The Royal College of Nursing’s briefing on payment by results stresses the need to understand individuals’ contribution to costs and quality, says Jennifer Taylor

Quality and productivity are today’s management buzzwords, set against a background of a public expenditure squeeze from 2011 onwards. With at least

£15-20bn of efficiency savings to be made, it is inevitable that managers will look at their workforce costs, and particularly nursing because of its relative size. In some trusts, nursing costs consume between 40 and 60 per cent of the workforce budget.

But Royal College of Nursing head of policy development and implementation Howard Catton says there is a risk that managers could take decisions about the nursing workforce that are “at worst blind, at best partially sighted”.

£104 - Daily health resource group reimbursement for HRG A38: Alzheimer’s disease (non elective)

£69 - Actual nursing costs per day for HRG A38

66% - Nursing’s proportion of daily reimbursement for HRG A38

The nursing component of payment by results is crudely based on average nursing costs but does not take account of patient dependency, which can have a critical influence on the optimum level of nursing input.

Mr Catton says: “If they make decisions on the nursing workforce on partial or incomplete information - because we know that the work isn’t there in relation to patient dependency - there is a risk that could have a detrimental impact on service quality.”

The RCN’s contribution to filling that information gap comes in the form of a policy briefing published in July, Nursing and Payment by Results: understanding the cost of care.

Understanding costs means understanding the contribution each person makes to overall costs and quality, says RCN policy adviser Tim Curry, who leads its payment by results project.

“Somebody might cost twice as much as somebody else but they might be four times as significant to patient length of stay as the other person is.”

Nursing activity was observed in 60 wards for 48 hours across six shifts by nursing grade and patient. The data was collected by project lead researcher Keith Hurst from the Health and Social Care Centre at Leeds University. After noting what nurses actually did in terms of direct patient contact, a daily bed rate was calculated.

It revealed that with high-dependency patients, the nursing contribution goes up and a different skill set is needed and therefore a different cost base is needed.

“If you were just to cut off 5 per cent from your costs you might lose the very skills that care for that high-dependent patient,” explains Mr Curry. “And if you don’t have those skills their length of stay might go up [and] your costs [might also] go up.”

So what can managers do to get a handle on the costs of nursing?

A good place to start is to gather patient level information and costing using guidance published by the Department of Health in 2009.

The information will help understand variation within services and why it happens. The key to making it effective is to involve all clinicians gathering the information.

“Get under the skin of care costs,” says Mr Curry. “There’s a very real danger with payment by results, because it’s based all around procedure codes and diagnosis, that you’ll think the only thing that happens in hospitals is people get diagnosed, drugged up and sent home or have surgery and go home, when actually the majority of their time is spent in the hands of nurses.”

He adds: “You don’t have to cut services, you don’t have to cut thousands from your staff workforce, you could probably save millions just by looking at your variability in practice.”

Making a connection between best practice care, the design of the workforce and the financial incentives within payment by results will help managers to achieve better control over variation in costs and more predictability.

It will also enable them to deploy resources more effectively by looking at a care pathway and identifying where particular skills are needed.

The nursing profession has largely been excluded from the debate about costing so far - it has mainly focused on finance and medical coding - and Mr Curry admits that “nurses will naturally be suspicious why suddenly people are asking them what they do all day”.

Quell their fears by keeping the focus on quality, showing them what you will do with the information and how they can use it themselves to improve what they do, he says.

Ask them how they would like to control variation in a care pathway, in the context of the trust’s objectives of quality of care, reducing length of stay and containing costs.

Only managers who embrace a little bit of risk and work collaboratively across professions will succeed in this environment, says Mr Curry.

“They have to think more creatively about cost controls because if they don’t, all they will get is cheap, poor quality care.”