Poor NHS cost data will delay national pricing, Audit Commission warns

The findings highlight a major barrier to the government’s plans for increasing competition in the NHS from private and third sector providers. Competition from “any qualified provider” will only be allowed for services with fixed tariff prices, to prevent price competition.

The commission’s report, published today, follows its first comprehensive review for seven years of acute trusts’ “reference costs” for each service, which are the basis for tariff pricing.

The report found that during 2009-10, 12 per cent of trusts’ reference cost submissions were inaccurate and 24 per cent of trusts reported one or more inaccurate unit cost.

But providers’ main reference cost errors were in “non-admitted patient care” services that were off-tariff, such as critical care, chemotherapy, community services and diagnostic imaging.

The commission reported: “Extending the scope of the tariff is a key government policy, but these findings suggest that data is not accurate enough to set a national tariff for these services.”

Many of these mistakes were caused by the disparate IT systems providers used to track non-admitted services, it found. It anticipated these problems would increase as acute providers took over primary care trusts’ community services, and would require “significant investment” to remedy.

Andy McKeon, managing director for health at the Audit Commission, said it would take a “number of years” to bring data quality for non-tariff services up to the point they could be used to set national prices. He suggested the Department of Health should “explore other ways of setting the tariff”, such as sampling costs at providers where data quality was high.

However, the report said “broadly standard clinical practice” would be needed to set a “plausible single national price”. The review found that, even where costing information was accurate, the national spread of costs for some services was wide. For example, costs for one group of chemotherapy services ranged from under £500 to over £3,000, with “no clear indication of the suitable cost band”.

It concluded: “A single national price for many non-admitted patient code services… would carry serious financial implications for many commissioners and providers.”

The tariff this year covers £29bn of secondary care spending, but the DH intends to extend it to £60bn.