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Dated IT hinders hospitals in tracking costs

Think tank examines ‘patient level costing’

Jo Carlowe

Thursday, 20 September 2012

Many hospitals in England are unable to track costs due to outdated IT systems.

This is the conclusion of the Nuffield Trust which today published its report: Can Patient Level Costing Yield Efficiency Savings?

The report notes that clinicians and managers working in hospitals with outdated systems are unable to spot the often considerable variations in costs generated by patients, medical specialties and consultant teams, nor can they act to reduce waste.

The report found that hospitals incurred costs that were different from the price they received for care. The majority of the cases for which the hospital was paid using prices set by the official NHS payment system incurred costs that were more than 10% higher or lower than the tariff price.

It also found large potential for efficiencies. In one example patients with similar conditions were having differing numbers of tests requested. After discussions with clinical directors three tests were removed from the order set, resulting in savings of around £15,000 per year.

Another key finding was that 45% of all costs were linked to just 3% of patients. The fact that patient costs are skewed to a small minority is well known across the NHS, but patient-level information and costing systems potentially enable hospital trusts to examine the cost of the individual’s entire experience of care (or pathway), and where possible work with primary and community services to introduce preventative interventions.

The report examined the experience of one NHS Trust which uses a ‘patient-level information and costing system’ (or ‘PLICS’), to see whether this might be a solution for other trusts. 

Commenting on the report, co-author and Nuffield Trust Head of Research Dr Martin Bardsley said: “New patient-level information and costing systems let managers know how much money is spent on each patient, by each consultant, in each ward. The data they provide can show exactly where spending is not achieving the results it should. Yet many NHS hospitals have yet to implement these information systems, despite widespread adoption overseas. If used carefully, the information provided by patient level costing systems could be a valuable guide in efforts to reduce waste.”

The report’s authors conclude that financial pressure coupled with the more stringent failure regime introduced by the Health and Social Care Act 2012 may encourage hospital trusts to adopt these systems.

To speed up this process they recommend that the NHS economic regulator Monitor follow the German model of only using the better cost information from hospital trusts deploying patient-level information and costing systems to help set prices. This would also encourage more accurate setting of the national tariff price, they argue.

However they warn that PLICS may give hospitals a very advanced understanding of their costs, something to which commissioners would not be guaranteed access. This could create information asymmetry and have a detrimental effect on the efficiency of the market. 

To guard against this, they suggest that policy-makers could mandate some sharing of cost information between all providers and commissioners.

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