Britain’s health service cost gaps fuel ringfence debate

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By Sarah Neville and Keith Fray Taxpayers are paying to five times for common NHS operations in some hospitals, according to a Financial Times analysis that will fuel the debate healthcare funding in an era of austerity.

The differences are so great that the NHS could save about £100m a year – equivalent to about 4,000 nursing salaries – across just three operations if were to raise the of less efficient hospitals to the level of the top 25 per cent, according to an analysis of official data.

Disparities between the costs of carrying three common procedures – hip and knee replacements and cataract surgery – raises questions the health service’s protected budget. The results are likely to renew calls from the Conservative benches for the government to lift the ringfence on health spending in an effort to force the service to become efficient.

David Ruffley, a Tory member of the Treasury select , said: “The ringfencing of the NHS budget is about politics, is not about economics. Good economics would dictate that you drive down waste and unnecessary cost in all budgets, and you are not going to that unless you lift the ringfence.”

The data for the three operations across all hospitals for 2012-13 show a difference of between than two and almost fivefold in the cost of the cheapest and most expensive operations. Even when the FT excluded the top and bottom 5 per cent, to guard against any differences in the way some hospitals allocate their costs, the most expensive was than twice the cheapest.

A key reason for cost differences is likely to be the length of time patients stay in hospital after operations – the longer the stay, the higher the costs.

The procedures were selected because those undergo them are unlikely to have additional health problems that could make their treatment more complicated and explain higher costs. Any unavoidable additional costs of or capital were also stripped .

Mauro Laudicella, a senior lecturer in health economics at University carried the research for the FT, said in contrast to market-driven systems such as the US, NHS hospitals lacked incentives to keep costs low or to benchmark against neighbours. “Hospitals are mostly interested in breaking even . . . so they don’t regard on the cost of producing specific services as important.” (FT)