Monitor publishes new report on costing

Wednesday June 20th, 2012

Monitor has published an independent report on the costing information that underpins the current Payment by Results (PbR) system.

Strategic Options for Costing was commissioned from PwC.  Monitor also recently published An evaluation of reimbursement systems for NHS funded care, a research report from PwC which identified that the information underpinning the current PbR system requires significant improvement. To help Monitor understand how this might be achieved, it commissioned this new report on costing.

The PbR system is currently based on reference costs data. All providers submit their costs for each particular service and prices are then set based on the average across all providers. PwC’s evaluation of the reimbursement system identified that 40% of prices set under PbR change by 10% or more each year. The main cause of these variations in price is variations in costs reported by providers.

Adrian Masters, Monitor’s Director of Strategy, said: “It is often unclear whether these variations reflect real differences in the cost of providing the service, or ‘artificial’ differences in reported costs arising from different ways of allocating overhead costs to particular services. This new report makes a number of recommendations to help improve reliability and consistency of reported unit cost.

“We are now seeking views on the findings and recommendations in this report. We will be developing and consulting on our costing proposals and guidance later in the year, taking into account the findings of this report and the feedback received from stakeholders.”

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