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Monitor publishes costing guidance for NHS finance staff

By Vivienne Russell | 21 February 2013


Health finance professionals should work with their clinical and managerial colleagues to develop accurate costs for the services their organisations offer, Monitor said today.

The regulator has published guidance to help health service providers price the NHS-funded services they offer. Approved costing guidance sets out the standards and principles that should be used.

It defines six costing principles, which include consistency, data accuracy, transparency and involvement of stakeholders.

‘To ensure costing is accurate and locally relevant, finance staff should work with those performing the activities being costed, as well as those likely to use cost information in decision-making,’ the document stated.

‘This will also help cost accountants focus on collecting the most relevant information to develop costing data that is most suitable for its intended purpose.’

The guidance recommends that providers adopt an activity-based costing approach. ABC originated in the manufacturing sector and has been widely been adopted in the service sector.

‘Successful implementation of ABC is largely dependent on a good understanding of health care activities performed and data available to support the analysis of such activities,’ Monitor said.

The guidance also asks all NHS acute trusts to participate in Monitor’s pilot collection of Patient Level Information and Costing Systems data. Plics allows health care providers to understand costs at the individual patient level, underpinning a more accurate system of pricing. Currently, price are based on the average cost of providing similar types of NHS services.

A Monitor spokeswoman said: ‘Many providers already use Plics data and we encourage them to share this data with us. We have made changes to our collection in response to the feedback we received from stakeholders, which should make it easier to do this.

‘The more high-quality data we receive for the pilot, the more quickly we can move towards an improved pricing system that will deliver higher-quality care for patients and better value for taxpayers. It is also important for providers to continue to focus on improving the quality of average costs submissions as we gradually move to make greater use of Plics data.’

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