Feature / Costing lessons

Establishing clinical training costs is no easy matter, as it must take account of reduced productivity from teaching consultants and contributions from salaried students. Steve Brown reports on plans to get to grips with the issue

The NHS doesn’t know how much it costs to educate and train its clinical workforce. It knows how much money it pays to teaching hospitals and other service providers annually – about £3.6bn, the majority of the £4.9bn multi-professional education and training budget – but it doesn’t actually know how much these clinical placements cost. Do those training funds subsidise patient care in the receiving organisations, or do they in fact undertake their training roles at a loss?

There have been estimates done across samples of organisations – in part to inform new education and training tariffs starting to be phased in from April 2013. But there is not a firm figure for national costs across England and there are few organisations with a full understanding of their own costs.

This is about to change, as the NHS finally gears up to produce more accurate local costs for training activities. Health Education England is committed to introducing tariffs for all training activities, in part so that funding can follow trainees in a more equitable way. Better costing will lead to more accurate tariffs that more closely match the costs of training delivery, and better local cost data to inform decision-making.

Under the new system, Health Education England develops the different currencies for education and training, while the Department of Health sets the tariff price. But both are working closely and are keen to develop a system that benefits the sector.

Currently, instead of calculating actual education and training costs, providers net off their training and education income from their total quantum of costs. They then go on to calculate patient care costs as part of the reference costs collection.

This assumption that training costs equal training income has almost certainly led to both an overstating and understating of patient care costs in different organisations, depending on the local situation. The problem has been acknowledged for a long time, but has not been tackled for two reasons. First, unravelling teaching and training costs from the costs of care delivery is not easy. Second, while the NHS does not know the different local costs of training provision, it knows that funding per student ranges wildly across organisations. Accurate costing that led to revised funding arrangements could have a major destabilising effect on some providers.

However, calls for better costing data and a desire to provide a fairer, more flexible funding system have pushed the issue up the ‘to do’ list. There is an emerging consensus that trusts need to get a better grip of their education and training costs. The concern over instability is being addressed by phasing in tariff changes. Meanwhile, the ‘difficulty’ argument is being addressed by more guidance and support.

Reference point

The journey is in fact already under way. For the 2012/13 reference costs exercise, trusts have been told to exclude costs rather than net off income for private patients and other categories of non-NHS patients.

This may be a small step towards the goal of costing broader non-patient care activities, but the 2012/13 reference costs guidance also flagged a ‘pilot collection of all education and training costs’. This would be based on costs from April to September 2013 and take place in autumn 2013. It has not yet been decided if this will be a mandatory collection or – given the significant costing agenda already under way this year with a voluntary patient-level cost collection – something trusts can opt into.

The Department, which still runs reference cost collection, has been developing guidance to support this exercise. This helps trusts to identify all the areas where costs could arise, and offers suggestions for how to tackle issues such as recognising the reduced productivity of a teaching consultant delivering patient care while accompanied by trainees. The latest version of the guidance is on the HFMA costing website ​here​here. This draft version will be finalised later in the year.

Rather than using the traditional three types of training – undergraduate medical and dental (the old SIFT income stream); postgraduate medical and dental (MADEL); and nursing and other allied health professionals (NMET) – the guidance sets out costing approaches for salaried or non-salaried training.

The difference is that, with non-salaried programmes – including for undergraduate medics, preregistration nurses and allied health professionals – it is assumed that trainees spend all their time being trained rather than delivering services to patients.

For salaried programmes – where trainees are learning on the job and so are paid a salary – things get more complicated as trainees spend time delivering services as well as being trained. This includes specialty medical training. Robust costing must put the right proportion of costs into the patient care and training buckets. And, to complicate matters, the proportion is likely to change from training year to training year, from specialty to specialty, and from provider to provider.

Guidance on costs

‘This is absolutely not simple,’ says Jenny Firth, head of education funding at the Department. The broad approach is to identify all training costs, then allocate and apportion them across the relevant student/trainee cohorts. In determining costs, the guidance steers trusts to consider eight categories within non-salaried training programmes, including pre-placement costs, direct teaching costs, the cost of staff teaching while delivering patient care, facilities and overheads.

Some costs are easily identified as solely related to training – lecture theatres perhaps within the facilities cost category. But in other cases, more untangling is needed.

The guidance offers pointers. For example, when considering the cost of staff teaching while delivering care, the guidance suggests that if a clinic runs 50% longer when students are present, one third of the staff cost for providing the clinic could be attributed to education and training.

Working this through in more detail, the guidance says: ‘If a consultant – or another member of the team – with staff costs of £100,000, spends 5% of their total working time combining teaching with delivering patient care – they only have students/trainees with them for 5% of their time – and they spend 33% of that time teaching, then we would count 5% x 33% x £100,000 = £1,650 for this element.’

The guidance not only tries to guide cost accountants on what to consider, but also which section to include them in. So, central education costs include indirect staff costs, such as those in a library or the costs of staff required to quality assure placements, but not the cost of rooms and equipment (included in facilities) or the cost of administration.

Overheads issue

Ms Firth says overheads will be a key issue. Greater standardisation on allocation of overheads, driven in part by the HFMA Clinical costing standards and Monitor’s growing interest in costing, should support a more consistent approach among providers.

But there are grey areas. ‘Once you have established your overheads, our steering group has some ideas about attributing to education and training on the basis of teaching staff costs as a proportion of the whole salary bill or numbers of whole-time equivalents. But there are issues that need to be thought through about what goes into overheads,’ says Ms Firth. ‘For example, if you put in a percentage of the chief executive’s costs, you’d still need the chief executive if you took the trainees out.’

There could then be problems if the costs were used to inform tariffs. If too much overhead is put into education and training, removing trainees from one organisation might leave it unable to cover its remaining overheads on patient care activities. While further testing is undertaken on different approaches, the Department is planning to collect overhead costs separately as part of this year’s pilot collection.

Perhaps the most challenging area overall relates to salaried programmes. This adds an extra couple of cost components to the eight identified for non-salaried programmes, including the cost of checking trainees’ work and the cost of them attending courses or exams. But it also requires organisations to assess the overall proportion of trainee time spent training and delivering patient services. Views of the split are wide-ranging.

As part of the 2008 sample costing exercise, used to inform new undergraduate tariffs, providers were asked to report the average service contribution by junior doctors for different training years. These differed widely, both from the contribution implied by the current funding arrangements and from the level reported by postgraduate deans.

As an example, the average service contribution for foundation year one trainees was reported as 83%, compared with an assumption for funding purposes that trainees made no service contribution, and a view among deans that they spent one fifth of their time delivering service. The level of variation is a reason why postgraduate training has not yet moved to a tariff with undergraduate activity.

When collecting costs, the Department is not proposing to impose a national percentage for particular training programmes. It is keen to allow providers to capture their own real local proportions. But it accepts that guidance on what constitutes service and training is needed to provide consistency across the nation.

It suggests that examples of training include time spent by trainees on courses, in lectures or undertaking assessments. Time in meetings with supervisors and updating e-portfolios would also be seen as training. When looking at patient treatment activities, the guidance suggests providers should ‘consider what grade of staff they would need to carry out the same service if they did not have the trainee there’.

The Department understands the difficulty of the task in hand and that some parts of the NHS are coming at it from a standing start. It wants to be as open and inclusive as possible.

It also recognises the busy agenda, in general and in costing in particular. But it also needs to see progress. ‘We want as many trusts as possible thinking about education and training costs,’ says Sam Haskell, education funding policy manager at the Department. ‘We are being quite clear that any data collected won’t be used at this point to set tariff prices. But we need to ensure this is on organisations’ radar.’

Ms Firth says the key message is to get education staff involved in the process (see box page 18). ‘Finance staff need to establish strong links with education people in their trusts,’ she says, which can be established now, ahead of any detailed work or collection exercise. ‘If they don’t know who leads on nursing education or medical education, they need to find them and start conversations about how they can build systems and track trainees.’

There is a lot to do, and several iterations are likely to be needed before the NHS can provide a robust estimate of its training costs. But the journey is very definitely under way.