#2916 - Topic 3 Reading Counting The Costs - Accounting in the New Public Sector

Dream of successive governments to make medicine calculable

• Initial hope of administering healthcare in a ‘rational and effective manner’ as envisaged in the 1944 White Paper

The NHS had been established as a ‘medical enclosure’ rendering it resistant to all attempts to represent and calculate it in financial terms (Rose and Miller, 1992)

The Plowden Report of 1961 called for public expenditure controls as a way to achieve stable long-term planning with greater emphasis placed on the ‘wider application of mathematical techniques, statistics and accountancy’

Not until the 1970s that the medical enclosure of healthcare began to be breached

Attempted ‘marketization’ of healthcare under the Conservative governments of Margaret Thatcher and John Major

Reference costs (introduced in 1998) represented an explicit attempt to use costing for identifying and revealing ‘unacceptable’ variation between service providers (Llewellyn and Northcott, 2005)

In 2003, Reference Costing came to be harnessed for new uses, and gained greater significance, as the primary mechanism underlying the new NHS funding system called ‘Payment by Results’ (Department of Health, 2002)

• To pay providers of healthcare ‘fairly and transparently’ for services delivered

• Performance and accountability at its core

• Pays providers according to a ‘standard’ national tariff’ based on the national average (‘reference cost’ of a given procedure

Spate of predictions quickly followed concerning the likelihood of hospitals failing financial

• The potential risks of regulating by accounting numbers became apparent

Monitor was founded in 2004, to act as the independent regulator of NHS foundation trusts

• Was given the responsibility for overseeing and supporting the aim of improving financial management

• To enhance ‘performance’, ‘productivity’ and ‘profitability’

The National Institute of Health and Clinical Excellence (NICE) emerged at the end of 1990s

Regulating by accounting numbers as represented by PbR

• Produces risks which go beyond those supposedly temporary adjustments

Regulating by accounting numbers produces distinctive and possibly competing calculable spaces (Miller, 1992)

Hybridizing of the calculating and the medical self (Kurunmaki and Miller, 2006)

Tripartite nature of regulatory arena in healthcare

Accounting = costing

Medicine = Curing

Health economics = quantifying

Costing can produce incentives to hospitals to alter the volume and mix of activities and at the limit to eliminate certain treatments or even entire departments because of their financial implications

• This is in contrast to the aspirations of curing

Quantifying seeks to make calculable the societal costs and benefits of particular drug regimes or treatments

• Cost of treating one patient always represent benefits forgone by other patients, and the challenges for those designing healthcare systems and allocating resources is choosing among alternatives given scare resources

Kurunmaki and Miller study the tripartite system in reference to renal failure and the choice between hospital and home-based dialysis care

“In case of no medical contraindication, the choice of initial dialysis modality should be based on patient choice” (UK Renal Association, 2007)

• The welfare and the views of the patient should be paramount, and the cost is not an issue

Medics have been criticized for delivering clinical care which, too often, departs from best practice

• Too ready adoption of health technologies with no established clinical benefits (Rawlins, 1999)

Medical profession… accused of being overly protective of its core values and clinical freedom, lacking cost consciousness, and possessing too much power and influence within the system of health care, giving rise to questions about the various forms of self-regulation (Lloyd-Bostock and Hutter, 2008)

The field of health care regulation has increasingly become institutionally complex, and characterized by frequently changing sets of overseers, inspectors and assessors of various sorts (Walshe, 2003)

Institutional embodiment in the form of NICE

• Expected to provide coordinated and authoritative national evidence-based guidance on clinical and cost-effective treatments and care

• Increasing appetite for quantifying clinical care through economic models

  • Highly publicized cases such as the use of Herceptin to treat breast cancer

The guidance of NICE is largely consistent with the advice of the medics

• ‘mindful of the need to ensure that its advice takes account of the efficient use of NHS resources’

  • Generic clause

Service-line reporting

• Focus of Monitor is on the hospital as the accounting entity

Costs of treatment are compared against the national tariff, i.e. the price at which a trust is reimbursed under PbR

Clinical units viewed as profit centres

• Obliged to operate as a going concern

Risk-based regulatory approach

Trusts are likely to focus increasingly on the ‘profitability’ of individual treatments under the PbR

Monitor has been developing and promoting the concept of SLR

• To help trusts ‘develop a better understanding of the operational and financial performance of their various services and hence improve their strategic and clinical decision-making’ (Monitor, 2006)

‘Enables...