Learning from Innovation in the Health Industry
Edited by Marco R. Di Tommaso and Stuart O. Schweitzer
Chapter 7: Benchmarking Hospital Costs in the UK: Increasing Efficiency and Driving Innovation in the Healthcare Industry?
7. Benchmarking hospital costs in the UK: increasing eﬃciency and driving innovation in a health care industry?* Sue Llewellyn and Deryl Northcott INTRODUCTION A Health Industry Model (HIM) recognizes the broad contribution that health care can make to national economic development. Yet, wherever and whenever health care is publicly ﬁnanced, a key government policy objective is achieving technological development and innovation within resource constraints. Governments have employed a variety of mechanisms to achieve this aim. In the UK, for example, since the 1980s, health care management policy has undergone several reforms, from general management to resource management and the internal market through to, latterly, the ‘New Labour’ government’s modernization programme. Several authors have charted the history of these developments (see, for example, Bourn and Ezzamel, 1986a; Broadbent et al., 1991; Broadbent, 1992; Preston et al., 1992; Harrison and Pollitt, 1994; Hood, 1995; Jones and Dewing, 1997; Jones, 1999; Llewellyn, 1998; Keen, 1999; Klein, 1999). In conjunction with these broader ﬁnancial management agenda, a succession of costing initiatives have changed the way in which cost information is compiled, reported and used for control purposes in UK hospitals. Costing was reconﬁgured to support general management through devolved budgets, resource management through clinical budgeting and the internal market through setting prices equal to cost for contracting and commissioning (see Bourn and Ezzamel, 1986b; Bates and Brignall, 1993; King et al., 1994; Ellwood, 1996a, 1996b, 2000; Jones, 1999). However, until the advent of ‘modernization’ and relative performance evaluation in UK health care,...
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