Costs and performance of English mental health providers

Background: Despite limited resources in mental health care, there is little research exploring variations in cost performance across mental health care providers. In England, a prospective payment system for mental health care based on patient needs has been introduced with the potential to incentivise providers to control costs. The units of payment under the new system are 21 care clusters. Patients are allocated to a cluster by clinicians, and each cluster has a maximum review period. Aims of the Study: The aim of this research is to explain variations in cluster costs between mental health providers using observable patient demographic, need, social and treatment variables. We also investigate if provider-level variables explain differences in costs. The residual variation in cluster costs is compared across providers to provide insights into which providers may gain or lose under the new financial regime. Methods: The main data source is the Mental Health Minimum Data Set (MHMDS) for England for the years 2011/12 and 2012/13. Our unit of observation is the period of time spent in a care cluster and costs associated with the cluster review period are calculated from NHS Reference Cost data. Costs are modelled using multilevel log-linear and generalised linear models. The residual variation in costs at the provider level is quantified using Empirical Bayes estimates and comparative standard errors used to rank and compare providers. Results: There are wide variations in costs across providers. We find that variables associated with higher costs include older age, black ethnicity, admission under the Mental Health Act, and higher need as reflected in the care clusters. Provider type, size, occupancy and the proportion of formal admissions at the provider-level are also found to be significantly associated with costs. After controlling for patient- and provider-level variables, significant residual variation in costs remains at the provider level. Discussion and Limitations: The results suggest that some providers may have to increase efficiency in order to remain financially viable if providers are paid national fixed prices (tariffs) under the new payment system. Although the classification system for payment is not based on diagnosis, a limitation of the study is the inability to explore the effect of diagnosis due to poor coding in the MHMDS.