Widespread variations remain in local NHS spending - new analysis from The King's Fund

NHS spending: local variations in priorities: an update analyses Department of Health data* covering the financial years 2004/5, 2005/6 and 2006/7. The report provides an update to a previous report from The King’s Fund in 2006, which for the first time analysed the varying amounts primary care trusts (PCTs)** in England spend on diseases such as cancer, mental health and circulatory diseases (such as heart disease).

The latest report again reveals that some PCTs appear to spend much more than others on particular diseases, even after differences in the health needs of local populations and other factors have been taken into account. Across the country spending between the highest and lowest spending PCTs varies 2.9 fold on mental health; 2.5 fold on cancer; and 2.2 fold on circulatory diseases.

The data does allow an insight into the different spending decisions of PCTs, but the report warns that a degree of caution must be exercised with the figures as the Department of Health data used in part to determine the size of PCT budgets each year may be insensitive to some dimensions of need, by disease and by area. There may also be some problems with the quality and accuracy of the data and the report concludes that more work is needed to understand why these variations occur and persist.

The variations have remained relatively unchanged since 2004/5. For example, at the extremes:

  • Islington PCT (adjusting for need) spends £332 per head of population on mental health compared with £114 by East Riding of Yorkshire PCT – this represents a 2.9-fold gap. The proportion spent on mental health ranges from 8.7 per cent to 25 per cent of PCTs’ budgets.
  • Knowsley PCT spends £118 per head on cancer compared with £47 by Ealing PCT – this represents a 2.5-fold gap. The proportion spent on cancer ranges from 3.6 per cent to more than 9 per cent of PCTs’ budgets.
  • Middlesbrough PCT spends £167 per head on circulatory diseases compared with £76 by Southwark PCT – this represents a 2.2-fold gap. The proportion spent in this area ranges from 5.7 per cent to nearly 11 per cent of PCTs’ budgets.

The King’s Fund’s Chief Economist, Professor John Appleby said:

'This latest analysis reveals that the widespread variations in PCT spending on different diseases have remained relatively unchanged over the past three years. Even when local need and other legitimate reasons for variations in spending are taken into account, PCTs continue to spend varying amounts on cancer, coronary heart disease, mental health and a range of other diseases.

'Some of the variations we have highlighted will not solely be as a result of deliberate choices by PCTs. Other factors, such as variations in decisions by clinicians about who and when to treat, and what treatment to provide, and differences in the efficiency of hospitals, will also contribute to these variations. We must be careful in drawing firm conclusions from this data, but it does raise questions about the consistency of the decisions PCTs make about how much they spend on different diseases.'

The King’s Fund’s Chief Executive Niall Dickson added:

'This report raises questions rather providing answers. It does not mean that any one PCT's spending is necessarily wrong but it does suggest that as well as unexplained variations in clinical practice, there are unexplained spending variations – some of these are almost certainly not justified. We need better information about what PCTs spend their money on and what gains in health they achieve as a result. Fortunately, over the next few years we should achieve that.'

The report shows that during the three financial years covered by the analysis (2004/5 to 2006/7) the NHS received an extra £9 billion – a cash increase of 16 per cent. Figures for 2006/7 reveal that the government’s three clinical priorities of mental health, coronary heart disease and cancer continue to consume the largest shares of PCT spending – 12 per cent, 9 per cent and just over 6 per cent respectively. The largest share of spending (more than £8.4 billion, 12 per cent) was devoted to mental health services – twice as much as spent on cancer care.

Professor Appleby added:

'We are relatively early into a journey that will see PCTs and others collecting much more sophisticated information that will help us to understand more clearly the link between spending and health outcomes. The National Programme Budget Project will help us to answer vital questions about where the money goes, what we get for our investment in the NHS and how the NHS can improve value for money.

'But we have a long way to go – tackling unjustified variations in spending will first require much more effort in understanding why variations occur – and persist – and second, making determined efforts to change spending patterns to produce a more efficient and fairer NHS.'

Notes to editors: 

  • *The data is collected by the Department of Health through its National Programme Budget Project, which started in 2002. PCTs and hospitals now collect information on how much they spend on disease areas, rather than only recording how much was spent on primary care staff and salaries, drugs or different types and amounts of hospital procedures. As part of the NPBP, PCTs collect data on expenditure on 20 different disease areas – and in addition, on public health (‘healthy individuals), social care needs and ‘other’.  This data is designed to enable the government to evaluate how NHS money is being spent and whether the current allocation is in line with policy priorities. It also allows PCTs to compare their spending patterns and to question whether they are putting their available funds to the best possible use.
  • ** PCTs are in charge of spending around 75 per cent of the NHS budget in England – around £69 billion in 2006/7. The amount of money allocated by the Department of Health to each PCT is calculated taking into account population size, age and need for health care, as well as the cost of providing services particular to each area.
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