Research commissioned by the Department of Health has warned of huge problems in the way hospital services are measured and costed, saying they could undermine payment by results.

The research by PA Knowledge examined the scope for extending payment by results to chemotherapy and radiotherapy next year. It warns of a lack of credibility and consistency in the way cancer services are costed and counted and suggests some of the problems may extend beyond just cancer services.

The report says clinicians and payment by results coders are "struggling" to correctly use codes introduced in April 2007 to account for activity and costs.

These are intended to be used as the basis for refinements when the payment by results tariff is revised in April 2009. But the report says there is a "significant risk" trusts will not be proficient at using the codes in time, so that next year's tariff "will not work as intended".

Coding faults

The DH hopes to extend the tariff to chemotherapy and radiotherapy treatments next financial year. But faulty coding could mean the incentive mechanism assumed within the system fails.

Although trusts are already supposed to submit coded data on their chemotherapy and radiotherapy activity to the DH, less than 30 per cent did so in 2006-07 for chemotherapy and less than 10 per cent did so for radiotherapy.

Even when they did submit data, mistakes and inconsistent coding meant that trusts reported "very large" cost differences, with an average variation of£1,000 for the same procedure. Such variation was "not an acceptable basis" for setting a future payment by results tariff for cancer care, the report warned, adding that this was "very worrying".