EMERYVILLE, US - (HealthTech wire / Opinion by Paul Fitzsimmons) - Facing increased scrutiny at every turn, the pressure on the NHS to reduce costs, minimise variances in the cost and quality of care and drive efficiency gains is showing no signs of subsiding. Healthcare organisations are being advised to review existing performance and spend, deriving new ways of working to help meet the £20bn cost savings demanded. To address this, the Department of Health introduced QIPP (quality, innovation productivity and prevention) into the operating framework. This has heralded a rapid move towards locally negotiated tariffs for a growing range of clinical activity. No longer will national cost averages decide what a PCT will pay. This, coupled with performance-related funding, has meant that precise information at the most granular level possible is now an essential requirement for Foundation Trust providers and those aspiring to become one.
Facing up to this challenge is perceived by many as a simple accounting exercise rolling out financial data to the divisions by individual service line with some allocations attached to the non-direct costs. This, however, misses the point entirely.
Future success of reviewing financial data alongside performance information is not based on the data itself, but how effectively Trusts can engage clinicians and managers to accept and act on it to deliver real improvements to the efficiency and value of the care they provide to their patients. If change is made at the clinician level, the collective impact for the Trust becomes exponential when aggregated on a regional or national level.
To achieve significant efficiency gains, Trusts need to arm their clinical teams with the right information supported by actionable analytics and there lies the challenge. Many are being seduced by the attractions of service line reporting (SLR) because of the ease at which they believe it can be implemented. Others prefer the patient level costing (PLC) route because they feel the granularity it provides can greatly assist the change process by linking costs directly with patients. But who is right?
The key to the answer lies in fact that the NHS must engage clinicians to own and act on their data to improve the efficiency and effectiveness of their care. Given that premise as a starting point, the acid test will be which approach is most effective in achieving this result.
SLR vs PLIC is there a difference?
A majority of NHS trust managers believe the two approaches are actually different labels for the same thing. It is crucial to understand the difference as it has a significant impact on deciding which route to pursue.
From a methodological perspective, SLR is simply a top-down apportionment exercise consisting of assigning known direct costs to individual service-line activity, including a centrally decided portion of general overhead as illustrated in the table below.
[View table]
PLIC on the other hand is a bottom-up process of determining unit cost for every intervention or resource and linking them to individual activities. This enables clinicians and managers to assign the value of consumption at the patient level and link it to the clinical care provided. Although overhead apportionment is a part of the process, there is a transparency of logic for this leading to the resulting costs being more accurate on a case by case basis, as can be seen in the following table.
[View table]
Another significant difference is the level of detail from which remedial action can be agreed. The SLR approach is to aggregate activity and costs to individual service lines. PLIC works at a much more granular level on a per patient basis which are linked initially to a consultant team and then aggregated to service lines.
A final point of difference lies in what use can be made of the information generated. SLR is useful for providing broad overviews to feed an executive board or external regulators, such as Monitor who are mainly concerned with the total picture of a Trusts position. PLC is a much more valuable tool for line mangers and clinical teams because of its capability to expose the underlying variances in practice or outcomes associated with specific care pathways.
So what is the answer?
Given the original purpose of the exercise, PLIC comes out on top for several reasons:
- It provides a more accurate picture of variances by eliminating aggregated views where these can be masked.
- It has greater transparency as a methodology and can stimulate local understanding of the way clinical treatment choices and performance impact on costs.
- The granularity it provides enables clinicians to look at individual cases and arms them to better manage overspend and prevent unwarranted variations before they occur.
Having said this, it is important to understand that cost data at patient level which is all PLIC really is although useful, will not in itself provide the actionable information needed to engage clinicians.
Patient-level information and costing is essential
The true value of patient level costing is only achieved when this is linked to performance and quality data to create a full picture and this is the draw-back of most patient level information and costing systems (PLICS) that only report on the financial side of the triangle. It is through the additional element of other associated information around cases, pathways, volumes, variations in performance and apportionment rules that clinicians and managers will be able to understand where any problems exist and what should be done to address these, as shown in the table below.
Is it achievable?
PLICS is achievable because the main data sources which feed the costing elements can also be employed to support the other analytics around performance and treatment variation needed to complete the picture. All that is required to do this is an analytical system to generate the outputs and a clinician friendly reporting tool to provide the information in an easy to access format.
The combined information and costing approach ensures clinicians are engaged because it shows them exactly where the problems are within their own patients and treatment plans. It also enables them to understand and challenge the confounding factors outside their direct control which also contribute to the costs being reported, making it more credible than blunt values provided for a whole division or service line.
Linking reporting to a performance management framework, where the data is openly shared and poor outcomes are challenged, drives the behavioural changes that are required. With the right system, the targets can be incorporated into the reporting with alerts generated over time when noteworthy changes (positive or negative) occur.
What are the real benefits being achieved by those using PLICS?
Those trusts who have adopted PLICS over the more rudimentary SLR route and incorporated this data with corresponding performance and quality information are finding that it has empowered clinicians and managers to take ownership of their performance. This has yielded improvements in their financial position as well as fostered a culture of collective participation in determining the future targets and actions to achieve these.
Patient-level information and costing systems visually inform clinicians, managers, the commissioners of today and the GP commissioners of tomorrow about the current variances and areas within practice that require improvement. This approach promotes shared information, informs front line teams and presents the opportunity to redesign services to derive best practice and deliver efficiencies.
It is mandatory for healthcare organisations to make cuts, however, this must be addressed with care and decisions must be based on clear evidence. Analytic tools that facilitate PLIC allow organisations to understand what costs relate to which services, unwarranted variations within these and where performance variation reduction instead of cuts can be achieved without impacting upon the quality of care delivered.
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Source: MedeAnalytics
Paul Fitzsimmons is Managing Director at MedeAnalytics.
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