Foreword

• Good costing information is key to day-to-day management, but it will be absolutely vital during this coming period to inform decision-making to improve both the quality and cost-effectiveness of services

• The data needs to be derived in a uniform way, ensuring cost variations result from differences in clinical practice and the costs of treating patients, and not simply as a result of different costing approaches

• Acute Health Clinical Costing Standards are compatible with the NHS costing manual

• First draft published in 2009

Introduction

• Standards refer to clinical costing rather than just patient level costing

• Previous approaches to costing in the NHS have been dominated by a top-down approach

  • But can only produce information about high-level costs or average costs

  • Would not show you how those costs had arisen

• Clinical costing represents a change to this process by aiming to identify the resources consumed directly by individual patients

  • Once identified, these individual patient costs can be aggregated to provide HRG level costs or specialty costs with the added advantage that these higher level costs can be drilled into to provide full detail of how they have been derive

  • i.e. a bottom-up approach

• Not all costs can be easily attached to an individual patient

  • In the NHS we do not typically record all of the specific interventions that are involved in each patient’s care

• Indirect or overhead costs – such as the costs of payroll etc. can be divided among all patients based on appropriate allocation and apportionment methods

• This information can be reliably used to inform decisions around patient services and help improve quality and cost performance

• Adhering to these clinical costing standards should lead to an overall improvement in the quality of the underlying cost data used to produce reference costs and in the quality of costing in general in the NHS

Standard 1: Classification of direct, indirect and overhead costs

• All general ledger costs need to be classified as direct, indirect or overhead

• There may be occasions when costs need to be classified in different ways for specific reporting purposes

  • For instance, Monitor guidance suggests a different approach to classification for service line reporting

    • E.g. the standards classify pathology as a direct cost but Monitor’s guidance reports it as an indirect cost

• Wherever practicable costs should be allocated on an activity basis rather than treated as overheads

Standards 2: Creation of cost pool groups and cost pools

• All service costs or fully absorbed direct costs (direct costs inc. allocated indirect and overhead costs) need to be grouped into associated cost pool groups

• Will enable the comparison of costs at the individual and accumulated patient level for benchmarking purposes

• Will provide useful and informative groupings by which to analyse and report costs

• Will facilitate the audit of cost allocation and information systems

• Cost pool groups are an accumulation of individual direct cost departments that have been incurred in the treatment of patients

• Cost pools provide a level of granularity that organisations will require when applying cost drivers to different types of costs

• It is advised the costs of stock drugs should be allocated to the drugs cost pool group rather than be included within a number of other cost pool...

Buy the full version of these notes or essay plans and more in our Accounting in the New Public Sector Notes.