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      How much does a diabetes out-patient appointment actually cost? An argument for PLICS


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          – The national tariff system for clinical processes and procedures aims to put a discrete unit cost on clinical activity. Calculating such costs can be subject to a great deal of local variation and interpretation. Given the rising costs of diabetes the purpose of this paper is to ask the question what does a diabetes outpatient appointment in the UK NHS actually cost? This is important in a time of financial austerity and healthcare rationing because it can be difficult to decipher the attribution of costs within the acute hospital setting.


          – Exploring this question, the author considers the present cost model and analyse in terms of the language of unit model cost; the basic tariff system and how it works in diabetes and looking at internal cost information the author attempts to unbundle the cost to provide a more accurate value for the cost object.


          – One major finding is that costs and overheads are divided arbitrarily as opposed to being distributed on the basis of measured relative consumption. Alternative costing methods are appraised to demonstrate that a patient level episodic costing approach such as patient level information and costing system (PLICS) which incorporates aspects of activity-based costing (ABC) would be far more appropriate. Using time driven ABC (TDABC), a new patient appointment costs £162 for 30 minutes and a follow-up appointment costs £81 for 15 minutes.

          Practical implications

          – PLICS has the added benefit of greater financial and clinical transparency and this goes some way towards the holy grail of greater engagement with the doctors delivering clinical care.

          Social implications

          – It would appear that there are different purposes of different costing systems. One can argue that a costing system is there to both contain costs and divide overheads and demonstrate activity. Depending on how data are interpreted costing information can be an agent of enlightenment and behavioural modification for healthcare professionals to show them their direct and indirect costs, their capacity and productivity.


          – Clinicians and health service managers can see from this practical example how the distribution of costs and resources are unfair and can impede the delivery of a service. By using alternative costing methodologies such as ABC not only do the author gets a better reflection of the true cost of the finished consultant episode but is also able to engage clinicians in understanding how costs are generated.

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          Most cited references7

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          Time-driven activity-based costing in an outpatient clinic environment: development, relevance and managerial impact.

          Healthcare managers are continuously urged to provide better patient services at a lower cost. To cope with these cost pressures, healthcare management needs to improve its understanding of the relevant cost drivers. Through a case study, we show how to perform a time-driven activity-based costing of five outpatient clinic's departments and provide evidence of the benefits of such an analysis.
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            Pricing health services for purchasers--a review of methods and experiences.

            This article reviews methodologies and international experience related to costing and pricing health services for health care purchasers. The main factors affecting price-setting methods are: (1) provider payment systems; (2) information available on actual costs, service volumes and outcomes; and (3) characteristics of providers and purchasers. These factors are strongly interrelated. Provider payment systems determine the unit of services to be priced. In order to minimize incentives for under- or over-utilization, the prices that purchasers pay for health care services should be related to the actual unit costs of services, but accurately calculating real unit costs is intensive in terms of resources and information. Pertinent provider characteristics influencing price-setting include provider autonomy, provider negotiating power, and the degree of competition. The article presents a series of examples that run through each of these three sets of factors. The examples are from Denmark, the UK, and Thailand (for capitation); Australia, Hungary, and the United States (for case-based payment); and Germany, Korea, and Taiwan (for fee-for-service payment mechanisms). From these experiences, the article concludes with appropriate lessons for low- and middle-income countries, where the principal constraint on the development of provider payments systems is the limited availability of information on costs, volumes, and patient characteristics.
              • Record: found
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              • Article: not found

              A practical approach for calculating reliable cost estimates from observational data: application to cost analyses in maternal and child health.

              Comparative effectiveness research (CER) and cost-effectiveness analysis are valuable tools for informing health policy and clinical care decisions. Despite the increased availability of rich observational databases with economic measures, few researchers have the skills needed to conduct valid and reliable cost analyses for CER.

                Author and article information

                Journal of Health Organization and Management
                Emerald Publishing
                13 April 2015
                13 April 2015
                : 29
                : 2
                : 154-169
                Department of Diabetes, Royal Sussex County Hospital, Brighton, UK
                © Emerald Group Publishing Limited
                Technical paper
                Health & social care
                Healthcare management
                Custom metadata

                Health & Social care
                Unit cost,Out-patient appointment,Service line reporting,Diabetes mellitus,Patient level information and costing system (PLICS)


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