§ Mr. Hutton
The Reference Costs collection entails collecting unit cost and activity data from all National Health Service providers in England, for each financial year.
Various appropriate activity currencies are used for a range of services and treatments provided by the NHS, which form part of the scope of the Reference Costs collection. Unit cost data is produced by submitting NHS organisations in accordance with the rules detailed in the NHS Costing Manual, to ensure that both cost and activity data are calculated on a consistent and comparable basis.
The Department of Health collates such data, and produces national average unit cost figures, by calculating, for each service/treatment area, the total national cost for the service, and then dividing this by the total reported activity for that service, at national level.
All national average costs are published in the National Schedule of Reference Costs, at service level, in conjunction with national activity levels, and interquartile ranges, detailing the ranges between which the middle 50 per cent. of NHS provider costs lie.
To calculate National Reference Cost Index scores at individual organisation level, the individual NHS providers' activity is multiplied by the national average unit costs for each service/treatment category, undertaken by that NHS provider. This produces a total expected cost for each service/treatment area for each provider. When added together, this establishes an 1131W expected cost that each provider would be expected to incur if they were operating at the national average cost per treatment, procedure, etc.
An Index score of 100 signifies that on average, a provider is operating at national average cost levels. A score higher than 100 indicates that for their current level of activity, on average, an NHS provider is operating at costs higher than would be expected for this level of activity. Conversely, a score of less than 100 indicates that the organisation is operating at costs less than would be expected, were they to be operating at national average unit cost levels, for a particular financial year.