NHS: Costs of Operations

Lord Prior of Brampton Excerpts

Monday 9th November 2015 Lords Chamber

[Lord Naseby]

To ask Her Majesty’s Government whether the National Health Service will publish the average cost of all operations and procedures undertaken (1) by general practitioners, and (2) in hospitals.

[The Parliamentary Under-Secretary of State, Department of Health (Lord Prior of Brampton) (Con)]

My Lords, the department has published the average cost of operations and procedures in hospitals for the past 17 financial years. These reference costs are the average unit costs to NHS hospital trusts of providing acute, ambulance, mental health and community services, covering £58 billion, or 55%, of revenue expenditure in 2013-14. Reference costs for 2014-15 will be published this month. There are currently no plans to collect similar information from general practitioners.

[Lord Naseby (Con)]

Does my noble friend recall that one of the features of GP fundholding was that GPs had a budget, the patient could choose what hospital they went to and the hospital to which they were referred then sent a bill to the GP? If we introduced a new system whereby GPs and hospitals actually knew the cost of what they were or should be charging, would that not enable GPs and hospitals to stick to their budgets, and some of the overspend would then disappear?

[Lord Prior of Brampton]

My Lords, hospitals do know their costs; they know their reference costs and their HRGs. Increasingly, we will want to get patient-level costing into all our hospitals, as is already the case in some hospitals. If you know the actual cost by patient, the hospital management can have a much better discussion with hospital clinicians. Patient-level costing is important going forward in hospitals. For GPs, we have a calculated payment, as my noble friend will know: currently £75.77 per capita on the list, adjusted for various matters. A capitated figure for GPs is probably better than a much more detailed breakdown of costs.

[Baroness Walmsley (LD)]

Do the figures for hospitals discriminate between those that have to service expensive PFI contracts and those that do not? If so, and if the former are more expensive than the latter, is the department funding them appropriately to enable them to pay those costs?

[Lord Prior of Brampton]

The noble Baroness makes an important point. We have what we call a “market forces factor”, which is applied to the tariff to make adjustments for unavoidable differences in costs—for instance, providing care in London compared to providing it in a cheaper place. The way we measure the cost of capital is not entirely satisfactory, though, and if an individual trust has a very expensive PFI, that is not properly compensated for by the market forces factor. We should spend some more time looking at that issue.

[Baroness Wall of New Barnet (Lab)]

My Lords, is the Minister aware of the new system brought in by the department to measure every activity that goes on in a hospital, including the consultant’s time and all the extra things that are used? He talks about reference costs and even tariffs, but they are not actually a very good measure of the cost of materials and services that are already used in the health service.

[Lord Prior of Brampton]

The reference costs try to pick up all the costs attributable to certain procedures. As I was saying earlier, a patient-level costing system would probably be more accurate. I did not catch the first part of the noble Baroness’s question, so perhaps we could deal with this outside the Chamber. Hospitals are incredibly complex and picking up all the costs, particularly allocating overhead costs to individual procedures, is difficult. Compared to any other hospital costing system I have seen in the world, though, the NHS reference-cost system is pretty comprehensive.

[Lord Ribeiro (Con)]

My Lords, one category not included in the list is the independent sector treatment centres. Are these proving as cost-effective as we would like? If so, is it not time that NHS consultants have greater access to them to deal with their elective cases, many of which are often cancelled because of the need to bring in emergencies?

[Lord Prior of Brampton]

My noble friend raises an interesting question about independent treatment centres, which are for elective cases, not emergencies. They are able to plan their case mix more accurately, and are much choosier about the case mix they take. They can be extremely efficient, and if they have the volumes coming through, they are. Because of the case mix they take, they ought to be able to deliver significant cost advantages over providing such surgical care in a normal NHS hospital. The argument for ring-fencing orthopaedic procedures, for example, is overwhelming in terms both of cost and the quality of care delivered.

[Baroness Farrington of Ribbleton (Lab)]

My Lords, I have heard consultants getting very cross not with patients, but with patients with complications being referred from private hospitals when the procedure got too complicated for them to deal with. Could the Minister write to me detailing the available information he has about this? I stress that in both cases, the consultants were genuinely caring of the patients; but both said that in their view, this happened too often.

[Lord Prior of Brampton]

I will certainly look into this and write to the noble Baroness, as she requests. There is no question but that in complex cases, the NHS is better equipped than most private hospitals to deal with such complexity; and of course, even when a simple case is handled in a private hospital and something goes wrong, that may lead to a referral back to an NHS hospital. However, I will certainly look into this and write to the noble Baroness.