Challenges in costing health care services: Recent evidence from the UK

Recent developments in performance measurement and reporting systems in the UK National Health Service (NHS) have created new challenges in costing health care services. In particular, the introduction of the “National Reference Costing Exercise” (NRCE) has substantively changed the way in which health care cost information is reported and used. While the outputs of the NRCE are intended to support hospital management and control by facilitating cost benchmarking, the usefulness of NRCE data depends on the comparability of cost information across hospitals. This paper draws on questionnaire results to explore the challenges in standardising health care cost information, as perceived by those closest to the costing exercise. The results reveal several problems in costing practice, all of which contribute to high variability in the costs reported by hospitals. Until these problems are recognised and addressed, they present a barrier to the effective use of comparative cost data for the management of English hospitals.