Feature / Efficiency drive

Better information linking clinical practice to costs is needed to engage clinicians and help providers become more efficient, says Peter Donnelly (pictured above) – and finance staff have a key role in making this possible 

Most observers would agree that an unbridled ‘market’ model cannot work in the provision of public health services as so many of the prerequisites for a true market do not exist. Providers cannot operate as true businesses, free to supply directly to the public whatever and wherever they choose.

In England, the Department of Health and the foundation trust regulator Monitor ensure the public interest is protected. But this does not obviate the need for all providers of public health services to practise good business management.

One objective of payment by results (PBR) is to pay a long-term sustainable price to an efficient provider of appropriate, accessible, high-quality, timely services. Appropriateness encapsulates efficacy, allocative efficiency and equity. A premium may be necessary to ensure accessibility, quality and timeliness. Efficiency is defined as costing no more than is necessary to provide services that meet the criteria outlined above.

To determine whether an organisation is efficient, we must first understand what activity it is engaged in and how the organisation adds value in the overall value chain.

This is true of any economic activity. Yet the management structures and information flows in public hospitals demonstrate that the essential economic activity has often been widely misunderstood.

Hospitals are not factories making manufactured items to precise specifications. They are nothing like organisations that provide train services or theatre performances or à la carte meals. Hospitals diagnose and treat individual patients, taking legal and clinical responsibility for that activity. They are possibly the largest bespoke industry in the world where a key professional group is responsible for making the choices that add value for the organisation.

Doctors and other health professionals decide on and use resources in the diagnosis and treatment of patients. But the information produced for understanding and managing the business has for years been irrelevant to such activity. Management information should be much more bottom up than top down.    

Hospitals may be a bespoke industry but no one would argue that comparisons cannot be made between patients when deciding on their treatment. Work by Yale professor Bob Fetter  in the US in the late 1970s – and by extensive international research ever since – proves that patients with similar diagnoses, demographics or comorbidities can be grouped.

Research has also shown that there is, in all  countries, considerable variation in the choices made by clinicians in the diagnosis and treatment of similar patients. The graph below shows an example of the variability of clinical decision-making.

Doctors and other clinical staff love relevant information and are not afraid of it. As much as possible they evaluate  data, matching them with a clinical picture to reach a judgement on a process of pathology, to predict the likely next steps in a patient’s illness or to prompt a further line of investigation or treatment.

Doctors tell us they are frustrated by the lack of information on their activity and are desperate to know who does what to whom, with what effect and at what cost. They are keen to improve their clinical practice and see that the practice of poorly performing colleagues is addressed.

The key to winning the enthusiasm of doctors and other clinicians to ensure services are delivered efficiently is to work with their thirst for information, their ethos of education and their passion for patient care.

One way of measuring efficiency is to assess the costs of inputs – for example, the number of nurses per patient in ICU or the cost of meals. This is usually done by making comparisons with agreed benchmark prices or operating process performance metrics.

But this information should always be allied with data on the variable use of inputs by different clinicians or teams of clinicians – for example, the number of days in ICU. Clinicians must be given clinically meaningful data that enables variation in the use of inputs to be highlighted and a dialogue to take place on the appropriateness of that variation. The international model for this is by the use of patient level information and costing systems (PLICS).

PLICS record clinical interactions, processes, procedures and events, which are connected directly with a patient’s care from time of admission to time of discharge. They also ascribe to the patient the direct and indirect cost of the resources used during those interactions, processes, procedures and events.

This allows comparisons of individual elements of input to outputs to be made – for example, coronary artery bypass graft and hip replacement. It also enables comparison of inputs against clinical pathways and against outcomes, such as variable life-adjusted display plots for cardiothoracic surgery.

This connection to quality is crucial and must not be omitted in any assessment of PLICS data. Easily available granular electronic data on inputs, however, greatly facilitates these connections between inputs/ outputs and outcomes. Lowest cost is not the objective.  The objective is the elimination of unnecessary cost in achieving the desired quality.

Using PLICS data, comparisons can be made, say, between surgeons performing knee replacements on similar patients. These could include variations in:

• pre-op pathology
• day of surgery admittance rate
• theatre time
• type and cost of prosthetic
• ICU time
• length of stay
• post-operative complications
• short term revisions
• Oxford scores.

This information is delivered in a way that doctors understand and relate to. It can provide the basis for dialogue between clinicians and between clinicians and management.

Clinicians do not come to work in the public health system to waste resources. But they become understandably frustrated with budgets (often historical and unrelated to the clinical casemix) and variances. Telling a clinician that he or she has overspent their budget when they believe what they are doing right is at best pointless and at worst counterproductive. PLICS data can highlight problems, leading to root cause analysis and resolution. PLICS puts much more financial control and responsibility into the hands of clinicians.

  This new reporting might be seen as reversing the natural order. It recognises the clinical staff  are not only operational but a much more integral part of financial control than often previously acknowledged. It is no longer finance in one corner and clinical operations in another. Some directors of finance, managers and accountants can feel threatened. Change is uncomfortable, particularly when business practices have been institutionalised.

But in a time of rising demand and scarce resource this change is necessary. Directors of finance cannot expect to continue demanding year after year that we all save an extra x %.

Information flows that reflect and conform to the business model are good news for everyone. The financial controller’s role becomes more integrated with clinical operations rather than in the semi-adversarial role of cutting budgets. The role becomes an enabler of information to facilitate efficiency. 

The Department of Health encourages the use of PLICS. But it is aware this is something hospitals should see as valuable for themselves, not another imposition from above. It also understands that unless the information produced from PLICS is accurate and has integrity its use by clinical staff will be impaired.

Setting standards

The Department has worked closely with the hospital sector over the past 12 months to create clinical information costing standards for hospitals using PLICS. It has sought to understand the international best practice and apply this to England. In some areas, such as quality control and audit, we believe new standards of international best practice have been developed through this work. The draft standards are under consultation with key stakeholders, including the HFMA.

Hospitals need to deliver care efficiently and be accountable. PLICS is necessary because it hugely increases transparency in focusing on the core economic activity of hospitals – the diagnosis and treatment of patients by clinicians. It addresses the acknowledged variability in diagnosis and treatment and evidences this for dialogue. It supports the quality agenda and provides evidence for additional payment for better quality. It makes clear the differing inputs that may lead to better or worse outcomes for patients.

Additionally it provides a basis for service line reporting and supports service line management. It will better inform payment classifications and tariffs in the future.

PLICS provide clinicians with meaningful data that allows them to take ownership of their operations. Allied with focused education in specific management techniques and adequate autonomy to invest resources in patient care, this should strengthen the involvement of clinicians at all levels and build a stronger, patient-centred NHS. 

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