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Department of Health guidelines falsely inflate NHS costs

In my last blog I talked about the Payment by Results (PbR) system where most treatments in an NHS hospital are paid at a rate called the National Tariff adjusted for local costs (essentially a London weighting) called the Market Forces Factor (MFF).

You can download the Payment by Results price list from the Department of Health. In this spreadsheet each procedure has a code called the Healthcare Resource Group (HRG) code, and the volume of treatments carried out by the NHS – listed by the HRG codes – can be downloaded from the HESonline website. You can combine these spreadsheets to see which procedures the NHS does most, and the cost of those procedures.

The Department of Health has recently produced a document called A simple guide to Payment by Results, which explains how the payment system works. Figure 1 caught my eye:

DoH payment guide

This suggests that an NHS hospital is paid £961 for a cataract removal. I know that this is not the case, so I investigated further. Figure 2 in the "simple guide" says that the cataract procedure has an HRG of BZ01Z Enhanced Cataract Surgery at a cost of £961. So I checked the National Tariff spreadsheet and found this:

DoH national tariff

Do you see what the Department of Health have done? They have quoted the higher cost procedure BZ01Z at £961 rather than the lower cost BZ02Z at £748. Perhaps this is because most cataract patients need the more expensive procedure? No. HESonline says this:

HESonline NHS treatments

In 2009/10 there were 320,000 of the cheaper phacoemulsification operations and just 6,900 of the more expensive "enhanced" operations. So why did the Department of Health list the less common procedure that is 30% more expensive? A recent study by the Journal of the Royal Society of Medicine says that the NHS is one of the most cost-effective systems in the world and not only does it cost less than most, it saves more lives per head of population than most.

The government intends to privatise parts of the NHS through its Any Qualified Provider policy, and so it is in the government's interest to make it appear that the NHS is more expensive than it actually is, and make it appear that NHS costs are closer to the private sector. The last government set up Independent Sector Treatment Centres, profit-making private companies that perform the more common procedures for NHS patients: the "cream skimming" that I mentioned last week.

Netcare Healthcare was contracted to perform cataract removal for NHS patients. Hansard lists the Ophthalmic Chain Cataract Initiative and gives the contract as £42 million over 64 months. For this money Netcare performed 44,735 operations or £939 per procedure. Hansard does not give the HRG code, but it is well known that ISTC contracts allowed the private hospitals to "cherry-pick" the easy cases and re-refer harder cases back to the NHS, so it is more likely that these operations carried out by Netcare were the cheaper BZ02Z operations (where the NHS would be paid £748) rather than the more expensive BZ01Z (where the NHS is paid £961).

So referring back to the Department of Health guide, it looks like the department lists cataract operations at the more expensive £961 to make it appear that the NHS is performing cataract operations more expensively than the private sector ISTCs, which the current government is pushing as Any Qualified Providers.

In the next few months, to fulfil its intention to privatise the NHS, the government will try very hard to show that the private sector is cheaper than the NHS. This document seems to be just one example of the government bending the truth.

Richard Blogger writes about the NHS and social policy at NHS Vault.


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