Nuffield Trust backs PLICS ‘investment’

The Nuffield Trust has published a report backing patient-level costing in the NHS.

The short report examines the spread of PLICS across the English health service and looks at its impact on one trust in detail.

It concludes that PLICS can provide far more information about acute trust costs than the service-line reporting backed by Monitor or more traditional attempts to measure hospital costs.

However, it notes that to generate savings PLICS must be backed by management action to get clinicians to look at how their decisions affect costs, and to make changes that deliver care more efficiently.

As such, it argues that PLICS should be seen as a “long term investment” rather than a way of making short-term savings.

“When implemented well, [PLICS] provides a vast array of useful and accurate data on distributions of expenditure and profitability against income,” authors Ian Blunt and Martin Bardsley conclude.

“However, it relies on the provider to make use of this information in terms of influencing practice to become more efficient at setting prices.

“Despite this, trusts without access to high-quality cost information will find it challenging to ensure their efficiency savings are cutting waste, not care.”

Patient-level costing has its roots in the activity based costing systems developed in US manufacturing firms in the 1970s, and has been adopted by hospitals in the US and some parts of Europe.

The NHS has been relatively slow to adopt it, despite interest from the HFMA and Department of Health, with business intelligence experts split on whether the health service needs the level of costing information it supplies.

A DH study in 2011 found just under half of all NHS trusts had adopted PLICS, with another quarter interested in doing so.

The Nuffield Trust researchers examined the data available to one acute trust that introduced PLICS in 2007, and show that it should be able to compare its costs with tariff prices down to team, consultant and patient level.

The unnamed trust is in financial balance only because it makes a surplus in some areas that offsets a deficit in others.

Therefore, the researchers imply that it needs to use PLICS data to make the kind of detailed efficiency savings that will make it less vulnerable to a change in its patient population or tariff prices.

Blunt and Bardsley add that PLICS can deliver other benefits, such as providing data for negotiations with commissioners, and supporting projects to redesign patient pathways.

Conversely, they warn that if clinical commissioners are not given access to PLICS data, they will be at even more of a disadvantage than other NHS commissioners have been.

“To guard against this, policy-makers could mandate some level of cost information-sharing between all providers and commissioners,” they argue.

They also warn that if trusts use PLICS effectively, they could pull out of some unprofitable areas, and this will need to be managed carefully.

“While locally this will be the job of the local clinical commissioning group, it will be important that in a ‘national’ health service there is monitoring to ensure continued equity of access. The primary responsibility here is that of the NHS Commissioning Board.”