Economics and public policy 0 NHS research and development as a public good

This paper analyses National Health Service R&D as a Samuelsonian public good. It also identifies other characteristics of NHS R&D: supplier-induced demand; information asymmetries; jointness in production of R&D, medical education and health care; multiplicity in research funding sources; uncertainty about research outcomes; the difficulty of measuring and valuing research outcomes; and the behavioural characteristics of the institutions which produce R&D. The principal conclusion is that a centrally planned approach is unlikely to solve the problems arising from these characteristics, whereas the creation of an appropriate institutional and behavioural framework is more promising. The recent reforms in the arrangements for supporting R&D in the NHS can be seen as a response consistent with this analysis, are outlined and set in their historical context.R&D; supply and demand

Dental utilisation by young adults before and after subsidisation reform in Finland

Dental care was never fully integrated into the welfare state in Finland, but in 1986 it was decided to improve access to both publicly and privately provided dental care by reducing the price paid by patients. Since this would have been rather expensive to do for the whole population, it was decided to introduce it gradually, starting with the young adult population (those under 21 already had free publicly provided dental care). The so-called “Subsidisation Reform” (SR) was based on the assumption that the seeking of care would increase, as would the amount of care actually provided, and this increase would be spread across both the public and the private sectors. This study investigates the short-term effects of this reform. The seeking of care did increase, but the amount of care actually provided decreased and the changes were not evenly spread between the two sectors. The reasons for these changes are explored, and some of the inherent difficulties in evaluating health care reforms are set out, since they are likely to be of wider significance than this particular reform in Finland.reform, dental care

The value of health at different ages

Is the value of being healthy the same across all ages? The standard practice of economic evaluation assumes so, and does not discriminate between a QALY (Quality Adjusted Life Year) to an elderly person and one to a child. But on the other hand, it is possible to assume that the value of a healthy year is different according to age, as has been done with DALYs (Disability Adjusted Life Years). This paper is based on a series of interviews designed to elicit and to quantify preferences concerning health at different ages. There were three hypotheses to be tested: (1) that the relative value of health decreases with age, (2) that this decreasing profile is independent of a respondent’s age, and (3) that this age-related preference can be expressed on an interval scale. The results obtained did turn out to depend on a respondent’s age: a mostly negative age-value profile was obtained from younger respondents, but the profile from older respondents had a peak at middle age. Thus, the 1st and 2nd hypotheses were largely rejected. The 3rd hypothesis cannot be rejected, but it should be noted that the variance of the responses was large, thus rendering rejection somewhat less likely. To conclude, the respondents valued a unit of health differently, depending on the age of the patient. While this study does not attempt to determine the exact continuous age-value profile, it found the profile clearly declining beyond middle age.health, QALYs, age

Approaches to capitation and risk adjustment in health care: an international survey

This report is a survey of current capitation methods in health care finance in developed countries. It was commissioned as part of the fundamental review by UK Ministers of the formula used to allocate health care finance to local areas in England, being carried out under the auspices of the Advisory Committee on Resource Allocation (ACRA). The study was commissioned in February 1999 and completed in May 1999. It was informed by a review of published literature and an extensive network of contacts in government departments and academic institutions. A capitation can be defined as the amount of health service funds to be assigned to a person for the service in question, for the time period in question, subject to any national budget constraints. In effect, a capitation system puts a “price” on the head of every citizen. Capitations are usually varied according to an individual’s personal and social characteristics, using a process known as risk adjustment. In most nations, the intention is that the risk-adjusted capitation should represent an unbiased estimate of the expected costs of the citizen to the health care plan over the chosen time period (typically one year). There is an element of capitation funding in the health care systems of almost all developed countries. Capitation is seen as an important mechanism for securing both equity and efficiency objectives. The review examined capitation schemes in 19 countries and concentrated on major strategic risk adjustment schemes implemented at the national or regional level. It identified two broad approaches to setting capitations, which we term matrix methods and index methods. The fundamental difficulties affecting both approaches are a lack of suitable data and the problem of disentangling needs effects from supply effects on health care utilization. Almost all schemes rely on analysis of empirical data, and various analytic methods have been used for setting capitations. Numerous need and cost factors have been used in setting capitations. However, the choice has usually been determined more by data availability than a compelling link to health care expenditure needs. The review concluded that there were elements of many schemes that may be of relevance to the review of methods currently used in England, and which deserve further investigation. However, until improvements in data availability are in place, it is difficult to envisage major enhancements to methods currently in use.capitation

A model of the determinants of expenditure on children's personal social services

Every year the United Kingdom central government assesses the relative spending needs of English local authorities in respect of the services for which is it responsible. This is done by estimating a Standard Spending Assessment (SSA) for each service, which is intended to indicate the spending requirements of an authority if it were to adopt a standard level of services, given the circumstances in its area. In practice, statistical methods are used to develop SSAs for most services. This report describes the findings of a study designed to review the methods for setting SSAs for a single service: personal social services (PSS) for children, which in 1995/96 accounting for about £1.8 billion of expenditure (4.4% of total local government expenditure). The study was commissioned by the Department of Health and undertaken by a consortium which comprised The University of York, MORI and the National Children’s Bureau. The study was guided by a technical advisory group, comprising representatives from the local authority associations and the Department of Health. In seeking to limit the length of the report, the authors have necessarily omitted a great deal of the technical material produced in the course of the study. We understand that the Department of Health is willing to make this material and the data used in the study available to interested parties, subject to certain confidentiality restrictions. Existing methodology for constructing SSAs had been the subject of some criticism, both in general and specifically in respect of children’s PSS. This document reports the results of a study designed to apply a radically new statistical approach to estimating the SSA for children’s PSS. Previous methods were based on statistical analysis of local authority aggregate data. In contrast, this study is based on an analysis of PSS spending in 1,036 small areas (with populations of about 10,000) within 25 local authorities. A relatively new statistical method known as multilevel modelling, which was originally developed in the educational sector, was used for this purpose.children, SSA, social services

Hospital benchmarking analysis and the derivation of cost indices

This paper reports work undertaken for the UK Department of Health to explore approaches to measuring and comparing hospital productivity. The purpose of the cost indices produced in this paper has been to use them to derive productivity scores for English NHS Trusts in order to benchmark them against one another to help identify poorer performers. The work builds on previous deterministic ‘efficiency indices’ by using statistical regression adjustment techniques. This work describes the derivation of three cost indices (CCI, 2CCI and 3CCI), each with increasing adjustment in terms of case mix, factor prices and environmental factors. The analysis uses data for the year 1995/6 and specifically examines acute Trusts. The CCI cost index is a deterministic index that takes into account case mix as measured by Healthcare Resource Groups (HRGs) and inpatient, first outpatient and accident and emergency (A & E) activity. It is a weighted index of actual / expected costs where expected costs are measured as average national costs per respective attendance. 2CCI takes factors into account such as additional adjustments for case mix, age and gender mix, transfers in and out of the hospital, inter-specialty transfers, local labour and capital prices and teaching and research costs for which Trusts might be over or under compensated. The 3CCI makes additional adjustments over and above those in the 2CCI for hospital capacity, including number of beds, and number of sites, scale of inpatient and non-inpatient activity and scope of activity. It therefore tries to capture institutional characteristics amenable to change in the long, but not the short run. 2CCI and 3CCI indices are obtained from a short-run regression model using CCI as the dependent variable, and productivity scores are obtained from the residuals of the regressions. The results suggest that the statistical adjustments reduce estimates of productivity variation between providers considerably, such that there is relatively little difference between providers in terms of fully adjusted (short-run) productivity scores (3CCI). This suggests that savings from bringing poorer performers up to those with higher productivity scores, may in fact be quite small. In the long run there may be more scope for productivity enhancement and savings than in the short run, by optimising capacity and activity levels. Productivity benchmarking results should always be tempered against judgements on the quality and effectiveness of service provision which these indices are currently unable to measure. Implicitly equating high cost to inefficiency, as these indices do, may also be problematic. The paper suggests that the use of panel data and the application of alternative methodologies (such as stochastic frontiers and Data Envelopment Analysis) would be a valuable way to extend this work.cost index, productivity

Estimating demand pressures arising from need for social services for older people

The twelve years preceding the introduction of the community care reforms in 1993/4 saw an increased demand for health and social services generated by the increase in numbers of older people (particularly the over 85s) and reflected in the rapid growth of residential and nursing home places over a twelve year period (from 224,000 in 1983 to 427,000 in 1994). While the move into the residential and nursing home sector was partly driven by the perverse incentives offered by social security in the early 1980s, it may also have reflected a real increase in the levels of dependency experienced by older people coming into contact with the services during the period. This has fuelled concern about rising costs. However, there are competing forecasts of how big a burden the costs of care will be. One of the difficulties is in determining how far the burden will fall on statutory services or formal services (provided by either the statutory or independent sectors) and how far the pool of informal carers will be large enough to maintain the level of care which it provides currently. The Institute of Actuaries published an influential paper in 1993 (Nuttall et al, 1993) suggesting that the current cost of informal caring based on a rate of £7 per hour could be estimated at £33.9 billion. The House of Commons Health Committee (1996) took evidence during 1995 and 1996 and concluded that the gloomiest forecasts were unfounded and that radical action was not needed in the immediate future. Nevertheless, whatever the predictions for the medium and long term, concerns have been raised with regard to current capacities to meet demand. The community care changes resulting from the Act were funded by a transfer, Special Transitional Grant (STG), to the local authorities with which to meet their new responsibilities. There has been a continuing debate as to whether the STG and the SSA allocations have been sufficient to enable them to do this. The Association of Directors of Social Services and the Association of Metropolitan Authorities (now subsumed into the Association of Local Government) have repeatedly called for a review of the current funding of community care saying they are unable to meet the full needs of dependent people (Community Care, 1996, 1997a).elderly, social services

Performance indicators and health promition targets

This paper discusses the usefulness of performance indicators in health promotion. Health promotion and target-setting in health have both risen to the fore in the light of the Health of the Nation White Paper. This coupled with increasing pressure on all sectors of health care to demonstrate their “value-for-money” have meant that health promotion activities are being scrutinised as never before. Performance indicators have been one suggested means of ensuring movement towards Health of the Nation targets and value-for-money in health promotion. The paper outlines the uses to which performance indicators have been put elsewhere in the NHS and argues that they are unlikely to be directly transferrable to health promotion. Criteria for successful performance indicators in health promotion are outlined. However, it is doubtful whether these criteria will be fulfilled to any useful extent at present. The theory of health promotion is characterised by many different views of what is an appropriate outcome measure of any health promotion intervention and therefore what will be an appropriate performance indicator. Consensus in theory is needed before any consensus on what is most suitable to measure is reached. In addition, any outcomes from health promotion, by its very nature, are likely to become apparent only over long periods of time, if at all. This reduces the likelihood of attribution and the feasibility of assigning responsibility for meeting targets. Nonetheless, there is some scope for performance indicators in health promotion and their use as an internal management tool and as mechanisms for reaching external micro and macro level health-related targets is discussed. A collection of suggested macro performance indicators from the Health Education Authority are evaluated according to the criteria developed earlier. It is argued that at present these do not qualify as performance indicators, although they are certainly useful as monitoring tools. The paper concludes with priorities for further research in this area. Despite the emphasis on target-setting brought about by the Health of the Nation, knowledge and expertise in performance indicators for health promotion is lacking. This is a matter of urgent concern. There are many complex conceptual and practical problems which will influence the future role and choice of performance indicators in health promotion. These range from the fundamental, differing views about the definition of health education and health promotion, to the practical, a lack of knowledge at the community level about how to start looking for indicators, and the technical, a lack of clear responsibility for meeting macro-level targets.performance indicators, targets

Prioritising investments in health technology assessment: can we assess the potential value for money?

The objective was to develop an economic prioritisation model to assist those involved in (i) the selection and prioritisation of health technology assessment topics and (ii) commissioning of HTA projects. The model used decision analytic techniques to estimate the expected costs and benefits of the health care interventions which were the focus of the HTA question(s) considered by the NHS Health Technology Assessment Programme in England. Initial estimation of the value for money of HTA was conducted for a number of topics considered in 1997 and 1998. The main conclusion was that it is feasible to conduct ex ante assessments of the value for money of HTA for specific topics. However, a considerable amount of work is required to ensure that the methods used are valid, reliable, consistent and an efficient use of valuable research time.INAHTA, NCCHTA

Towards panel data specifications of efficiency measures for English acute hospitals

This paper reports work undertaken for the Department of Health to explore different approaches of measuring hospital efficiency. The emphasis throughout is on developing adjusted cost-efficiency measures in line with NHS Trusts performance objectives. Previous work described the derivation of three residual-based cost indices (CCI, 2CCI and 3CCI), each with increasing adjustment in terms of case mix, factor prices and environmental factors for a single year’s data (1995/6) (Söderlund & van der Merwe, 1999). This study explores further options based on the previous work by: (1) supplementing hospital level with specialty level data; (2) studying a 4-year panel from 1994/5 to 1997/8; (3) estimating models with non-symmetric error terms and including Trust-specific effects when measuring inefficiency. Although the paper argues that panel data models may have certain advantages over cross-sectional ones, the results suggest that data pooling across years provide robust parameter estimates. Longitudinal fixed effect models may however be useful to construct efficiency indices while stochastic frontier models have the advantage of taking account of random noise. Specialty level models proved inferior to whole hospital estimations. The paper argues that the degree of variation between hospitals in terms of efficiency is not that great and scope for efficiency enhancement is primarily attainable by optimising capacity and activity levels in the long run. Increased activity levels may however have adverse consequences such as increased hospital infection rates, poorer quality of care and a lack of capacity to deal with emergency demand. The paper argues that the Department of Health might consider a shift from the adjusted cost index approach used in this normative benchmarking framework to the more conventional efficiency analysis approach using a total cost function, and more flexible functional forms, allowing for a more defensible interpretation of the residuals as inefficiency.efficiency