ISTCs: Are they cost effective?

Posted on August 5, 2009. Filed under: ISTC, News stories |

OnMedica Views | Alan Maynard, professor of health economics, York | 5 August 2009

Initially the Blair government wanted about 15% of elective care to bepublic_private provided by Independent Sector Treatment Centres (ISTCs). About half this capacity has been commissioned and starting in 2010 the contracts for over 30 units will come up for renewal.

The initial rationale of ISTCs was the hope that they would act as a catalyst for the “inefficient” NHS to improve productivity and reduce waiting times. Inherent in this argument was the notion that elective and acute hospital work could be separated and that specialised ISTCs would be able to be more efficient providers of elective care than multi-product NHS hospitals.

The initial contracts offered to private providers guaranteed volumes and reimbursement at tariffs plus 15%. A combination of weak PCTs and slow GPs failed to refer sufficient volumes of patients in the early years and as a consequence ISTCs were paid even though they did not provide contracted volumes.

Their reimbursement at tariff plus was also problematic. Unsurprisingly ISTCs cream skim i.e. they avoid the complex cases and hip revisions and take those patients who can be quickly processed thereby yielding a nice surplus of tariff over cost.

This cream skimming means that any complications are dealt with by transfers to the local NHS, who also treat those patients who may be only marginally profitable. Furthermore because of trauma and emergency obligations, NHS hospitals have to retain orthopaedic capacity even if most of the required local activity is dealt with in ISTCs.

The evaluation of ISTCs is noticeable by its absence which means that the evidence base for recontracting in 2010 is absent. Efforts by researchers at York to analyse ISTC activity for the Department of Health has been hampered by their failure to submit data. NHS hospitals produce timely data as reimbursement by PbR is dependent on PCTs receiving activity data. With ISTCs guaranteed activity volumes in their contracts the incentive to submit data was weak and thus activity analysis has been problematic. It is sad that the Department of Health and the NHS did not see fit to rectify this poor data reporting in a timely manner.

ISTCs cream skim and generally appear to have lower lengths of stay. However there is no cost data to compare them with NHS providers even if there were appropriate comparators in the public sector with such largely straight forward patient mixes. Consequently is no relative cost data to inform commissioning.

ISTCs are nice examples of experimentation without evaluation. This faith based approach to health care reform enables the competing political factions to declare their policies a success if it suits their manifesto needs. As we approach the election, the initial contracts are expiring and government is considering how to manage the next phase of ISTC development.

The 2010 commissioning of ISTCs is being managed by PCTs, organisations whose evidenced success as purchasers is noticeable by its absence! For local providers the choices are whether to compete with the private owners of ISTCs, to collaborate with them or to ignore them. It is unclear to whatextent the current government will accept NHS provider take over of local ISTCs.

The Conservative Opposition has indicated that if elected they would regard PbR tariffs as maximum prices and PCTs would be expected to negotiate these downwards. The current government is telling PCTs that they must contract with ISTCs at PbR tariffs i.e. there is no local discretion to reduce prices for elective care. Fixed prices go uncomfortably with Labour rhetoric about wishing to use competition to catalyse change and improved productivity in the NHS. Flexible prices in the future with the Tories may mean the private sector is protected if it is given five year fixed tariffs before the election in 2010.

Not only should there be debate about the reimbursement arrangements, there also needs to be greater transparency not only in relation to activity and relative cost, but also in relation to safety and patient reported outcome measurement (PROMs).Only with systematic analysis and management of such data can relative performance in terms of cost, activity and outcome be identified.

It is impossible to identify the relative cost effectiveness of the ISTC reform let alone the relative performance of the competing private providers. This does not facilitate the forthcoming recontracting and offers neither patients nor taxpayers protection of their wealth and health!

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