ASSESSMENT
OF PERFORMANCE
6. Table 2.1.3 shows that there were changes
between forecast outturn for 1996-97 and final outturn in the
HCHS current and capital and the FHS programmes, due to adjustments
to bring in line with the Appropriation Accounts and underspends
in the capital programme. Table 2.1.4 shows that in 1997-98 the
main changes between estimated outturn and forecast outturn were
due to higher forecast of expenditure in the HCHS current programme
and lower forecast expenditure in the HCHS capital and FHS programmes.
7. Overall, table 2.1.1 shows that forecast
expenditure in 1997-98 will be higher than outturn expenditure
in 1996-97 in all programmes except NHS capital, Departmental
administration, Central Government (specific) grants to local
authorities and local authority credit approvals.
HOSPITAL AND
COMMUNITY HEALTH
SERVICES (HCHS) COST
WEIGHTED ACTIVITY
INDEX
Background
8. The Department has traditionally measured
the efficiency of the HCHS by the Cost Weighted Activity Index
(CWAI—discussed in paragraphs 10 to 13), using retrospective,
provider based data derived mainly from audited final accounts.
Since 1992-93 the Department has complemented the CWAI index by
an in-year estimation of health authority efficiency using the
Purchaser Efficiency Index (PEI—discussed in paragraphs
14 to 17).
9. The Government's view is that priorities
and performance in the NHS have been distorted by an obsession
with measuring changes in the Purchaser Efficiency Index without
the same regard for improvements in other areas. Its manifesto
claimed that "the Tories `so-called Efficiency Index' counts
the number of patient `episodes', not the quality or success of
treatment" and that under this Government, "the measure
will be quality of outcome, itself an incentive for effectiveness."
The Government is therefore committed to replacing the PEI with
a new, broader-based framework for assessing the NHS's performance
in meeting the wider goals of improving health and health services.
The new approach will concentrate of measuring what really counts
for patients, by ensuring that the pursuit of quality and efficiency
go together. But there will be no let up in our efforts to tackle
inefficiency through demanding targets on unit costs and productivity.
NHS Trusts will be required to publish their costs on a consistent
basis to help drive out unacceptable variations through benchmarking.
Cost Weighted Activity Index
10. The index (Table 2.1.5) provides a broad
measure of the overall growth in HCHS activity, in which the contribution
of the individual components are weighted by their costs. Following
changes in accounting practice within the NHS it has been difficult
to guage the increase in expenditure in both volume and real terms.
However, estimates have been made using broadly comparable data
and are shown in Table 2.1.5 and its associated graph (Figure
2.1.1). Over the 10 years since 1986-87 overall activity level
increased by around 31 per cent. Over the same period, the volume
of inputs—that is expenditure after allowing for increases
in HCHS pay and other input unit prices—increased by around
17 per cent, suggesting an increase in efficiency of around 12
per cent.
11. Improvements in HCHS efficiency are
dependent on several factors. An important driver is medical advance
supporting new patterns of care delivery. For example, the introduction
of minimally invasive therapies has reduced hospital stays for
many treatments and thereby improved efficiency. The relocation
of much long stay care to community settings has also had a similar
effect. Each has contributed to significant gains in labour and
capital productivity. On the other hand, we can be reasonably
sure that the ageing of the population works against improvements
in efficiency. Elderly people tend to require more expensive care,
and their increasing numbers have placed upward pressure on average
unit costs. Additionally efficiency measures which have been adopted
in the past—such as the movement towards delivery of care
in a Day Case or Outpatients setting and the closure of long stay
psychiatric hospitals—have begun to reach the limits of
their potential.
12. Trends in efficiency are the inverse
of trends in unit costs. The efficiency gains recorded are therefore
consistent with unit costs which have fallen compared to HCHS
specific inflation. Inflation, over the past year, within the
HCHS has been equal to inflation in the economy as a whole.
13. The Cost Weighted Activity Index growth
for 1995-96 differs from that presented to the Committee last
year. Analysis has revealed errors in activity data reported by
some NHS trusts (see Question 4.12 paragraph 2). The CWAI figures
for 1995-96 and 1996-97 are estimates, removing the effects of
the errors. Work continues to collate fully corrected figures.
Revised time series of activity data will be published in late
Summer, and the CWAI can be revised at that time.
