7. EFFICIENCY AND PRODUCTIVITY
7.1.12 What estimate has the Department made
of the administrative costs of Payment by Results? (Q91)
Answer
1. The Department of Health commissioned
an independent study from the Centre for Health Economics (CHE),
University of York, which was published in July 2006[17]
as The Administrative Costs of Payment by Results.
2. The CHE study estimated that administrative
costs associated with payment by results (PbR) had increased by
between £100,000 and £180,000 per organisation
in hospital trusts and by between £90,000 and £190,000 in
PCTs. Most of the additional expenditure is due to recruitment
of additional staff. As part of their study, CHE interviewed
senior managers in a small sample of hospital trusts and PCTs.
3. CHE found that although PbR is expected
to have reduced the costs of price negotiation, this is offset
by increases in other areas, notably the demand for more highly
specified patient-level data. Interviewees were unanimous that
the higher administrative costs of PbR were justified by the benefits,
including greater clarity of payment rules and sharper incentives.
In addition, interviewees indicated that PbR had led to improvements
to the delivery of patient care, by enabling resources to be shifted
across settings and by highlighting where service improvements
might be made.
4. The CHE study is consistent with the
Audit Commission's estimates[18]
of the administrative costs of PbR in Early Lessons from Payment
by Results (October 2005) and The right result? Payment
by Results 2003-07 (February 2008). Their recent research
indicated "ongoing costs in the range of £50-100,000 per
year for an average PCT and up to £200,000 for a trust.
This includes information systems and software licenses, additional
staff and management time, audits and training. However, it does
not reflect the costs incurred through, for example, dispute resolution
or activity validation, or indeed the benefits or costs saved
as result of PbR improving monitoring or less time spent negotiating
local prices. It can be argued that investment in improving information
systems and wider commissioning functions has a purpose wider
than PbR, and therefore the cost of such investments should not
be attributed solely to PbR implementation. However, the requirements
necessary to function under PbR have certainly hastened the introduction
of these system improvements."
17 The CHE study is available at:
http://www.dh.gov.uk/en/Managingyourorganisation/Financeandplanning/NHSFinancialReforms/DH_4138133 Back
18
The Audit Commission reports are available at
http://www.audit-commission.gov.uk/nationalstudies/health/pbr/Pages/Default.aspx Back
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