One side effect of new technology is increased cost. In the latest in our series celebrating the NHS's 60th anniversary, Ingrid Torjesen asks how the service should decide what it can afford to offer

"Why is it that in other industries technology seems to be cost saving but in the NHS it always seems to be cost increasing?" asks London School of Economics professor of social policy Julian Le Grand.

The reason, according to the former Number 10 adviser, is that while in other industries technology simply improves efficiency, in the NHS it is likely to create demand.

"Even if something like microsurgery results in the average cost of an intervention falling, it also leads to an increase in demand for it and managers have got to find that out of a limited budget," he explains. "At the same time, we are also developing new technologies, particularly drugs, to do things that we couldn't do previously and that is cost increasing."

NHS Institute for Innovation and Improvement chief executive Bernard Crump says a major problem is that the benefits of improving technology often make more of an impact in the budgets of organisations that have not made the actual investment. So an acute trust will develop care that results in better health in the community but not be paid for the benefits then felt in primary care. Or a primary care trust will invest in preventive medicine that actually sees a provider dealing with fewer patients with long-term conditions.

An increased emphasis on preventive medicine means ways need to be developed of tracking such benefits so savings can find their way back to the bottom line of the organisation that makes the investment. "Specific things can be done in secondary care to incentivise initiatives that in the future might result in the benefit of avoiding operations," says Professor Crump. "I am encouraging the development of case examples to track through these benefits, so we can help commissioners be more confident than they have been in the past [and so] that they will see some of the benefits."

Although "a certain degree of healthy conservatism" is welcome, the NHS could improve on the way technology is taken up, he adds. Action to adopt many technologies that have proved cost-effective in the long term have been slower in the UK than elsewhere.

In 1999 the government took a major step forward by setting up the National Institute for Clinical Excellence to assess emerging technologies, particularly the most costly and controversial. Since then the renamed National Institute for Health and Clinical Excellence has issued guidance on more than 100 technologies and uses an approval threshold of£30,000 per quality adjusted life year (QALY): a way of measuring the quality and quantity of a life lived as a result of a medical intervention.

But as with most investment decisions made by PCTs, research by York University's centre for health economics found that PCTs set much lower and variable thresholds. On average they fund technology for circulatory diseases at no more than£8,000 per QALY and below£13,100 per QALY for cancer.

In January the Commons health select committee recommended that NICE's remit be increased to include all drugs. It suggested less in-depth evaluations to be conducted first and soon after licensing with a lower QALY threshold to ensure that the most clinically and cost-effective drugs are available quickly. NICE is yet to issue a formal response.

Professor Crump believes formal provision agreements could be made with manufacturing companies to use technology strictly on the basis that all patients are studied in an ongoing trial. Trial results would then determine whether the provisional decision was made definitive.

In the meantime he suggests that PCTs work together and use techniques such as decision analysis to look at the cost and consequences of introducing an intervention and identifying the most important drivers of the decision.

"The decision needs to be taken by each individual PCT," he says. "But the work on what the available evidence says and constructing that into a decision analysis or another set of information can help the PCT in making its decision. That work could be sensibly done by one organisation on behalf of many others in a structured way." The NHS Institute is developing a supportive network of PCT staff who have to make similar choices.

Croydon PCT has been collaborating with other south west London trusts to define clear criteria for which patients should and should not be referred for particular operations.

"The NHS should have a much closer look at procedures that don't offer much clinical benefit. Into that basket you could throw things such as some grommet procedures, some tonsillectomies, some varicose vein procedures and most cosmetic surgery," argues director of public health Tim Crayford, who is also president of the Association of Directors of Public Health.

NICE was criticised by the Commons health select committee for not evaluating older technologies. Professor Le Grand believes technology should be reviewed on an ongoing basis because "things often get piled on top of what is going on already and that creates budgetary pressure".

However, few interventions have so few benefits that they should not be used at all, asserts Professor Crump. "The issue is principally about with whom exactly they should be used on and at exactly what stage in a disease. Often the issue is when an intervention might be stopped if it is not having the impact that was anticipated."

He acknowledges that withdrawing an intervention is difficult but adds that setting expectations for patients and relatives will become increasingly important.

But York University professor of health economics Alan Maynard is more sceptical about the value of some technologies. He cites a 2005 analysis by the BMJ which concluded that the effectiveness of half of all medicines is not known and that there is only evidence of definite benefits for 15 per cent and of likely benefits for 23 per cent of medicines.

In his view this lack of evidence is not limited just to medicines: "To what extent do hospitals do things that have no value in terms of improving health outcomes? I suspect that it is quite a significant percentage, but I cannot evidence it because people will not measure outcomes."

National view

Professor Maynard welcomes plans announced in the NHS operating framework to measure patient-reported outcomes for hips, knees, varicose veins and hernias from April 2009. These assessments will help determine who these procedures should be reserved for, he says.

A more national view on investment in specialist technologies needing vast capital expenditure, such as scanners and some surgical interventions, is recommended by Professor Crump. This would ensure their introduction in a planned way, to avoid unreasonable delays in patients getting benefits, to provide equitable access and to guard against over-investment.

He is adamant that he is not advocating a process that rigidly determines everything but rather takes advantage of strengthened specialised commissioning arrangements and the reduced number of strategic health authorities.

Professor Le Grand agrees that very expensive equipment needs to be concentrated at points where it can be used effectively. This will ensure that there is not only a sufficient volume of patients but also that medical staff will be able to keep up their skills, he explains.

And Dr Crayford argues that more central decision making would help avoid postcode lotteries. He adds that there is no sense of what the "national" part of the NHS actually means, because services are not defined into core and peripheral at a national level.

"I would argue for more central decision making across elective care, probably under the auspices of NICE," he says.

Sir Muir Gray, chief knowledge officer to the NHS and director of the National Knowledge Service, says that while magnitudes of likely benefits, harms and costs can be assessed once, investment decisions must also take account of local need by employing simple local modelling techniques.

As a past chair of the UK national screening committee, Sir Muir took some of the NHS's biggest technology decisions when he advised ministers to fund national breast and cervical screening. He says all decisions should consider how that technology fits into the programme budget. "I always set a screening decision in the context of other things, either for that disease or [for] that population group. 'Would you spend£35m on breast cancer screening?' is a different question to 'If you had£35m pounds to spend on breast cancer would you spend it on screening?'"

The NHS must move away from seeing healthcare as "horizontal slabs of primary, secondary and tertiary care", he says.

"Toyota's core businesses are light trucks, heavy trucks, hybrids and cars," he continues. "The core businesses of the health service are not PCTs, foundation trusts and SHAs but rheumatoid arthritis, asthma and epilepsy. We need to focus on our core businesses and make decisions on our core businesses' budgets. They are not well developed, but that will come."

Intensive measures

The stakes are high in intensive care. Its benefits can be huge, but as they apply to only a limited number of people the cost is massive. But properly targeted treatments work out at significantly less than£30,000 per quality adjusted life year says Jeremy Bewley, a consultant in intensive care at United Bristol Healthcare trust.

"We would not admit someone to intensive care if we didn't think they could benefit from the treatment," he says. "We try to avoid continuing the treatment if we feel the patient is not benefiting." It is not unusual to withdraw intensive care treatment and he believes stopping other types of treatment should be less difficult.

"If someone stops taking a drug [in the wider NHS] you can always argue you may or may not be benefiting from it - you have to see how things go. When taking away a ventilator in intensive care, it is very clear cut that what you are doing is allowing nature to take its course."

Over the past 10 years trusts have been much more willing to invest in intensive care, Dr Bewley says, partly because money has been made available through cancer services. It is quite a safe area for trusts to invest in: "There is no competition with the diagnostic and treatment centres because they can't provide it; it is a bit like emergency care," he explains.

Scanning savings

The diagnostic value of CT, MRI and PET-CT scanners is huge, but they are not as cost-effective as they could be because they tend to be used as an addition rather than as an alternative to other techniques, says Royal College of Radiologists chair Giles Maskell.

"Everything else that used to be done is still done and then people think, 'Shall we do the latest and newest too?' If the technology was more available, you would be able to cut out some of the earlier steps and do the most useful thing first."

Even when technology begins to be more readily available, as has happened with MRI and CT scanners, clinicians tend to stick to their old practices, he says. For example, GPs still order thousands of x-rays a week for people with back problems, yet an x-ray of the lower back is a complete waste of time, says Dr Maskell, "whereas an MRI scan does answer the questions. But still the GPs get an x-ray done because that is what we have always done."

Although Dr Maskell says that some areas still have too few MRI and CT scanners, he believes the 18-week target has improved access dramatically.

The newest technique - PET-CT - is the latest technology in short supply, but Dr Maskell believes it has big money-saving potential.

Status of statins

Cholesterol-lowering statins became available for secondary prevention of heart attacks and strokes in the 1990s. They proved highly effective and by 2004, 3 million people were on them, costing the NHS more than any other drug.

Demand grew as statins were licensed for primary prevention in conditions with high cardiovascular risk and recommendations lowered target cholesterol levels and proposed that statins should be prescribed for even more patients.

Generic statins, costing up to 10 times less than the brands, became available. The Department of Health began to encourage generic prescribing but clinicians argue that care should be tailored to the individual.

Judging managers on an 80 per cent generic statin prescribing target is "tantamount to criminal", claims Leeds University professor of clinical cardiology Alistair Hall.

"All the professional societies say we should aim to get cholesterol below a certain number but the official position of the NHS is that as long as patients are on a statin the number doesn't matter. That isn't academically true. It likens patients to a can of beans.

"Elderly complex patients with multiple diseases and organ problems don't quite fit the commercial model," Professor Hall argues.

Cataract vision

In 2000 the average wait for cataract removal was six months. The DH pledged to cut this to three. It purchased more than 13,000 day-case operations from independent sector treatment centres and hit its target in 2005.

However, research by the Royal Society of Ophthalmologists published in December showed that in the process, waiting lists had been brought down so much that an increasing number of patients were having operations while their eyesight was still good enough for them to drive.

President of the British Association of Day Surgery Ian Jackson says: "Waiting lists were not going up, so if you look at this logically, the capacity was there. The extra capacity has allowed them to be brought down in a more controlled fashion.

"Where you have no cataracts waiting list is where the government has put in initiatives to actually bring that about."

He recommends introducing a national visual acuity threshold to ensure that patients are not having unnecessary operations.

While the first day-case patients might have felt short-changed, expecting at least an overnight stay, this has changed.

"Now our elderly patients expect to be able to go in and out in a day," Dr Jackson comments.

"Increasingly they know from talking to each other that this work can be done with topical drops and if this can't be done in their case, they are asking why."