CCGs purchase health care services from both NHS providers and independent health care organisations. Each year the regulator, NHS Improvement (previously Monitor) sets a basket of tariffs, which are effectively a series of fixed prices for specific treatments. The question facing a CCG that the Edge Health team supported was whether to pay its independent providers the nationally set prices for a selection of services, or whether the cost base for independent providers sufficiently differed from NHS providers.
The Edge Health team was commissioned to analyse the hypothetical cost of solely providing specific services. The objective was to investigate whether or not the national tariffs were appropriate after accounting for the fact that independent providers focus primarily on elective rather than non-urgent care. Moreover, independent providers often do not treat higher risk patients, owing to the fact that they may be managed more appropriately in full service NHS hospitals. To investigate this, the Edge Health team built a bottom-up costing model, drawing on independent data for benchmarking and clinical advice, to provide an estimated cost range under various sensitivity scenarios.
The analysis suggested that the cost incurred by independent providers of delivering some services were substantially below the national tariff – even after allowing for an acceptable rate of return to a private sector independent provider. The CCG used the evidence in its negotiations with independent providers and negotiated lower prices, which have translated into significant savings and can be deployed to fund other elements of public health care.