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Article Abstract

Online ISSN: 1099-176X    Print ISSN: 1091-4358
The Journal of Mental Health Policy and Economics
Volume 20, Issue 2, 2017. Pages: 83-94
Published Online: 1 June 2017

Copyright © 2017 ICMPE.


 

Costs and Performance of English Mental Health Providers

Valerie Moran1* and Rowena Jacobs2

1PhD, Research Fellow, Department of Health Services Research and Policy, London School of Hygiene and Tropical Medicine, 15-17 Tavistock Place, London, UK
2PhD, Professor of Health Economics, Centre for Health Economics, University of York, Alcuin A Block, Heslington, York, UK

*Correspondence to: Dr. Valerie Moran, London School of Hygiene and Tropical Medicine, 15-17 Tavistock Place, London WC1H 9SH, UK.
Tel. +44-20-7927 2731
E-mail: valerie.moran@lshtm.ac.uk

Source of Funding: This work was funded by a Centre for Health Economics (University of York) PhD Studentship held by Valerie Moran.

Abstract

In England, a prospective payment system for mental health care based on patient needs has been introduced with the potential to incentivise providers to control costs. We explain variations in costs between providers using observable patient- and provider-level variables.  Costs are modelled using multi-level log-linear and generalised linear models.The residual variation in costs is compared across providers using Empirical Bayes estimates and comparative standard errors. Higher costs are associated with older age, black ethnicity, admission under the Mental Health Act, and higher need.  Provider type, size, occupancy and proportion of formal admissions at the provider-level are significantly associated with costs.  After controlling for patient- and provider-level variables, significant residual variation in costs remains at the provider level. This suggests that some providers may have to increase efficiency in order to remain financially viable if providers are paid national fixed prices (tariffs) under the new payment system.

 

Background: Despite limited resources in mental health care, there is little research exploring variations in cost performance across mental health care providers. In England, a prospective payment system for mental health care based on patient needs has been introduced with the potential to incentivise providers to control costs. The units of payment under the new system are 21 care clusters. Patients are allocated to a cluster by clinicians, and each cluster has a maximum review period.

Aims of the Study: The aim of this research is to explain variations in cluster costs between mental health providers using observable patient demographic, need, social and treatment variables. We also investigate if provider-level variables explain differences in costs. The residual variation in cluster costs is compared across providers to provide insights into which providers may gain or lose under the new financial regime.

Methods: The main data source is the Mental Health Minimum Data Set (MHMDS) for England for the years 2011/12 and 2012/13. Our unit of observation is the period of time spent in a care cluster and costs associated with the cluster review period are calculated from NHS Reference Cost data. Costs are modelled using multi-level log-linear and generalised linear models. The residual variation in costs at the provider level is quantified using Empirical Bayes estimates and comparative standard errors used to rank and compare providers.

Results: There are wide variations in costs across providers. We find that variables associated with higher costs include older age, black ethnicity, admission under the Mental Health Act, and higher need as reflected in the care clusters. Provider type, size, occupancy and the proportion of formal admissions at the provider-level are also found to be significantly associated with costs. After controlling for patient- and provider-level variables, significant residual variation in costs remains at the provider level.

Discussion and Limitations: The results suggest that some providers may have to increase efficiency in order to remain financially viable if providers are paid national fixed prices (tariffs) under the new payment system. Although the classification system for payment is not based on diagnosis, a limitation of the study is the inability to explore the effect of diagnosis due to poor coding in the MHMDS.

Implications for Health Care Provision and Use: We find that some mental health care providers in England are associated with higher costs of provision after controlling for characteristics of service users and providers. These higher costs may be associated with higher quality care or with inefficient provision of care.

Implications for Health Policies: The introduction of a national tariff is likely to provide a strong incentive to reduce costs. Policies may need to consider safe-guarding local health economies if some providers make substantial losses under the new payment regime.

Implications for Further Research: Future research should consider the relationship between costs and quality to ascertain whether reducing costs may potentially negatively impact patient outcomes.

Received 29 June 2016; accepted 3 April 2017

Copyright 2017 ICMPE