Feature / Levelling up

Cardiff and Vale University Health Board has implemented the first patient level costing system in Wales. But what are the benefits of introducing this tool into a health service without a tariff mechanism? Seamus Ward reports.

It has taken more than two years of planning and development, but in October NHS Wales’ first patient level costing system (PLC) was implemented by Cardiff and Vale University Health Board (UHB).

Those familiar with PLC in the English NHS may be surprised that a system so closely linked in many minds with the tariff is being implemented in a system without payment by results (PBR). But PLC is a key element of NHS Wales’ efforts to create a higher quality, sustainable service.

Fundamentally, PLC identifies all clinical interactions with individual patients and their resource consequences, and integrates all of this financial and activity information in one analysis tool. In England, the tariff provides a means of identifying income by patient. This can then be compared with individual patient costs to understand profitability at different levels in order to identify the contribution from service areas, be it profit or loss, together with opportunities to increase productivity.

However, even without the opportunity to look at income by patient, PLC can offer opportunities to benchmark against peers, allowing hospitals or clinical directorates to identify potential efficiencies and enable better modelling and planning. There are also wider uses, such as clinical audit.

The enormous potential for analysis, even in a tariff-free system, led the then NHS Wales finance director, Jeff Buggle, to urge local providers to introduce PLC two years ago.

The establishment of PLC is one of the 14 high-value efficiency opportunities identified by the Welsh Assembly government in its five-year NHS service, workforce and financial framework to cut costs and improve quality.

Cardiff and Vale will start rolling out its PLC system this month, once it has processed the current year to date position. Hywel Jones, the health board’s finance manager for service development and improvement, led the implementation of its PLC initiative. He says the focus is on integrating expenditure and activity on a timely (monthly) basis.

‘This is an improvement from managers reviewing their budget report on one hand and activity information on another and making inferences from that. The system will enable an understanding of services expenditure and trend by the drivers of that expenditure.

‘From a budget perspective. it will be able to inform the setting of budgets prospectively. It identifies potential areas for how to allocate cost improvement plans (CIPs) between specialties and the alignment of CIPs with the organisation’s strategy. It can also allow organisations to track expenditure through pathways and model what-if scenarios,’ he adds.

Cardiff and Vale, together with other organisations in NHS Wales, are funded on an allocation basis for their resident population, and therefore has limited income opportunities. The application of PLC must focus on spend and how it uses its resources with the aim of improving quality and uncovering potential for greater efficiency. There are two key themes – cost efficiency and effectiveness. The focus on efficiency means looking at data to compare the cost of services or interactions with patients, such as pathology tests or theatre time. Effectiveness examines the choices made by clinicians in ordering tests, performing surgery or prescribing medicines. If the choices made are inappropriate, there are resource consequences.

Using the system, costs can be examined – the cost of the same treatments performed by individual clinicians, for example, or the cost by age of patient or even by GP practice, Mr Jones says. Higher costs for one clinician, or one GP practice, could be entirely appropriate, depending on casemix or the health needs of the resident population.

But he adds: ‘It may not be linked to these factors and, with the help of clinical colleagues, we will be looking to identify opportunities to reduce costs. There may be a high level of inappropriate diagnostic or laboratory referrals, for example.’

Test runs have included looking at the impact on costs of which day of the week a patient is admitted and the use of laboratory tests. One test, covering the first three quarters of 2009/10, found more than one full blood count a day was ordered in 4% of finished consultant episodes. The question could then be asked if this was appropriate or inefficient use of resources.

In the first phase, the Cardiff PLC system will have data for all admitted patient care and acute hospital-based services – wards, theatres, pathology, radiology, patient prescribed drugs, and high-cost prostheses. The next stage will look to include its A&E and assessment unit, as well as mental health and community services. Over time, UHB aims to include primary care data such as general medical services.

The information will be available to about 300 managers and clinicians with self-service access to the organisation’s business intelligence (BI) tool – a tool already used widely for activity analysis, waiting list management and performance monitoring.

The process of developing Cardiff’s PLC system began with the decision to continue to use its existing data warehouse, which takes information from the patient administration system, as well as areas such as pharmacy, theatres and pathology.

 ‘We decided to develop our existing warehouse and BI tool to support PLC because we had a number of users in the organisation already using the one system for analysis and BI. So we wanted to enhance this to ensure all users would only use one performance tool for all the various analyses, and ensure consistent information irrespective of what information was being looked at,’ Mr Jones says. ‘We didn’t want the scenario where we had separate business intelligence tools in the organisation. Integrating all forms of information and analysis in one place is very powerful.’

Once this decision had been taken, the board had to develop its data warehouse and BI tool and ensure they linked with the PLC system. As a result, the PLC system receives data from the warehouse and BI system, then calculates and returns costs to them.

‘From a system perspective, our PLC system gets all activity data from our warehouse, an extract from our general ledger, and a series of rules have been designed and written marrying this cost and activity. This then generates an output that is transferred back to the organisation warehouse and BI tool for analysis,’ Mr Jones explains.

He adds that the UHB is also looking to develop finance professionals’ skills in supporting devolved budget holders by using the information to analyse use of resources holistically, moving away from the traditional focus on spend against budget.

‘Once the system is up and running, part of the debate will be identifying appropriate benchmarks in terms of what procedures should cost, in addition to the internal comparison and understanding levels of variation,’ Mr Jones adds.

‘We are showing the data, warts and all. Some of it is difficult to address, such as areas where information is not readily or easily available in automated form – for example, junior medical staff interaction with patients. But we feel having the information will allow us to ask questions and people will see the power of it. Initial feedback from general and clinical managers has been positive – many have been surprised by how much services cost.’

PLC will help finance professionals to develop and manage their roles as business analysts. There may be a different focus, but NHS Wales believes PLC will help deliver its goal of a sustainable, quality service.