Options explored for more frequent cost submission

14 April 2021 Steve Brown

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The possibility of a move to more frequent national cost collections of patient-level costs – originally imagined as a quarterly submission – was first raised last November and subsequently picked up by NHS England and NHS Improvement chief financial officer Julian Kelly at the HFMA annual conference in December. Since then, the national costing bodies have been undertaking a scoping exercise to investigate how this could be taken forward.chris walters cost conf 21 L

Speaking at this week’s HFMA Healthcare Costing for Value Institute costing conference, NHS England and NHS Improvement director of pricing and costing Chris Walters (pictured) said this exercise had already involved getting views from the wider costing community – with more detailed engagement planned. And he added that a ‘menu of options’ for more frequent collections would be finalised by May – although a more detailed timeline shows a ‘problem statement’ being produced by May.

‘That menu is likely to include options where a representative sample but not all NHS providers are required to submit costs more frequently and where the costing standards underpinning costs are much lighter touch,’ he told the conference.

The sample approach would appear to be similar to a model used in the German healthcare system, where a national body (the Institut fur das Entgeltsystem im Krankenhaus, Inek) collects detailed costs from a sample of hospitals to inform tariff prices used in its hospital payment system (see HFMA briefing Costing healthcare in Germany). In Germany, hospitals in the sample receive some funding as a contribution to the additional costs incurred in submitting the detailed cost data.

A move to lighter touch costing standards may address concerns raised by the HFMA on behalf of costing practitioners that the current costing approach is too complex and not proportionate to the benefits delivered. The association has argued that the standards need to be simplified in general and that this need would be amplified by a requirement to submit more frequent cost returns.

Mr Walters said that having set out the options, a preferred option would be identified and developed by the end of the year. Draft guidance would then be published in January or February. Then after consultation and ‘fine tuning’ of the guidance, a voluntary collection could be held as early as July 2022.

NHS England and NHS Improvement deputy director of costing Helen Laing said that even with a move to more frequent cost collections, the aim was to complete the Costing Transformation Programme. She highlighted the recent announcement confirming that NHS providers would be mandated to submit patient-level costs for their community services starting with the 2021/22 financial year. Costs for acute, mental health and ambulance services are already collected at the patient-level.

Learning from a voluntary submission of community service costs will be shared over the coming months and there will be a further voluntary collection in November. ‘It would be really helpful if we could have between 50 and 60 providers to help us with this,’ she told the conference.

Covid impact on productivity

Mr Walters also echoed calls for NHS trusts to get involved with the Exceptional Quarterly Collection (EQC) – see New push for trusts to join EQC. The initiative was launched last year to help NHS England and NHS Improvement understand the financial implications of the service’s response to the Covid-19 pandemic. EQC submissions are made at the aggregate level – so do not require the submission of detailed patient-level costs broken down into resources and activities. It has to date been confined to acute services and a number of activities are excluded to keep the return manageable.

Just under 20 organisations made a return for Q1 but this had halved by Q3. However Mr Walters said the information gleaned from the EQC had been ‘instrumental’ in securing the extra £6.6bn for the NHS announced in the spring spending review.

The submissions received for the first half of the year amounted to some £3.5bn of costs – around 10% of the total acute cost quantum. And Mr Walters said that the analysis of the data had ‘generated some eyewatering insights’.

‘For the first half of 2020/21, for every point of delivery – that is non-elective, elective, accident and emergency, outpatient attendances and outpatient procedures – average costs increased significantly between 35% and 48% from 2019/20 to 2020/21,’ he told the conference. These increases were driven by reductions in activity combined with either increases or less-than-proportional decreases in total costs.

‘Activity reduced for every point of delivery from 45% for A&E to an eyewatering 69% for outpatient procedures in Q1,’ he said. For three of the five points of delivery – electives and both types of outpatients – total costs fell in 2020/21. However, this was by much less than the fall in activity, again increasing average cost. For the remaining two points of delivery – non-electives and accident and emergency – total costs increased, exacerbating the fall in activity to increase average costs.

‘These increases in average costs imply a significant slowdown in productivity during the pandemic – the so-called Covid drag factor,’ he said. ‘In fact, on the basis of this data, we estimate that NHS acute sector productivity fell by between 24% and 31% in the first half of 2020/21.’

Mr Walters said these estimates of Covid drag fed directly into discussions with the Department of Health and Social Care and the government, supporting the case for increased NHS funding. Further analysis – of Q3 and Q4 data and future returns – would continue to inform national discussions.