical experience of reference costs, raised by practitioners following the last reference cost audit. Capita is looking for costing practitioners interested in getting involved – a minimum of 12 days out of the office between September and February involving training and at least two audits. Mr Davis said costs would be covered and the exercise would provide a ‘great development opportunity’ for individuals and their organisations.

While the 2012/13 reference cost collection will be the clear focus for costing practitioners, Ms Butler said the Department was already thinking about 2013/14. There are key issues to consider, including whether there should continue to be a dual spell and finished consultant episode-based collection. Should spell data trim points be aligned to tariff? Should submission of costs by cost pool groups be mandated? Are changes needed to support new currencies such as the new maternity pathway tariff?

Having already started on improvements around the treatment of non-patient care costs, further progress is likely. There is ongoing work to develop tariffs for education and training – education resource groups (ERGs) – and a possible pilot collection of costs and activity in the autumn. At this point Ms Butler said the Department was ‘exploring options and implications’ for 2013/14 reference costs. ‘This is big for reference costs,’ she said, ‘and it is difficult. But it is coming, so be prepared. Even if it is not in 2013/14 reference costs, there may be some progress towards it.’

There may, as Tony Whitfield suggests, be increasing amounts of glamour attached to NHS costing.  But this raised profile will clearly be accompanied by rising expectations and punishing amounts of work.