NHS: Costs of Operations

Baroness Wall of New Barnet Excerpts

Monday 9th November 2015 Lords Chamber

[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.