Opportunity Costs of Implementing Nice Decisions in NHS Wales

Abstract

Background: When a technology is recommended by the National Institute for Health and Care Excellence (NICE), the National Health Service (NHS) is mandated to provide the funding to accommodate it within three months of publication. Explicit in NICE’s approach to health technology assessment (HTA) is the assumption that the approval of a new, cost-increasing technology will result in the displacement of an existing, less cost-effective health care programme from elsewhere in the NHS. Notwithstanding the research which has been undertaken to establish what NICE’s cost effectiveness threshold should be, to date there has been no attempt to identify the actual opportunity costs of specific NICE decisions. Understanding what, in practice, is foregone when new cost-increasing technologies are introduced is important for an understanding of the effects of HTA.

Objectives: The objectives of this paper were to document how in practice local NHS commissioners in Wales accommodated financial shocks arising from technology appraisals (TAs) issued by NICE and from other cost pressures. We also aimed to investigate how prioritisation decisions were made by budget holders in the NHS.

Methods: Semi-structured interviews were conducted with Finance Directors and Medical Directors from all seven Local Health Boards (LHBs) in NHS Wales. These interviews covered prioritisation processes, as well as methods of financing NICE TAs and other financial “shocks” at each LHB. We then undertook a systematic identification of themes and topics from the information recorded. The study relates to the period October 2010 to March 2013.

Results: The financial impact of NICE TAs is generally anticipated and planned for in advance and the majority of LHBs have contingency funds available to cope with these and other “shocks” within-period. Efficiency savings (defined as reductions in costs with no assumed reductions in quality) were a major source of funds for cost pressures of all kinds. Service displacements were not linkable to particular NICE TAs and there appears to be a general lack of explicit prioritisation activities. The Welsh Government has, on occasion, acted as the funder of last resort.

Conclusions: Services may be displaced as part of a response to the cumulative impact of all types of cost pressures, including cost-increasing health technologies newly recommended by NICE, but such displacements were not direct responses to the publication of individual NICE TAs. The additional cost pressure represented by a new NICE TA is likely to be accommodated at least partly by greater efficiency and increased expenditure rather than displacement of services.

Keywords: cost-effectiveness thresholds, health technology assessment, NICE, opportunity costs, health care

JEL Classification: L01