Cross Charging for Radiology – King’s Experience Kathryn Dean Divisional Manager, Nov 2010

Background Payment by results (PbR), activity based costing, analysis of income and expenditure all require some element of internal cross charging to enable full understanding of cost drivers. Understanding the full costs of treatment improves budget awareness and greater income margin transparency. Implementation was based on three key principles to improve: –Full cost awareness –Assist business planning –Accountability for diagnostic/blood product demand growth

Drivers Diagnostic / product requesting was increasing at a rate in excess of Finished Consultant Episode growth. Income distribution for additional activity was not consistent and no real mechanism existed for apportioning income to diagnostic services. There was no system to provide incentives for Divisions to consider the impact and costs of diagnostic/product requesting sufficiently. Accountability for budget performance in Diagnostics was blurred by the debate about unfunded activity increases over which the departments could have little or no control. Cost charging generally already worked well for drugs and hence more consideration is given to drug prescribing and costs than would otherwise be.

Methodology A pilot for zero-based recharging was initially undertaken in CT and Angiography from 1st August 2005 subsequently rolled out across all modalities, nuclear medicine and pathology Pre-requisites »Currency e.g. per patient appointment or per examination »Patient level and consultant level robust data »Detail knowledge of coding system »Needs to be simple and time efficient to run »Needs to have an element of risk sharing for Divisions and departments Costs included and subsequent budget devolved to Divisions »Pay costs »Non pay »Maintenance »Lease costs »Radiology IT and management overheads Budget allocated on a baseline activity in 04/05. Modalities have set income targets to balance the staff and consumable costs Marginal rate agreed for over performance due to the nature of step costs

Benefits Monthly data at patient level with test/procedure/product and associated cost. This enables Divisions to review diagnostics against FCE/Spells and assess the cost/benefit of additional diagnostic requesting, thereby providing greater income transparency. While cross-charging does mean that diagnostic services may be better remunerated for demand increases it does not absolve them from driving down unit prices. Diagnostics implemented a cost improvement programme to maintain prices and thereby pass on efficiency savings to referring Divisions. Responsiveness of staff resources to fluctuations in demand, and scope to develop Business Cases for additional staff where there have been sustained increases in demand Dialogue with Divisions has increased in response to improved awareness of requesting levels for specific tests. Improvements to the recording of consultant level data on PIMS identified by Divisions has improved overall data quality within the cross charging mapping information i.e. reallocating doctors to the correct Division Noticeable reduction in usage or a slowing of over performance levels following increased awareness. For example there has been a reduction in wastage of blood products following proactive interventions by Transfusion Practitioners.

Concerns – Trust wide There remain some concerns that the level of recharges made have increased in the past 3-4 years since implementation. However, test prices have remained static due to internal cost efficiencies within Diagnostics, therefore increases in recharges are linked to increased demand be it associated with additional tests per patient, increased FCE’s generating additional tests, or more complex testing (and often more expensive). Greater use of the patient level recharge data could be made i.e. inclusion in Business Cases costings when assessing the implications of service developments, additional Consultant posts or implementation of new treatment plans/protocols. o Perception that the process is lengthy and complicated to set up recharges may dissuade wider implementation. However it has been very beneficial, as for the King’s knows what diagnostics actually cost.