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January 31st, 2014

Research highlight: Unit cost programmes at PSSRU

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Estimated reading time: 5 minutes

Blog Editor

January 31st, 2014

Research highlight: Unit cost programmes at PSSRU

0 comments

Estimated reading time: 5 minutes

For more than 20 years, the Personal Social Services Research Unit (PSSRU) at Kent and LSE has been pioneering approaches for estimating the costs of public sector services. Today we highlight some of the outstanding unit cost research – past and present – that has come out of the Unit.

What are unit costs and why are they needed?

Understanding the way money flows through organisations and feeds into services is crucial to ensuring high quality service provision. Unit costs – the cost of one unit of “output”, such as one hour of GP time or one case review performed by a social worker – are an important aspect of assessing performance and “value for money”.

The underlying idea is a simple one: Resources, such as social worker time, are needed to provide a service such as child protection services. Estimating the cost of resources going into service provision is what unit cost work is all about.

How do we calculate unit costs?

The PSSRU approach to unit costing is grounded in economic theory. The following principles are applied to all our work:

  • Unit cost calculations should be inclusive, meaning they should include the financial implications of all service components – staffing, power, maintenance, management or administration
  • A “long-run marginal opportunity cost” approach is used. While this sounds intimidating, the concept is simple. The “marginal cost” is the cost of supporting one extra client or providing one additional unit of output (e.g. GP hour). The “long-run” part means that we recognise the financial implications of necessary expansion. For example, to provide additional hospital bed days, additional hospitals need to be built. Therefore, the costs of buildings and other large, one-off investments need to be included
  • Our work also takes into account the fact that not all professionals spend all their time with clients. Other activities may include writing reports, travelling for home visits or supervising trainees. The ratio of direct time (work with clients) to indirect time (other activities, on a per-client basis) is therefore included in our calculations
  • Where possible, our unit costs include information to allow for regional weighting – in particular to distinguish the higher London costs from lower costs elsewhere.

Who uses unit costs?

There are many agencies and individuals interested in unit costs. They include:

  • The Treasury, the Department of Health, Department for Education and the Ministry of Justice – for impact assessments and to inform policy development and to advise ministers on policy options
  • The National Institute for Health and Care Excellence (NICE) – recommended for use in their Assessing Costs Impact Methods Guide
  • Quoted in Hansard
  • Researchers – more than two-thirds of economic evaluations in England published between 2008 and 2012 have used our unit costs
  • Professional bodies, local commissioners and the National Health Service (NHS England) in researching information on disease profiles, commissioning services or predicting demand for services.

What sorts of Unit Costs do we publish?

PSSRU publishes a wide range of work that builds on our unit cost programmes. Here we introduce some of our large unit cost projects.

Unit Costs of Health and Social Care

Our flagship publication, the Unit Costs of Health and Social Care , has its origins in an initiative to improve information about the unit costs of community care services. In 1992, the Department of Health commissioned the Personal Social Services Research Unit at Kent and the Centre for Health Economics (CHE) to draw together the best available evidence about unit costs.

The aim is to collate information from

  • routinely-collected data
  • literature and
  • ongoing research

so that the most up-to-date, nationally applicable unit costs for health and social care services can be calculated.

Units Costs 2013
Units Costs 2013

In addition to our unit cost schemas, we publish guest editorials dealing with new and evolving methods or highlighting a particularly interesting costing exercise, most recently on widening the scope of unit costs to include environmental costs. Recent volumes have included short articles on time diaries, cognitive behavioural therapy workshops and the Social Care Institute for Excellence’s approach to valuing informal care.

The findings are published annually and with every new volume we improve the quality and expand the range of cost information provided, building on previous estimates and drawing on new sources that reflect developing services and increasing demand for unit costs to enable economic analyses. We’re proud to look back on 21 volumes and have just published the 2013 edition.

Unit Costs in Criminal Justice

Another exciting and complex project recently completed at PSSRU, in collaboration with colleagues at the Centre for the Economics of Mental and Physical Health, is the Unit Costs in Criminal Justice volume. The project was funded by the Ministry of Justice to provide new information on the cost of offender management activities that could be used in combination with evidence on the impact of interventions on re‐offending, to determine cost‐effectiveness and value for money. This included:

  • Unit costs for a wide variety of accredited offending behaviour programmes delivered in prison
  • A model for estimating prison accommodation and security costs
  • Unit costs for a variety of Youth Offending Team practitioners and
  • Illustrative estimates for externally provided interventions for young offenders

The project also provided the Ministry of Justice with a transparent and flexible approach to estimating unit costs that should allow them to adapt and update the results as needed.

Unit costs of children’s services

While the previous two examples of unit cost work are project-specific, there is an ongoing effort within PSSRU to improve our knowledge of the costs of providing services for children and young people. PSSRU’s Jennifer Beecham has developed an approach that enables services and Local Authorities to calculate unit costs. While her seminal report, Unit Costs – Not Exactly Child’s Play (free download) was initially targeted at providers of children’s services, the approach is applicable to all unit cost work and has found a wide audience. Other work includes

Work is also underway to estimate the costs of secondary and tertiary eating disorder care for young people and the costs associated with transition from children’s to adult services for young people with developmental and behavioural disorders.

How you can contribute

If this blog post has whetted your appetite and you would like to contribute to the Unit Costs of Health and Social Care publication, here are some ways to get involved:

  • Are you a health and social care professional? We would like to know how you spend your time! You can participate in our research by following this link: https://www.surveymonkey.com/s/SZMF5YL
  • If you have cost information for new services or sources of information for any element of the unit costs (e.g. new overhead or qualification information), we would love to hear from you.
  • Suggestions are welcome for short articles and guest editorials.
  • Any comments or information you would like to send us can be submitted using our online feedback form.

For more information on the Unit Costs of Health and Social Care, please contact Lesley Curtis (l.a.curtis@kent.ac.uk)

For more information on the Unit Costs in Criminal Justice project, please contact Nadia Brookes (n.k.brookes@kent.ac.uk)

For more information on our work on services for children and young people, please contact Professor Jennifer Beecham (j.beecham@lse.ac.uk)

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