Counting the costs: The risks of regulating and accounting for health care provision

Abstract

Payment by Results (PbR) is one of the most fundamental changes in NHS policy since the introduction of the ‘internal market’ in 1991. It is also one of the most visible and influential attempts across the same period to modernize the NHS through accounting and, more specifically, costing. As a funding system, PbR promises to pay providers fairly and transparently by using a ‘standard national tariff.’ However, like all accounting based reforms, PbR encounters the range of professions and expertises active in the domain. Like all costing systems that give visibility where previously it was lacking, PbR creates new calculable spaces and new risks. The aim of the paper is threefold. First, we seek to chart the nature of the arena within which PbR operates. We identify the multiple actors that are influential in the regulatory field of health service provision, and focus on three types of actor in particular, namely the National Institute for Health and Clinical Excellence (NICE), Monitor and professional medical associations. We argue that these three actors need to be viewed as representative of different types of expertise (schematically speaking, health economics, accounting and medicine) and that, to understand fully the nature of the regulatory game in the healthcare arena, PbR needs to be analysed not as a stand alone intervention but as enmeshed within the inter-professional complex that emerges out of the interaction of these three types of expertise. Second, we argue that we need to focus on the ways in which PbR, along with other regulatory interventions in the healthcare field, such as those of NICE and Monitor, seek to create new and sometimes competing calculable spaces based on different entity assumptions. Third, we argue that to understand empirically the dynamics of healthcare reform in the UK we need to examine the extent to which PbR creates new calculating selves, or a hybridizing of the calculating and medical self. The regulatory complex within which PbR operates may, we argue, produce contradictory incentives and thereby contribute to systemic provision risks.

Keywords:

• Risk
• regulation
• accounting
• healthcare
• costs
• standard
• results
• expertise
• calculation

Acknowledgements

We would like to acknowledge the comments of anonymous reviewers, the support and encouragement of Bridget Hutter, as well as comments from colleagues in the Centre for Analysis of Risk and Regulation and in the Department of Accounting at the London School of Economics and Political Science. We also gratefully acknowledge the support of the Economic and Social Research Council (ESRC); the work reported here was part of the programme of the ESRC Centre for Analysis of Risk and Regulation.

Notes

1 Chancellor of the Exchequer 1961, quoted in Klein 1983: 65.

2 Understanding and managing costs, in the name of competitiveness, has been the concern of accountants in the private sector for many decades (Johnson and Kaplan 1987).

3 www.renal.org/pages/pages/the-association.php

4 Originally termed the ‘National Institute for Clinical Excellence,’ when it was founded in 1999, it was renamed in 2005 the ‘National Institute for Health and Clinical Excellence,’ following its amalgamation with the Health Development Agency.

5 See Bevan and Hood (2006) on a related issue with reference to NHS targets.

6 More recently, Monitor (2007b) has promoted the use of SLR data for purposes of Service-Line Management (SLM). Note the comparable development of, first, Activity Based Costing (ABC) and, subsequently, Activity Based Management (ABM) in the management accounting literature (Johnson and Kaplan 1987, Kaplan and Cooper 1998).

7 Listed in ‘Schedule 2’ of the ‘Terms of Authorisation’ of a Foundation Trust; Health and Social Care (Community Health and Standards) Act 2003 (c. 43).

8 Note also the debate concerning whether NICE is an ‘Economists' dream or nightmare?’ Some economists have argued that NICE guidelines fail to help maximize the possible health gains from available resources, by not explicitly considering the opportunity cost of the additional resource requirements for new interventions (Birch and Gafni 2007, Drummond 2007). In the absence of opportunity cost considerations, it is argued, the recommendations emerging from the strict application of the guidelines are essentially value judgements, of those making NICE recommendations, about whether the estimated effects of an intervention are worth the estimated resource costs. But ignoring the underlying principles of economics is claimed to undermine the basis of the recommendations, which has led Sculpher et al. (2004) to suggest that this research should be viewed less as economic evaluation and more as ‘just evaluation for decision-making’ (Birch and Gafni 2007: 199).

9 The Healthcare Commission is the independent inspection body for both the NHS and independent healthcare. It exists to promote improvements in the quality of healthcare and public health in England and Wales.