HRGs & PbR

HRGs are the UK equivalent to the DRG's used in other countries. HRGs were introduced in the UK in response to what was perceived to be unacceptably high variation in costs between acute providers. An ideological statement was made that the 'same' admission should cost the same across all types of provider and that casemix was the sole source of cost variation. A statement which was unsupported by the evidence, even back in the early 1990s when the HRG programme was first conceived.

It would seem that this flawed assumption has led to a system of calculating average costs that do not reflect the huge variation in the cost of the same procedure conducted in different specialties. After all, what appears to be the same procedure conducted by a Plastic Surgeon should cost more than the apparent same procedure conducted by a Dermatologist, etc. Teaching hospitals should cost more than a general hospital and those hospitals which adopt new technology to give enhanced patient benefits may cost more than one which retains older methods. It would appear that HRG's and PbR have inadvertantly introduced greater inbalances in financial flows than the perceived problems they sought to remedy!

GP Commissioning & Clinical Commissioning Groups

The government of England is seeking to shift the responsibility for containing rising healthcare costs onto primary care. There are some serious limitations of such an approach if it is operated within a capitated budget. Firstly the financial risk associated with a population of less than 100,000 head is unacceptably high. There are very few GP practices with 100,000 patients. Secondly the risk associated with the high cost elements of acute care require a combined risk pool over one million head to avoid the risk pool itself becoming a source of financial risk. Statistical evaluation shows that 'high cost' implies anything or any person with a cost exceeding £5,000 - a figure which is surprisingly low.

Studies by HCAF show that the risk associated with emergency admissions is 3-times higher than simple chance-based variation. It would seem that GP commissioning  exists within a statistical conundrum. The idea sounds good but the real world of financial risk defeats the good intent. For commissioning to thrive it must be backed by detailed actuarial studies relating to the time-patterns in cost exhibited by various diagnoses.

A modest investment in some actuarial studies will give greater clarity as to which policies & projects will have the greatest impact. Refer to the 'Financial Risk' folder for more details. HCAF also offer an impartial evaluation of the implied financial risk in commissioning plans. Contact Dr Rod Jones for further details hcaf_rod@yahoo.co.uk

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