Understanding the difference between ‘cost-effective’ and ‘affordable’ in the context of spreading health innovation
Robert Berry, Head of Innovation at Kent, Surrey, Sussex Academic Health Science Network (AHSN) reflects on the crucial difference between ‘cost effective’ and ‘affordable.’
Andrew Dillon, CEO of the National Institute for Health and Care Excellence (NICE), recently highlighted the difference between ‘cost effective’ and ‘affordable’:
“Something being cost-effective is not the same as being affordable. Once we have established value for money there is the beginning of the challenge associated with fitting that new product within the resources available.”In doing so, he acknowledged the direct impact this distinction can have on the uptake of new technologies. In other words, a specific barrier to adoption of innovation, including NICE guidance, in the NHS.
What’s the difference between ‘cost effective’ and ‘affordable’?
The specific issue Andrew Dillon refers to is this: evidence of cost effectiveness is often assumed to mean affordable. However, while this may be true when we look at it from a global perspective (sufficient scale of implementation and duration), it may not be true when the organisational structures (their boundaries), financial and other performance management processes within the NHS are taken into account.
Boundary issues encountered may include the different contract mechanisms used in different health or care settings. For example, a pathway that crosses a GP practice, community or mental health or secondary acute care may cross different forms of cost and volume and block contracts. The different formulas and their separate allocation methods can inhibit, or even prohibit, adoption of new technology. This can be further compounded by the different quality and performance expectations in different settings.
What else do we know?
In addition to ensuring that both clinical and financial aspects are robustly reviewed, operational delivery needs to be similarly reviewed. In some cases, companies assume that services are both present and optimised everywhere for their technology. Not recognising variation in services across the NHS, and the costs and time needed to achieve service changes are contributing factors to lower than expected adoption of technology.What are the solutions?
From an individual company perspective there is little that can be done to address health system structural and financial mechanisms. However, being aware of the specific risks related to their product will enable a company to make informed business decisions earlier and avoid disappointment or surprise when expected levels of adoption are not achieved. That is where AHSN’s ‘Bridging the Gap’ services come in.
Some AHSNs – including Kent, Surrey, Sussex – are able to review and support the development of financial models, (what we would call a ‘budget impact model’), that can help identify potential risks arising from financial and organisational factors.KSS AHSN has been helping companies for a number of years to better understand the challenges they may face in relation to working with the NHS through its ‘Bridging the Gap’ services. This service has been accessed by over a thousand companies.
If you are a company and would like to better understand what risks there are to your business and or develop a budget impact model, please contact Rob Berry: firstname.lastname@example.org
Rob is Head of Innovation at KSS AHSN (and interim Commercial Director for UCLPartners). His analysis of health care adoption draws on operational and business management experience within the NHS and his MSc in Health Care Management, as well as his involvement in national groups such as the NICE Implementation Collaborative, all of which have helped to design and deliver KSS AHSN’s ‘Bridging the Gap’ services.