Patient-level costing: can it yield efficiency savings?

This report examines how, in an era of financial challenge, NHS trusts can make better use of cost information at the patient level.

The challenge faced by the NHS of achieving major efficiency savings (estimated at around four to five per cent a year between now and 2015) highlights the desirability of improving the availability and scrutiny of data on the costs and outcomes of health care.

Patient-level costing systems (or 'PLICS') were introduced in the NHS in the mid-2000s. The Nuffield Trust research summary: Patient-level costing: can it yield efficiency savings? highlights the key findings of a full report looking at the use of these computerised information systems in hospitals that were set up to track and enable analysis of the costs of care incurred by individual patients.

The report examines whether the implementation of information systems for patient-level costing might lead to greater efficiencies.

If used carefully, the information provided by patient-level costing systems could be a valuable guide in efforts to reduce waste Dr Martin Bardsley, Director of Research, Nuffield Trust

Specifically, the study examines how trusts are using and planning to use patient-level costing systems, drawing on the experiences of several early adopters. It also draws an empirical analysis of data from one trust that is more advanced than most in its use of patient-level costing.

The study found that costs to the hospital can be very different from the price they receive for care, with only 17 per cent of cases within 10 per cent of the NHS tariff cost. It also found costly variations of care procedures for similar cases within trusts, and a ‘clustering’ of costs around a small minority of patients; both of these offer the potential for service redesign and potential cost savings.

The authors conclude that financial pressure coupled with the more stringent failure regime introduced by the Health and Social Care Act 2012 may encourage hospital trusts to adopt these systems. However, they also warn that such systems may give hospitals a more advanced understanding of their costs than those commissioning services from them.

To guard against this, they suggest that policy-makers could require a minimum level of sharing of cost information between providers and commissioners.

This research summary and report form part of the Nuffield Trust’s wider programme of work on efficiency – to find out more, visit the dedicated project page.

Suggested citation

Blunt I and Bardsley M (2012) Patient-level costing: can it yield efficiency savings? Research report. Nuffield Trust.