Comparing NHS Hospital Unit Costs

Abstract

Efforts to improve the efficiency of the hospital sector in the National Health Service (NHS) have concentrated on measuring the unit costs of service provision. Hospitals identified as having high unit costs are considered poor performers. Several indices have been constructed to measure unit costs. These produce conflicting messages: hospitals with relatively high unit costs as measured using one index may have low unit costs according to another index. Furthermore, the publication of cost information may lead to unintended consequences and perverse behaviour, rather than genuine performance improvements. To get a more accurate picture of performance, cost information should be included within a broader performance assessment framework for hospitals.