Letter from Angie Jezard, senior consultant, AJ Financial and Strategic Healthcare

Up until recently there has been a very good reason why trusts have not concentrated on which services are profitable or loss-making. The problem has not been one of understanding costs but of tracking actual income back to the specialty/cost-centre/service ('The new economics', HSJ, 16 November, 2006).

Since the internal market first came into being some 15 years ago, finance departments up and down the country have tried to engage clinicians and others in cost-apportionment methodology and the wonders of direct, indirect and fixed costs.

Initially there was a lot of interest, but it became clear that the other part of the equation - the income generated by specialties, services and so on - could not be similarly calculated, and the interest fell away. After all, if you were not going to see the benefits of your improved service efficiency and activity levels, what was the point?

Payment by results at last gives this missing piece of information and it will now be possible to do what for years has only been a dream, held by enterprising specialties and finance staff alike. Do not forget that trusts' own reference costs (evolved from the old Korner returns) are the basis for the tariff.

So Monitor chair Bill Moyes should not be giving the impression that the NHS is only just waking up to the idea of working out where the discrepancies in cost versus income might lie. The NHS has been trying to resolve this for well over a decade.

Angie Jezard

Senior consultant, AJ Financial and Strategic Healthcare