Home Health Britain’s health service cost gaps fuel ringfence debate

Britain’s health service cost gaps fuel ringfence debate


By Sarah Neville and Keith Fray Taxpayers are paying up to five times more for common NHS operations in some hospitals, according to a Financial Times analysis that will fuel the debate over future 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 it were to raise the performance 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 out three common procedures – hip and knee replacements and cataract surgery – raises questions over 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 more efficient.

David Ruffley, a Tory member of the Treasury select committee, said: “The ringfencing of the NHS budget is about politics, it 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 get that unless you lift the ringfence.”

The data for the three operations across all hospitals for 2012-13 show a difference of between more 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 more 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 who 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 labour or capital were also stripped out.

Mauro Laudicella, a senior lecturer in health economics at City University who carried out 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 performance against neighbours. “Hospitals are mostly interested in breaking even . . . so they don’t regard information on the cost of producing specific services as important.” (FT)

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