Simplified costing guidance released

The two bodies this week issued a suite of costing guidance covering the 2020/21 financial year and this year’s National Cost Collection, submissions to which will be made in September and October.

There have been calls for major changes to the costing methodology to make them more proportionate to the benefits delivered. NHS England and NHS Improvement said they had been listening to costing practitioners’ concerns and had been reviewing the documentation over the last two years.

‘As such, we are glad to announce that the 2021 ACG documentation has been significantly simplified and rationalised compared to previous years’ iterations, which will make it easier for costing practitioners to follow and will make it less burdensome on organisations to apply the standards,’ they said. They added that the guidance would continue to be developed over the coming years.

Initial feedback from costing practitioners suggested the changes are a good step in the right direction. But, with 765 pages of mandatory guidance, further simplification is still needed – especially given the ambition to move to quarterly cost collection. Practitioners are concerned that quarterly patient-level cost submissions will leave little time left to use costing data locally to support improvement (see Collection for all seasons, Healthcare Finance March 2021). They would prefer to see national submissions based on the way they report costs locally as part of business-as-usual reports.

They are also concerned that costing teams are being asked to submit data that is not already routinely collected. Specialised ward care (SWC) is a prime example. After a year where the submission of adult critical care costs via a new SWC feed was voluntary, it will now be compulsory. Costing practitioners argue that new information requirements should be mandated for organisations well before they are introduced into costing standards. Many organisations do not have this data in place – and introducing the requirement in such a difficult year adds extra burdens on hard pressed teams and may produce unreliable information.

The national costing bodies said that the new guidance did reflect an attempt to reduce the burden on costing teams, with a nearly 50% reduction in mandated guidance. The costing principles have been updated to focus on three core themes: materiality; data and information; engagement and usage. These replace the seven principles included in earlier versions.

On materiality, the guidance recognises that this can be subjective and could be set locally. Practitioners spoken to by Healthcare Finance welcomed this move, enabling them to focus on their main cost areas and those most relevant to clinicians. However, the guidance does suggest that a starting place for discussion would be a materiality threshold of more than 0.05% of an organisation’s expenses or more than 5% of a specialty’s overall costs, in line with the level set previously. Any choice of locally set materiality threshold will be reviewed as part of the costing assurance programme.

The guidance also does away with type 2 support costs, with costs now more simply classified as either patient facing or overheads – a change that was again welcomed by practitioners.

With particular concerns about the work involved in setting up a dedicated costing ledger, the guidance also allows providers to choose a general ledger to costing ledger mapping level. In the simpler approach, providers will be able to map their general ledger chart of accounts to collection resources or overheads – essential mapping. Alternatively, a full mapping approach will see providers map costs to the standardised cost ledger.

There has also been a reduction in the number of allocation methods, activities and resources required to be used as part of the costing process. There has been a 16% reduction in the number of resources and activities specified and there are 37 fewer allocation methods (26% reduction). And ‘costing extensions’ have been introduced to support organisations that need more help or want to undertake a deep dive into a specific area , rather than include these within the main guidance.

Separate guidance has been published to support practitioners in capturing the impact of Covid-19 on their local patient care costs. Significant costs have been incurred in the direct treatment of Covid-19 patients – with six healthcare resource groups introduced to identify these patients. But Covid-19 will also have had a significant impact on the costs of care for non-Covid activity, in particular because costs are likely to have been spread across significantly reduced activity.

There are some question marks over the value of this year’s collection overall as the unique nature of the year means the cost data produced may not be suitable for benchmarking or price setting.

Last year, exceptional Covid-19 costs incurred by trusts were excluded from the collection, but this year effectively only the costs incurred in units such the Nightingale hospitals will be excluded.

Costing practitioners have raised concerns about their ability to accurately allocate costs to patients given significant numbers of staff were redeployed during the pandemic response. Orthopaedic consultants for example may have been redeployed away from elective workloads to support the emergency department.

However, in many cases there is no robust data to underpin these movements and the general ledger is not always updated to reflect the changes. This includes bank and agency spend not being aligned with the appropriate budget.

The guidance proposes ways to address this, for example suggesting that the proportional changes in activity in some departments could be used as a proxy for the proportion of consultant workforce redeployed.

Further actions will be needed to recognise where theatres have been turned into temporary critical care capacity or wards and to identify increased non-face-to-face activity that arose during the pandemic response.

HFMA head of costing and value Catherine Mitchell (pictured above) welcomed the simplifications in the costing guidance, but underlined that further change was required. ‘The HFMA is a major supporter of the move to patient-level costing. We believe patient-level cost data is a powerful tool to support service improvement and pathway redesign. We are pleased to see that practitioners’ concerns are being listened to, but further simplification of the standards and the costing methodology is needed and we will continue to work with the national bodies to achieve this.’