Cost data is recorded and reported by NHS trusts and NHS foundation trusts under NHS Improvement requirements for the provider licence. This information has a variety of users – for example:

• Trusts and commissioners use reference costs to manage their costs, agree local contracts and plan future services

• NHS Improvement uses reference cost as the basis for pricing, including the national tariff;
• Cost data supports a wide variety of cross-sectoral work to improve clinical outcomes and efficiency, including the work on operational productivity led by Lord Carter and benchmarking trusts to identify unwarranted cost variation.

The processes for submitting reference costs – and their accuracy – vary considerably between trusts. Between 2013 and 2015, audits commissioned by NHS Improvement found that over 50% of acute submissions were materially inaccurate. More recent audits suggest the quality of reference costs submitted by acute trusts has improved, and reference costs remain a key source of data used both within trusts and externally.

Reference costs show how NHS providers spent money to provide healthcare to patients. They have been collected for every financial year since 1997/98.

Reference costs are used by trusts to understand efficiency, as well as for the Model Hospital, the getting it right first time (GIRFT) programme and national tariff prices. They are one of the richest sources of data about NHS finances.

To support the sustainable delivery of high-quality patient care as outlined in the Five Year Forward View, providers need to fully understand their current models of care and what the impact would be of moving to a new way of delivering services.

Cost is an important factor in evaluating how effectively and efficiently you’re delivering care to patients. Having accurate, consistent, patient-level cost information will help you to:

• Make the best possible use of resources;
• Evaluate clinical practice;

• Compare different ways of working.

NHS Improvement previously consulted on their proposals to improve the costing of NHS services. This consultation document proposed:

• A mandatory requirement (from 2018/19) for NHS trusts and NHS foundation trusts to record and report patient-level costs for acute activity in line with the Healthcare Costing Standards for England (the Standards);
• To support the transition from reference costs to patient-level costs, NHS Improvement proposed dual running of reference cost and patient-level cost collections for up to two years (2018/19 and 2019/20).

Please see below a link to their response to feedback:

Improving the costing of NHS services: proposals for 2015 to 2021.

NHS Improvement’s Costing Transformation Programme (CTP) was established to implement Patient Level Information and Costing Systems (PLICS) across Acute, Mental Health, Ambulance and Community providers.

The data enables the testing and review of new standards that are being developed by NHS Improvement in relation to patient level costing.

NHS Improvement has requested that NHS Digital establishes and operates a system to collect patient-level costing information under section 255 of the Health and Social Care Act 2012.

Health Episode Statistics (HES) provides one half of the cost collection data NHS Improvement will receive from NHS Digital (NHS admitted patient care (APC), outpatient appointments and A&E attendances in England). The other half of the collection data is defined in the submission extract specification which describes the fields providers are to submit to NHS Digital in the summer 2017 collection.

The submissions will be sent into NHS Digital in XML format. Further information about the format of the XML files is available from NHS Improvement Patient Level and Information Costing Systems (PLICS) cost collection guidance file specifications.

This is a single annual collection exercise from each of the Trusts.  Trusts should be aware of their individual collection dates within the overall schedule following previous communications from NHS Improvement. The collection schedule has been agreed between NHS Digital and NHS Improvement with Trust’s input as part of its development.

Resources are a collection of costs used to deliver an activity. The costs within a resource may have different information sources and cost drivers. Once these costs have been calculated they can be aggregated to whatever level the resources have been set at, and you can be confident the resource unit cost is accurate because it is underpinned by this costing process.

Activities are the ‘things’ the provider does, such as a procedure in theatre or a pathology test. Together resources and activities form a two-dimensional view of what costs have been incurred to deliver what activity.

Departments should work with their informatics and costing departments to understand the different types of activity in these collections to ensure costs are allocated correctly to activity, and that activity is reported correctly in their patient-level reporting dashboard. For example; outpatient department costs are allocated to all activity that takes place in the department, this incorporates the main procedures performed (including non-face to face activity), teaching, training, Cancer MDTs, clinics times, equipment, theatre minutes etc.

Take care to identify any ‘hidden’ activity within your department. This is activity that takes place but is not recorded on your organisation’s main systems such as PAS.

For example, a department may report its admitted patient care activity on PAS but not its community activity. If this is the case, you should work with the informatics department and the department responsible for the data to obtain a feed containing 100% of the activity undertaken by the department.