News / News analysis: Green light for costing plan

Monitor’s costing reform proposals were set out in a consultation document at the start of December last year. It proposed an ‘improved, transparent and intuitive costing method’ that would apply to all providers of NHS services using standard definitions and rules to ensure consistent and comparable cost data. It said the aim was to move to a single cost collection – replacing the currently separate reference costs, education and training and voluntary patient-cost collections – and set an ambitious timetable to bring the whole service on board.

The revised costing process would be broken down into three stages:

•  Mapping general ledger costs to human and physical resources
•  Assigning these resource costs to the activities that use them
•  Then assigning these activity costs to specific patients.

Monitor estimated a four-year transition to a mandated collection for each service area. However, it recognised that different service areas had different starting points in relation to patient costing and so had proposed a phased approach covering acute, mental health, community and ambulance sectors. Overall, its proposals would mean all acute providers taking part in a first mandatory collection for 2018/19 costs and the whole sector using the new approach for the 2020/21 collection.

With 50 responses to a survey undertaken as part of the consultation, and more than 100 different organisations taking part in engagement workshops, Monitor has now refined its proposals – naming its finalised plan the costing transformation programme or CTP.

Monitor costing and outcomes lead Glen Pearson said the engagement had been really useful. ‘We are very grateful for the positive and energetic feedback that we received on the proposals,’ he said. ‘We feel the changes that we have made ensure that we have a robust transformation programme that is ambitious
and achievable and will deliver benefits to patients in the years to come.’

Nearly 90% of relevant provider organisations in the survey thought the programme and four-year pace of change was achievable. Ambulance trusts were the only major exception. Under the original timetable, they were to form the vanguard of the change programme alongside acute providers. They argued that they were not well positioned for this. Key issues still needed to be resolved, including how ambulance services capture patient identifiers (especially when patients are unconscious).

There was also a need to refine classifications of different local services – such as the
provision of GP services on ambulances – and
a rationale for patient costing was needed,
given the current practice of costing at the incident or journey level.

Monitor has recognised the validity of these arguments and pushed back ambulance trusts’ implementation programme by a year. Their first mandated collection will now involve 2019/20 cost data.

Overall, respondents agreed with the rest of the sector sequencing. However, community service providers raised concerns about the delay before the focus of attention turned to their sector. Under the original proposals the four-year transition for community providers would have started in 2017/18. However, community providers called for their development phase to start as soon as possible. This would recognise that more time would be needed to define the minimum data set to support costing and to enable them to get any required data collecting systems in place.

Again, Monitor has heard the concern and brought forward the community services start date, while leaving their first mandated collection in 2020/21 as originally planned. Community services will now start their development phase in late 2015/16.

What this earlier starting development phase will mean in practice for community providers remains to be seen. Monitor had originally suggested it would take 18 months to develop new, detailed costing guidance for community and mental health services.

A new timeline, produced as part of Monitor’s consultation response paper, suggests community service standards will now be developed over 27 months, with work starting at the end of this calendar year, and published in final format in January 2018 to support the mandatory collection.

Mental health providers will follow the originally proposed timeline, despite similar – albeit less widespread – calls for a longer development period.

Monitor also confirmed that independent providers will follow the timeline relevant to the services they provide, although it acknowledged that consultation responses suggested their ability to meet the requirements would differ from provider to provider.

It is hoped the revised timeline for community services might also address concerns raised by integrated providers about how they would meet the proposals for their full range of services.

System accreditation

There was overwhelming support for a central accreditation system to provide assurance that patient costing systems were capable of delivering the proposed costing approach. Some respondents wanted the accreditation system to cover the support contract as well as the system – for example, examining response times to deal with queries – and the costing team itself.

Monitor has confirmed it will develop the accreditation process. However, it will confine itself to the costing system only. Assurance on other aspects of the costing process will be left for broader audit processes to be developed as part of quality assurance work.

Respondents also flagged up risks to the costing plans. The main concern was around lack of prioritised funding. In the current difficult financial context, trusts said it would be difficult to secure funding either for system procurement or for the additional costing staff needed to run the new process – Monitor has suggested in workshops that the number of costing practitioners could need to double at some providers without adequate resources. Trusts also highlighted potential difficulties in recruiting
and retaining suitably qualified costing staff as demand for their skills rose.

Monitor, in response to specific questions, said there would be no funding available generally to support the costing proposals. ‘This is because having a clear understanding of the costs of providing services is crucial to successful long-term sustainability,’ it said. ‘A detailed costing process is an expected component of satisfactory provider management and should be built into the organisation’s budget.’

The only exception will be a budget to support Monitor’s ‘roadmap’ partners – organisations that volunteer to get involved early and help develop and test the new costing standards and collection processes. Monitor will spell out the process for becoming a partner over the next three months. It has also promised a detailed implementation plan for costing transformation in the autumn. This will outline the detailed work stream plans, programme governance structure and key timelines.

The Monitor document also makes clear that it envisages the HFMA costing standards will remain a part of the Approved costing standards until the first mandated cost collection. For
acute trusts, this means the standards would continue to have a role for at least
three more years.

There is lots of detail that still needs to be clarified and significant milestones that need to be achieved. Monitor’s promised value for money case is perhaps the most important as this could have a big impact on buy-in to the programme
from provider boards and clinicians – both of which are key to successful implementation.

But the direction of travel is now completely clear. Monitor has confirmed the target of sector-wide patient cost collection. And the service – or at least the costing community – has rubber stamped the achievability of its proposals.

Under the firmed up plans, all acute trusts would submit costs as part of a first mandatory collection in 2018/19. This would enable the new data to inform a national tariff from 2021/22.

This could, of course, be a differently constructed tariff from the current one – more capitation-based payment approaches or capacity payments perhaps.

But whatever format it takes, it should be based on more robust and comparable cost data built up from individual patient cost information. The clock starts now.