Data Drives Success: A New Era in NHS Hospital Funding

Stay up to date on our latest blogs and content


By Stephen Ashmead | Mar 26, 2024

3 minute read Blog| Thought Leadership

It’s that time of year again – the evenings are getting lighter, mini eggs are in the supermarket, and hospital finance departments are frantically preparing for year end. In celebration, or commiseration, of this annual ritual, I’m looking at how hospitals are funded by the NHS in England, and how ensuring data collection workflows can provide both improved patient care and improved understanding of hospital financing.

How are hospitals funded?

The way health services are funded attempts to reflect NHS England’s principles, by encouraging comprehensive, high quality, integrated and effective healthcare. They also recognise how health services are changing to a more collaborative and sustainable model addressing population health and health inequalities. In 2019/20, the NHS introduced a blended model of payment, which, following a temporary hiatus during the Covid-19 pandemic, developed into the current ‘aligned payment and incentive’ approach we have today. For most secondary and tertiary health services, this has two elements:

  • A fixed element which covers non-elective services. This is negotiated between the care provider and their local Integrated Care Board (or boards for a large provider, but the idea is the same) based on expected activity during the year.
  • The variable element covers elective care, where the provider receives payment for the actual activity they deliver, according to a set list of prices.

There is plenty of extra complexity, with various top-ups and additional payment routes to cover high-cost activity or to encourage improved efficiency and care; for a more detailed overview of how we got to where we are, the HFMA have an excellent briefing.

For most activities, the list of prices is set according to what are called ‘healthcare resource groups’ (or HRGs), which are categories of similar activities considered to have roughly the same cost. Hospitals report this activity via the Commissioning Data Sets, which contain a wealth of information, including diagnoses and procedures, which for inpatient episodes are added manually by clinical coders. This information is used to assign an HRG to the activity, for which the hospital is paid.

Turning data into gold

As funding, both directly through the variable element, and indirectly through the negotiated fixed element, is based on data provided through the Commissioning Data Sets, higher quality data leads to more accurate funding for providers. However, given the complexity of healthcare data, this isn’t a straightforward process. The recent push towards implementing comprehensive Electronic Patient Record systems across the NHS should, in the long run, provide high-quality data, but many hospitals have struggled with the transition to more comprehensive systems, and are yet to realise the full benefits these EPRs are meant to deliver. While these EPRs do provide more data, their increased complexity means that not everything is captured effectively, and clinical coding teams can find themselves overwhelmed by the increased data. At the same time, the importance of quality clinical coding has been recognised to such a degree that it’s a cross-cutting workstream of the national Getting It Right First Time programme.

Not only that, but the Commissioning Data Sets themselves are undergoing significant changes, which only a handful of Trusts have successfully adopted. For example, the move towards SNOMED codes, which in the long run will give Trusts the opportunity to submit accurate, granular data around care, has had a somewhat slow and rocky start.

And finally, care pathways are becoming more complex, with more care delivered virtually, across different teams or at arm’s length, and the Commissioning Data Sets haven’t fully kept up with these new ways of working. There is also often tension when optimising EPRs between having a streamlined approach to encourage seamless transitions between different delivery types and capturing relevant information to allow a complete representation of the activity hospitals provide. Not only that, but the move towards shared services means more and more data has to be captured by different providers, who might use very different workflows and technologies from one another. And ICBs are interested in having a more holistic overview of the activity within their regions, but this is hampered by piecemeal data sharing processes.

The plus side is that none of these barriers are insurmountable, and many Trusts and ICBs have made huge and unrecognised strides in improving data quality. And nor do they need to struggle on their own. CereCore International has a team of highly experienced experts who are able to support organisations in getting the best out of their current or future technology and data. So if you’re a Trust that’s looking to:

  • Maximise clinical coding to improve accuracy and payments for activity
  • Roll out the latest versions of the Commissioning Data Sets
  • Implement or optimise a new EPR
  • Improve data capture across increasingly complex workflows

Or an ICB who wants to:

  • Get a better overview of the activity across your services
  • Improve integrated data flows
  • Support shared services through more comprehensive data capture, translation and migration

Get in touch with CereCore International to see if we can partner with you.

And finally, to all those in hospital finance teams: good luck with your end of year mayhem!


About the Author:
Stephen Ashmead

Senior BI Reporting Specialist at CereCore International

Put Us to Work

Let us know how we can support your initiatives and take some of the heavy lifting from healthcare IT.