The Chartered Society of Physiotherapy The Chartered Society of Physiotherapy


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The price is right

Many physio staff and their managers lack the skills and confidence to work out what their services really cost. Louise Hunt offers some helpful pointers.

File 105764While there is still uncertainty as to exactly how NHS reforms will pan out in England, one thing is certain: NHS services must get better at demonstrating cost and clinical efficiency in a more competitive health and social care environment. The challenge applies to all four UK countries.

Feedback from CSP members suggests that many managers feel they lack the skills and confidence to cost their therapy service accurately. ‘We have found there is a lack of understanding of costing terminology and how to breakdown service costs,’ says professional adviser Tori Salmon.

The CSP is developing resources to help managers with service costing as part of ongoing work to help members meet the demands of the changing NHS.

Historically, most NHS physiotherapy services have been commissioned as part of block contracts, which has made separating treatment costs from other service overheads ‘massively complicated’, Ms Salmon explains.

But there is growing recognition that using a bottom-up method – otherwise known as patient level costing, whereby day-to-day activity is evaluated – can give a more accurate picture of costs and show where services can make efficiency improvements and become more innovative.

This will be particularly important if the NHS increasingly adopts tariff-based pricing systems, as is happening in some clinical areas that have taken up the payment by results model. The coalition government’s new commissioning models for England following the introduction of the Health and Social Care Bill, with tenders open to any qualified provider, will offer additional pressures. 

‘Regardless of how the NHS is reformed, commissioners will need to know that a service is clinically productive and cost-effective, so accurate costing is essential,’ Ms Salmon says. While pointing out that it’s up to managers to provide this information, she adds, ‘you need the whole team on board to collect the data’.

She suggests a good first step would be to set up a project team with responsibility for overseeing the implementation of costing the service and engaging staff. This will  require liaison between departments in the trust which hold useful data on service costs, such as finance, estates and information technology services.

It is also important to develop a good communications strategy and strong partnerships with key stakeholders, such as the GP commissioners. Developing such a strategy is also an opportunity to find out what commissioners want and how you can meet their needs, Ms Salmon notes.

Efficiency targets

The next step is to ascertain exactly what the current service does. One method is to undertake a time and motion study, suggests Ms Salmon. ‘Staff record everything they do in a day over a couple of weeks. This is to help build a picture of what you are doing and, if there are inefficiencies, such as wasted journeys, to find another way of doing it. It’s important to analyse everything.’

Once service activities have been analysed then costs can be broken down, including staff costs and non-pay costs. For NHS services, overheads such as facilities and human resources costs, may be harder to define, Ms Salmon says. ‘Even if they are not in your control it is still important to know what proportion to attribute to the cost of the service. This is where having good communications with other departments can really help in developing robust data collection.

‘Once you know your costs you can look at whether there is a way to refine them, such as introducing targets based on efficiency.’

The CSP is developing a resource pack on patient level costing, which will provide more details on undertaking this process. In the meantime, the independent physio sector can offer plenty of advice.

‘The most important thing in understanding the cost of a service is knowing exactly how much time is involved in its activity,’ says Andrew Walton, chief executive of Connect Physical Health – the largest independent provider of musculoskeletal services to the NHS, employing more than 100 physios. ‘Because our income has always been related to activity – we have never had block contracts – it is essential for us to understand all the associated costs of an episode of care to work out costs per patient.’

A common pitfall in this exercise is missing out information. ‘Don’t think anything is too small, it all adds up,’ he advises. Mr Walton says it is important to collect data on did-not-attend-rates and cancellations, for example, as these cost the service in time and do not bring in income, and should be included in the service price.

Other crucial factors to include are staff holidays, maternity and paternity leave, training leave and time spent in meetings in order to calculate the true number of clinically productive hours per week. ‘You need to understand the core hours staff are fully utilised. In my experience there can be much variation,’ Mr Walton states. ‘You also need to look at appointment lengths: is everybody doing 30 minutes or are some people more flexible? And don’t forget consumables such as acupuncture needles.’

His company has achieved a 10 per cent increase in productivity since it introduced a bespoke IT system that gives data on how staff are used, alongside a central booking system.

‘As a management team this means we can be much more effective in workforce planning, by seeing the booking list we can respond quickly to increases in demand and move staff around or request overtime,’ he explains.

Need to modernise

Mr Walton, a physio by background, is an advocate of investment in tools, such as IT systems, that enable services to modernise and improve efficiency. He says managers should factor in a surplus cost for investment to improve their services, and a small amount for contingencies.

Mr Walton echoes the CSP’s advice on working with estates and finance departments to include information on overhead charges within competitive tenders. Some NHS trusts decide not to include an overhead charge in bids, but even so ‘it is important to educate commissioners that there are not only the direct costs of physiotherapists’ time to consider’, he notes.

‘Physio managers need accurate information – don’t second guess costing. Winning a bid, but under-pricing your service, is the worst scenario. In competitive procurement there is huge variation on price and that tells me that there are some people who aren’t pricing correctly.’

Some physios balk at being more competitive, Mr Walton adds: ‘This is a really critical time for physiotherapists with lots of opportunity but we have to market ourselves, so I am passionate that we look on the current situation positively.’


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