Clinical advisor: Debjani Duncan

Progress towards a smarter NHS depends on the engagement of clinicians and, increasingly, the patients themselves’ Debjani Duncan.

Clinical engagement is not a new concept for procurement but the ways in which it is achieved and the agenda it sets out to address now needs to change. The current drive within the NHS is firmly concentrated on delivering responsive, convenient and personalised services for all patients regardless of demographics and diagnosis. This has created a shift in emphasis on the clinicians’ agenda which is far more all-encompassing than the business of delivering high quality healthcare. Increasingly the mandate handed down within the NHS Improvement Plan1 requires a multi-faceted and inclusive approach to reform which covers organisational and sector boundaries.

These new challenges are set to create dramatic impacts as the patient journey reduces to 18 weeks by 2008 and the ten high impact changes2 proposed by the Modernisation Agency are addressed. That’s not to mention the implementation of national service frameworks and other clinical governance or safety initiatives. Within this landscape therefore procurement personnel, whether clinical, NHS-experienced or otherwise, will have to develop a real understanding of where they fit on the clinicians’ radar and utilise that understanding to maximum effect.

I believe that this is the only way that embedded change will take place and commitment and cooperation at all levels will be essential. Thankfully it is little disputed that to achieve this will require far more engagement of the principal stakeholders’ namely clinicians and, increasingly, patients themselves.

In addition, outside of the day job the six main challenges set out by government for clinicians to address partnership, professions and workforce, performance, patient empowerment, access and prevention are the priorities that they are working to. Industry and procurement have to mirror this by tailoring their efforts and services accordingly, otherwise true engagement will not happen. The old  what’s in it for me adage still rings true if you cannot help address clinicians’ most pressing needs, there will be no incentive for them to cooperate and embrace the behaviours we desire from them. The only way to achieve this is to find ways of directly relating procurement activity to the delivery of these challenges and demonstrate tangible ways in which we can contribute.

We must therefore be aware of these changes to keep abreast of clinical needs and to help those who facilitate the purchasing of clinical products to achieve the collective goals of a smarter NHS. As we know, there is still a healthy scepticism among clinicians about the procurement process. However, by recognising the skills and knowledge they possess, and tapping into what fires them up, efforts at getting innovative products to market, ensuring sustainability over time and building relationships with product users to modernise and improve healthcare, will be greatly enhanced.

The demographic shift towards an ageing population means that the overall market for healthcare will continue to grow. In addition, the population is becoming more demanding due to increasing awareness of the possibilities that might be achieved through the use of new technologies, materials, systems and processes in the delivery of healthcare.

The main drivers for the NHS in the future will be the increasing trend towards community-based solutions to healthcare. This shifting emphasis represents a major challenge for those delivering the service and an opportunity for the design of new products and services tailored to the more local and personalised environments in which they will be used. Consideration of design will become more critical, as the types of medical devices and services used in hospitals tend to become more stigmatising when used in the home. With these changing patterns of care there is a clear need for the NHS to foster and adopt new solutions to healthcare problems. What is not always so clear is how the service can specify and procure in a timely and transparent manner what it needs.

For businesses, this situation presents multiple barriers through lack of understanding of the process of clinical procurement. The increasing trend to employ strategically placed clinical staff within collaborative procurement hubs and confederations is set to address some of the main issues, by working in partnership with local staff within trusts to address the lack of resource to undertake clinical trials’ and/or access to patients for the trials, as well as the multiple approval processes to get into each trust’s supply chain. Fundamentally though, there are now increasingly clear pathways developing for business and clinicians to share knowledge and intelligence on what the NHS is trying to procure and how that might be supplied  through the conduit of clinically-trained procurement personnel.


Procurement consultant: Christine Harland

Collaboration’s  working across trust boundaries, multiple agency initiatives, private sector partnership and patient involvement in procurement decision’s signals the way forward for public procurement in the health sector as a joined up, networked activity  Christine Harland.

This year’s Health Care Supplies Association conference (London, 3-4 November) featured high level speakers, not just from the procurement community, but also from the broader NHS and public procurement arena. Despite the diverse range of topics some common themes emerged  most strikingly that of collaboration and joined-up activity.

As Christine Beasley, Chief Nursing Officer, highlighted, this new way of working involves discussion and facilitation, rather than individual authoritative decision making. She referred to patients as senior partner’s not passive recipients. Duncan Eaton, chief executive of the NHS Purchasing and Supply Agency (PASA) urged the procurement community to fully involve patients in decisions on how NHS money is spent to provide their care.

One speaker (not from the NHS, I hasten to add) painted a picture of patients as simple folk who, if given a choice of provider, will base their decisions on food and car parking. In my experience this is absolutely not the case. Carers and patient’s particularly those with long term and serious health problem’s  can become highly educated about their condition and possible treatments. In the last few weeks we have seen patients use media coverage of the prescription of Herceptin by other primary care trusts (PCTs) to reverse decisions made about their own treatment. In our research on collaborative supply networks in healthcare, patient involvement in prosthetics and wheelchair design has had a profound impact on procurement decisions that improve quality of life. Attempts to include patients in decision-making must be genuine and afford them respect.

However, this strategic, holistic approach to procurement necessitates highly qualified, thinking practitioner’s and it is generally accepted that these are not in plentiful supply. Joe Gibson, chief executive of the Lifesource collaborative procurement hub, offered a sensible short-term solution’s  surround your best procurement people with resources which allow them to focus on their core competence. John Oughton, chief executive of the Office of Government Commerce (OGC), described how the OGC draws in procurement people from outside the public sector, in addition to growing its own through investment in undergraduate placements.

I empathise with both views. In my research centre at the University of Bath I surround research staff with administrative and technological support. Researchers research 100% of their time instead of doing tasks that others can do better and more cost-efficiently. I am frequently required to defend this approach against proponents of so-called lean organisation’s; I argue that it is lean. I also like the grow your own approach. Public procurement, particularly in the complex confederal NHS with its many, sometimes conflicting, issues takes a long time for people to get their heads around.

Collecting evidence and measuring outcomes is imperative for procurement. If the only measures we have are savings-based, this is what will drive us. We need to implement measures that provide evidence of other benefits of public procurement such as social, economic and environmental benefits, now termed sustainable procurement.

And it is around this last point that the main dichotomy of this conference appeared. I had a sense of left hand and right hand that troubled me and it came down to the policy and ethos of a public sector health service. One speaker promoted increased commercialisation of services; while a practical reality, patients are none too happy at being refused a MRI scan because the scanners are booked for private use for six months. In my own presentation I emphasised that if the NHS is to afford the increasing costs of drugs and technologies required to deliver leading edge healthcare, plurality of provision and partnerships with the private sector are essential. However, I expressed concern about unintended consequences of decisions that impact acutely on supply markets. There is particular concern over the limited involvement of procurement professionals in sourcing decisions for large areas of spend such as treatment centres, outsourced services and new hospitals. Duncan Eaton expressed the view that if the outsourcing of NHS Logistics went ahead the NHS must retain strategic responsibility for clinical equipment. Not to do so would be madness. And I agree wholeheartedly  babies and bathwater spring to mind. Dimitrios Hatzis of the Commercial Directorate of the Department of Health said that anything can be outsourced if it’s specified and managed professionally  and to a certain extent I agree with this as well. But managing the ethos of a unique public sector healthcare service being performed by a private sector, possibly culturally different, organisation requires sensitive service level agreements. There is plenty of evidence of unintended consequences when we have failed to recognise broader forms of value in service level agreements. Hospital cleaners used to chat with them, help them eat their lunch and offer a cheery face; outsourced cleaning contractors must adhere to the most efficient rota of tasks to be performed. Private sector catering providers increased patient satisfaction and reduced costs but in some cases provided inappropriate nutrition, leading to increased clinical malnutrition. So, I sincerely hope that the DH can pull this off successfully, becoming a beacon for other government departments to follow. Let’s hope next year’s conference has shining examples of these successes.


Procurement consultant: Dr Colin Connolly on PbR

The move to standardise clinical costs across the health service through Payment by Results is likely to run into problems because of continuing inaccuracies in costing clinical activities Dr Colin Connolly.

Payment by Results (PbR) is a natural progression of a whole series of reforms in both the funding and related clinical activity levels in the NHS health delivery system. Integral to the reforms is the dictum that money follows patient’s.

It is a philosophy that was first embedded in the NHS when allocations were switched from being made directly to NHS hospital trusts on an historical cost plus inflation basis through to channelling revenues through primary care trusts (PCTs). NHS hospitals in the secondary care sector now receive their income from the PCTs buying clinical services using the so-called clinical contract system.

The problems in delivering this admirable philosophy is that both the measurement of clinical activity and its associated costs have been and are still subject to wide errors. Problems are numerous, not least of which is that costing anything with the accounting system currently in use is at the very least difficult and probably impossible with any accuracy. The current system is both loaded with overheads and clinically nonspecific.

The study group attempting to cost specific clinical activity and its associated costs in diagnostic related groups (DRGs) or health resource groups (HRGs), has been engaged in its Herculean labours for fifteen years at least. Efficiency of frontline clinical services, supporting clinical diagnostic services as well as supply and hotel services on which the NHS relies have been subject in this period to continuous revolution sweating the asset’s, efficiency savings and Samuel Smiles initiatives, value for money, market testing, outsourcing, PFI/PPP and resource allocation to PCTs to buy hospital services via clinical contracts. This is in addition to the ongoing reorganisation of NHS bureaucracy.

The new systems to be imposed in 2006 under the stirring motto of PbR assumes that the problems of costing clinical activity have been largely solved. Allegedly, the inaccuracies are small enough at 2% to be addressed within the financial flexibility available to NHS trusts as they are reformed as stand alone NHS foundation trusts.

The assumptions made to support the introduction of PbR are based on models of standardisation for costing clinical procedures. Everyone will be required to have the same costs for the same procedures. This will pervade the whole of the internal management of clinical and nonclinical departments in trusts of whatever type, creating consequences for the supply costs of drugs, clinical and nonclinical disposables and equipment of all kinds which account for 20-25% of the total costs of clinical and diagnostic procedures.

The impact of the cost standardisation models adopted will be significant throughout the health services delivery system but particularly on clinical freedom and choice and the costs of supply. As far as supply is concerned, the Henry Ford philosophy that you can have any colour as long as it’s black seems appropriate. No wonder both the activities of the NHS Purchasing and Supply Agency (PASA) and the NHS Logistics Authority are currently being market tested.

Cost standardisation initiatives will also impact on the specifications for market testing of both NHS Logistics and PASA, since the focus will be on the supply of consumables and disposables. The models for PbR for NHS trusts include the cost of supply of consumables and disposables as overheads on the standard patient cost models adopted. Because of the volume of cost involved in supplies, it is the standard cost profile of supply that will inevitably cause supply cost to be used as a regulator of NHS trust cash flows.

The use of supplies as a cost regulator for the NHS in delivering its cash flow has a long history and it is this that has always created volatility in the associated volume of supply.

The need to match the cost of supply to the standard models of care to support the implemention of PbR will inevitably drive the supply cost profile down by far more than the cost errors of 2% allowed as a risk in the PbR accounting systems adopted.

Further still, as NHS trusts and PCTs realise the risk to cash flows, there will be growing pressure on one of the few costs that can be cut in the short term for which the cash limit needs to be delivered and for accounts to be balanced.

Finally. since the cost of supply has always been used as a cost saving in delivering trust cash limits at the end of every financial year, it is inevitable that suppliers will come under cash flow pressures of their own from the variation in supply delivery demanded. PASA and NHS Logistics or the new purchasing consortium will need to take into account the variation in supply delivery volumes.

But one issue that is not figuring loudly in the new initiative is the cost of quality, which will involve the freedom to use an intensity of diagnostics applied to patients which currently varies enormously within the NHS. The effects of the uncertainties created by PbR will emerge as the initiative is applied but in my view will lead to major risks to service delivery. My comment on yet another new initiative is: Forgive them for they know not what they do.


Clinical advisor: Anita Rush on bariatric care

In the August issue, HES questioned if trusts were procuring appropriate bariatric equipment. Providing appropriate care for these patients is complex and can only be done well by taking a holistic approach to patient care.  Anita Rush.

Bariatric management is a new concept in service and equipment provision. It started for me some years ago when I was tasked to provide equipment and home care for a bariatric patient in their domestic environment. The lessons I learned from that experience and the knowledge I gained from doing a Masters degree in Health Ergonomics enabled me to recognise that managing bariatric patients was full of challenge’s  including financial and human resources, equipment design, knowledge and training and environmental constraints.

Bariatrics is not just about providing the right equipment. It is about placing the bariatric patient at the centre  thinking out of the box and taking a holistic approach to patient care. The fact that most bariatric patients cannot tolerate lying down due to breathing impairment, may have skin problems, suffer from lack of self esteem or have other related medical problems means that sound clinical assessments and robust policies and procedures need to be in place to ensure safe systems of work.

A good guide is to base the procurement of bariatric equipment on 70% clinical need and 30% financial considerations. The selection of equipment should be done in a systematic way and form part of the risk assessment process. Equipment reviews should not only consider the needs of the bariatric patient but also include local and national statistical data, prevalence, adverse incidents and near misses.

In addition, the equipment must be fit for purpose. If the caregiver using the equipment cannot position themselves in a safe and comfortable posture to assist the patient to move, then there is an increased risk that the caregiver will suffer a musculoskeletal injury. But selecting appropriate equipment will reduce the inherent risks associated with handling bariatric patients and ensure the well being of both patients and staff.

It is essential when assessing and designing equipment for bariatric patients that their body dynamics (height and body type), mobility and weight (most bariatric patients will underestimate their weight) are taken into account. For example, when looking at beds the weight of the mattress, its height, and the weight of the patient’s spouse (if applicable) need to be considered in relation to the weight and height of the patient. In addition, in some cases the back of the bed will need to regress to accommodate the bulbous gluteal region.

But it is not only the patient with whom the equipment needs to be matched up. Different types of equipment also need to be compatible with each other. For example, if a hoist cannot lift high enough to get a patient easily on or off a bed, there is a risk of pressure damage to the patient due to shearing and to the nurse of musculoskeletal disorders as they drag the patient over the bed. If the patient is mobile then the bed needs to go low enough for them to lift their legs into bed  it’s well known that bariatric patients often do not go to bed as they cannot raise their legs high enough to get into bed.

When a bariatric patient is placed in a ward, they can take up to two bays, so it is important to assess whether there is enough space to accommodate them, whether the lift will be able to take the combined weight of the equipment and the patient and if the floor will also take the weight, particularly if on upper floors. There also needs to be enough room to enable the use and manoeuvrability of equipment and to accommodate at least four carers’ ideally at least 1.5 metres between the walls of the room and the equipment. The floor space should also be big enough for other equipment, such as mobile or gantry hoists, glide-about commodes, wheelchairs, stretchers (in acute environments) and the fallen patient.

So, how can procurement specialists, manufacturers, professionals and end users working within the health and social care environment contribute to providing the right environment and appropriate equipment provision to enhance the bariatric person’s self esteem and ensure that staff are competent in using the equipment supplied?

One thing that is essential is proper training. Knowing how to use the equipment is paramount to the safety of both the patient and the professionals using the equipment. Efficient training in conjunction with manufacturers should be competence-based and part of the procurement package.

I also think that bespoke equipment will be required to meet individual needs. Procurement specialists, manufacturers, end users and health professionals need to work alongside organisations and equipment designers to reduce the inherent risks associated with managing bariatric patients, influencing equipment and environmental design for current and future users.

Good work is being done by many manufacturers who over the last few years have responded well to the needs of bariatric patients, designing equipment using a systematic framework of data collection from end users and professionals that has enabled their design to be reviewed and improved. But we have a long way to go. It is time to think more laterally, to take a real look at today’s environment, and design equipment that is fit for the purpose  for appropriate and safe bariatric care.


Jon Sussex: A price to pay

As health economics gains ground as a tool for decision-making in the NHS, Marc Sansom talks to Jon Sussex about the impact of Payment by Results on the procurement of medical equipment.

In this pragmatic and secular age, the UK may no longer be a global vanguard of intellectual thought. But in many countries, it still provides a beacon for others to follow. For Jon Sussex working at the Office of Health Economics (OHE), where he is deputy director, it is not about breaking new ground. His concern is to improve people’s awareness and understanding about a discipline that is becoming increasingly influential in rational decision-making across the UK’s health services.

Founded in 1962, the OHE has an international reputation of some repute. Its close links with the Association of British Pharmaceutical Industry, which owns the organisation, often precludes the organisation from addressing certain issues, because as Sussex explains, people just wouldn’t believe the objectivity of what we were saying. But as it increasingly looks to attract funding from non-ABPI source’s  presently 30% of funds are externally-generated by the OHE  it’s ability to straddle the world of government, commerce and academia, combined with its peer-reviewed approach, positions the OHE well for the future.

PbR evaluation

One current, albeit modest, source of funding is from the Department of Health (DoH), which has contracted Aberdeen University and the OHE as a sub-contractor to jointly perform a national evaluation of Payment by Results (PbR), a controversial new policy that is dramatically changing the way that hospitals are funded.

Responsible for qualitative and advisory aspects of the project, with Aberdeen doing most of the number-crunching quantitative element, the two and a half year contract has been running for several months and, as Sussex explain’s, require’s feedback along the way to allow the government to adjust, nudge and steer the policy over the 2-3 year roll-out period.

The fundamental principle of PbR is to reward hospital trusts in England for the work that they do, thereby enabling the money to follow the patient’s and improve productivity. Its implementation, however, is fraught with difficulties. The OHE’s main objective, says Sussex, is to generate ideas about what the issues are, identify the good and the bad things about the policy, suggest solutions and propogate good practice. But will PbR improve care to patients? And will it enable them to benefit from new treatments and the latest in medical technology?

At a superficial level, says Sussex, it’s likely that by paying hospitals for each additional item of work they do, they will improve their activity levels and will see more patients. This will mean they will need more of everything, including equipment and supplies’.

Cost-effective incentive

However, says Sussex, PbR also provides an incentive to do the extra work at as low a cost as possible. The price that the hospital is paid is a nationally fixed tariff. So the lower the cost of the treatment, the greater is the hospital’s surplus to spend on other activities. I’m not saying it would, but it is feasible that the hospital may cut its future equipment costs to generate a surplus or to come below the tariff if it is a high cost trust.

So if you are a clinician or a procurement manager, PbR may increase the pressure from the finance director to go for the cheap option rather than the most cost-effective one.

Sussex identifies a number of factors that could lead to a squeeze on the procurement of medical technology. He links the first to the fact that the price of each activity is fixed centrally and is an average price for health service activity two years ago. A hospital is performing surgery at a fixed price of 1,000 but then a new technology that improves patient outcomes is supplied to the market at 1,100.

The supplier, however, must be able to demonstrate to the hospital that it will save money on the overall treatment by the patient leaving hospital sooner, because the extra cost will not feed into the tariff for another two years.

Recognising this as a disincentive for trusts to adopt new technologies, the DoH has introduced a mechanism for passing through the costs of new drugs or technology. Citing the hassle factor Sussex is concerned, however, that the option of negotiating the pass-through of the costs of a new technology may not be exercised. Negotiating the level of costs to be passed through will encroach on management and clinical time, when a tariff already exists’.

PbR is more or less based on average cost and Sussex is also concerned that during the phasing-in period this will create a financial imbalance. The trusts that are below average cost are being paid more by the primary care trusts for doing the same work. High cost hospital trusts, however, are under obligation to bring their costs down to the tariff price. But they can’t do it overnight. It is easy to pay low cost trusts more. But it is much harder to extract cost savings from the high cost trusts, so nationally money will be tight and that will impact on the procurement budget. Politicians say they will be ruthless and let high cost services close  but will they?

The final factor, says Sussex, is that major financial changes such as PbR will create an atmosphere of fear, uncertainty and gloom. PbR is creating financial risks in trusts that didn’t exist before. Trusts do not know how much money they are going to be paid. Finance directors will, therefore, be holding money in contingency reserves, reinforcing the feeling that money is tight. The concern is that there may be a price to pay if trusts are averse to buying new technologies until the uncertainty has been reduced.


Clinical advisor: Dr George Findlay on patient safety

Clinicians need to relinquish insistence on professional autonomy and allow the standardisation of healthcare technology and equipment in the interests of patient safety, Dr George Findlay.


At a recent meeting of the All-Party Parliamentary Group on Patient Safety discussion focussed on improving patient safety through improvements in the process of healthcare procurement. Understandably, a considerable amount of attention was given to the technical aspects of procurement that could lead to cost efficiencies and therefore increased real spending in healthcare. However, it is also important to examine the role of the clinician in the process of procurement of healthcare technologies, as this may be a significant obstacle to optimum patient safety.

Variation in the delivery of care is often the first step towards avoidable error. If, for example, a particular department of orthopaedic surgery has five consultants who each perform the same operation with different instruments to each other, use a different type of prosthesis, use different materials for suturing and have different care pathways for the postoperative management of the patient, it is not difficult to see that there is enormous scope for error and adverse events. This was discussed in an article on patient safety published earlier this year which details five system barriers to ultrasafe healthcare1. Two of these barriers are pertinent to the issue of healthcare procurement and patient safety: the abandonment of professional autonomy and transition from the mindset of craftsman to that of equivalent actor.

The hypothetical orthopaedic department would say there was no good evidence that any one of the five approaches used was significantly worse or better than the other, and each surgeon would point to results that were comparable to those of their colleagues. Differences would be tolerated by the institution as a result of surgeons’ professional autonomy. But the same professional autonomy will create a rich environment for confusion and adverse events and is likely to be inefficient in financial terms because of the need to procure small amounts of different equipment.

A much safer environment could be created by the abandonment of professional autonomy and acceptance that standardisation could lead to better patient outcomes. This is not to say that any one approach is superior to the other but that there are big benefits to be realised through avoidance of adverse events as a result of standardisation.

With the transition from mindset of craftsman to that of equivalent actor, each equivalent member of the team should be considered interchangeable and able to perform the tasks of their colleagues. This is rarely possible at the moment because of the importance individual clinicians place on professional autonomy and their unwillingness to accept standardisation.

What does this mean for procurement and use of health technologies? Firstly the principle of standardisation should take precedence over professional autonomy. The role of individual clinicians as the final arbitrator of what monitors, tools and disposable items they use should be phased out and replaced by decisions based on larger clinical care groups. There would also be potential financial benefits from the improved purchasing power that such a move would bring.

A second consequence is that the adoption of new medical technologies should move from the current ad hoc approach to a more formal method that includes assessment of the impact of the change on patient benefit and adverse events. With an understanding of the factors that contribute to the risk of adverse events, it should no longer be acceptable to allow clinicians to make unilateral and individual decisions about changes in practice.

But not all healthcare technologies bring benefit. For example, a recent report by the National Confidential Enquiry into Patient Outcome and Death (NCEPOD) An Acute Problem? noted that the observation of respiratory rates was infrequent2. Respiratory rate monitoring is simple, cheap and is an early and sensitive indicator of developing illness. It appears that one of the reasons for this reduction is the use of monitors to record oxygen saturation by pulse oximetry. Such monitors provide different information from respiratory rate observation, are expensive and have not been shown to lead to earlier detection of developing illness in hospital wards. In fact the widespread adoption of pulse oximetry may have actually caused adverse events due to delayed recognition of developing illness.

Clinicians are motivated by providing better care and any changes they introduce have this aim in mind. However, few clinicians consider the impact of variation in practice and professional autonomy as factors likely to lead to poorer outcomes. Certainly, there needs to be much more central control over the procurement and use of medical technologies. The role of clinicians should be to embrace the changes that will improve patient safety, rather than stand behind the arguments of professional autonomy and the art of medicine to justify the wide variations in practice that currently exist.


Finance director: Bob Dredge on PbR (Part 2 of 3)

In theory payment by results should be very simple but in practice it has turned out to be quite complex, perhaps too complex to have been brought in all at once, Bob Dredge.

Payment by results has been presented as a simple system that makes a single, nationally predetermined payment for every patient treated in hospitals. In effect the system is simple: admitted, treated, coded and paid for at tariff.

However, one of the problems in the implementation of PbR has been the apparent over-elaboration of the simple, fundamental concept of a predictable and fixed payment, but why does it have to be like this?

The payment is based on the healthcare resource group (HRG) that the patient falls into. The Department of Health (DH) sets the national, non-negotiable fee for this. But, of course, the patient is not allocated directly to an HRG. This is determined by a fixed set of algorithms that group the many interventions recorded as the patient is treated. Each has a code attached, so it is the recording of activities, rather than the coding, that is fundamental to the accuracy of the HRG.

The tariff, for the moment, applies only to elective in-patients in England. (We will soon know if this is to be extended to non-elective, out-patients and other services for 2006/7). So the first problem is to identify not all patients, but only the elective ones.

Remember that one fundamental aim is to set a fair tariff, and this is where the fun starts because the HRG system, as many will tell you, is not perfect. The current version (it is being reviewed) is some years old. Some of its classifications were never too accurate, while others, medical technology has passed by. When developing the tariffs, the PbR team found that some HRGs had very few cases recorded against them. To set a tariff on such a small set of data would be unreliable, so some HRGs were excluded on this basis. In all 22 HRGs were excluded in 2005/6, 10 of them for burns patients.

In addition to this, a whole set of patient’s those paid for by the National Services Advisory Group (NSAG)  were excluded. This is because these patients are by definition very complex and costly, requiring extremely specialised care and the national tariff would probably underpay for their treatment.

Specialised groups

This leads us then to so-called specialised patient’s, those with certain groups of conditions, laid out in a national definition set. More hospitals than not have patients who fall into these groupings, even if they are relatively few in number. As there is a relationship between average costs at hospitals and the number of specialised cases they treat, a premium is added to the basic tariff for these cases. It is averaged over the specialty and ranges from a seemingly miserly 4% for cancer, up to a massive 156% for orthopaedics  although there are very, very few cases in orthopaedics that qualify for this supplement.

With regard to medical technology, there are a few specific high cost drugs and devices that are deemed to be either so new that the tariff calculation has not caught up with them, or used on a limited number of patients and not the entire HRG cohort. The prices of these 23 specific exclusions are negotiated locally (as are the prices for all excluded services).

Currently the tariff is calculated from a process known as reference costs and drawn from data provided by all providers in England. These give the national average cost for each HRG, assuming by deduction the national average length of stay, as this is still the most common principal cost driver for acute care. But some patients stay for much shorter periods and some much longer. To pay full tariff for the former would overcompensate the provider; to pay in full for the latter would undercompensate them, so a system known as outlier payments is used. For long-stay patients this is an internationally recognised refinement. For each HRG conventional statistical parameters are used to set the point at which the long-stay addition kicks in.

The short-stay adjustment is not so common and is less well developed (and justified!). The pragmatic rule is that a reduced tariff is paid for short-stay patients in HRGs that have an average stay of over five days, if the patient’s stay is less than two days.

New technologies

There are further possibilities for complexity as the national system allows local negotiation for things that do not easily fit into the conventional pattern of care profiles. These are the pass-through payments, where a new technology or process can be added to the tariff and paid for locally, and the unbundling process whereby the tariff can be deconstructed to allow for parts of the usual treatment processes to be stripped out of the tariff. These need a separate article to explain. Perhaps we can return to this when we see the new rules for next year.

Not so simple

So, the simple process of admit, treat, code and pay is not so simple at all. And there is a further add on the market forces factor, paid directly from the Department of Health based on the cost of planned work at the start of the year. This is to compensate for unavoidable variations in input costs and is geographically based. It ranges from nothing in West Cornwall to 46% in Central London. This is a pretty contentious and complex subject, but I think the way it is handled is probably fair and right.

So, not so simple and a lot of things to deal with if the right payment is to be made. Perhaps it was a bit too complex to bring in all at once. Maybe it will be simplified for next year  and by the time you read this we should know!