Aims Specialist Integrated Haematological Malignancy Diagnostic Services (SIHMDS) were introduced as a standard of care within the UK National Health Service to reduce diagnostic error and improve clinical outcomes. Two broad models of service delivery have become established: ‘co-located’ services operating from a single-site and ‘networked’ services, with geographically separated laboratories linked by common management and information systems. Detailed systematic cost analysis has never been published on any established SIHMDS model.
Methods We used Activity Based Costing (ABC) to construct a cost model for our regional ‘networked’ SIHMDS covering a two-million population based on activity in 2011.
Results Overall estimated annual running costs were £1 056 260 per annum (£733 400 excluding consultant costs), with individual running costs for diagnosis, staging, disease monitoring and end of treatment assessment components of £723 138, £55 302, £184 152 and £94 134 per annum, respectively. The cost distribution by department was 28.5% for haematology, 29.5% for histopathology and 42% for genetics laboratories. Costs of the diagnostic pathways varied considerably; pathways for myelodysplastic syndromes and lymphoma were the most expensive and the pathways for essential thrombocythaemia and polycythaemia vera being the least.
Conclusions ABC analysis enables estimation of running costs of a SIHMDS model comprised of ‘networked’ laboratories. Similar cost analyses for other SIHMDS models covering varying populations are warranted to optimise quality and cost-effectiveness in delivery of modern haemato-oncology diagnostic services in the UK as well as internationally.
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Improving consistency and accuracy of diagnosis was identified by the UK National Health Service (NHS) National Institute for Health and Care Excellence (NICE) Improving Outcomes Guidance (IOG) for Haematological Cancers as the most important factor in improving patient outcomes.1–3 This was reinforced recently within the NHS Manual for Cancer Services Measures for Haemato-oncology (V.1.1)2 with the introduction of Specialist Integrated Haematological Malignancy Diagnostic Service (SIHMDS) laboratories as a standard of care, where diagnostic tissue from patients with suspected or known haematological cancer follows predefined test repertoires (haematological and histopathological morphology, immunophenotyping, cytogenetics and molecular genetics) and synthesised into a single integrated report.
Neither original nor current recommendations have specified the configuration of SIHMDS services, other than integrated reporting by dedicated haematopathologists.1 ,2 Two broad models of service delivery have become established; ‘co-located’ services operating from a single-site, and ‘networked’ services, where geographically separated laboratories are linked by common management and information systems. Both approaches offer potential advantages and disadvantages. ‘Networked’ SIHMDS models harness the experience of established laboratories, and thereby potentially reduce potential capital, staffing and other developmental costs considered necessary for a dedicated haematological service within ‘co-located’ facilities, but individual elements may continue to deliver other services outside of haemato-oncology, and arguably may therefore be less focused.
The Haemato-Oncology Diagnostic Service (HODS), established in Sheffield in 2007, is an example of a publically funded ‘networked’ SIHMDS involving accredited specialist laboratories (haematological morphology and immunophenotyping, histopathology and genetics) linked by common management and information systems, and coordinated from within a single NHS Trust (Sheffield Teaching Hospitals NHS Foundation Trust). The service provides regional diagnostic haemato-oncology services for adults in a population of approximately two million, and complies with current specifications for SIHMDS laboratories.2 There is a Lead Clinician and weekly meetings at which consultant haematopathologists and healthcare scientists from each laboratory specialism review cases and finalise integrated reports. Consultant haematopathologists also provide direct input into weekly clinical haemato-oncology multidisciplinary meetings (MDM).
In 2003 the NICE IOG estimated initial set up costs, and annual running costs for a centralised SIHMDS laboratory to be £230 000 and £364 000 per annum, respectively, based on an assumed population of 1.5 million.4 The running costs included salaries for scientific and administrative staff, as well as reagent costs and lease contracts for scientific equipment, but salaries for consultant haematopathologists were not included. These figures have not been subject to revision since initial publication.
Activity Based Cost (ABC) modelling of processes is frequently used in business, economics, management science and healthcare to provide a holistic picture of costs involved.5–8 Each activity is identified and financial costs based on actual expenditure or activity are calculated to provide an accurate measurement of financial performance. In order to understand the true running costs of an established SIHMDS, we undertook a detailed ABC modelling analysis of our regional SIHMDS laboratory.
Cost model structure
The costing model was developed in collaboration with the School of Health and Related Research (ScHARR) at the University of Sheffield using DecisionPro, Vanguard Software Corporation. An ABC approach was used whereby each activity was identified and the financial cost calculated based on the actual expenditure. The total running cost of the service was calculated by multiplying the unit cost of each test by the volume of tests undertaken. The casemix of the tests was estimated from activity data over a 2-month period. This included determining the investigational pathway for each disease with subclassifications for diagnosis, staging, monitoring and assessment. The model structure used is illustrated in figure 1.
Tests conducted to interrogate tissue samples of patients with leukaemia, lymphoma, myeloproliferative neoplasm and myeloma were included; haematology (bone marrow aspirate and flow cytometry), histopathology (bone marrow trephine, trephine immunohistochemistry, lymphoproliferative morphology and immunohistochemistry), cytogenetics and molecular genetics. Unit costs were calculated to include medical and non-medical staff, equipment, consumables and overheads.
The investigational pathway of each disease was subclassified into diagnostic, staging, monitoring and assessment. Within each of these pathways, different tests were performed according to disease type and category. For example, tissue samples from patients with chronic myeloid leukaemia were assigned to one of two pathways; diagnosis or monitoring. In contrast tissue samples from patients with lymphoma were assigned to one of four pathways (diagnosis, staging, monitoring and end of treatment assessment; table 1).
Activity (number of cases)
Activity was derived from the casemix data of samples received between 1 October and 30 November 2011 (n=613). In order to produce an accurate representation of the work undertaken, all cases from this period were reviewed against the clinical information provided and the number of tests performed for each of the predefined diagnostic, staging and monitoring pathways calculated (table 1). Data were collated to derive the number of cases and the number of tests by investigational pathway. These were then further split by category and disease as shown in table 1.
Laboratory test procedures in haematology and histopathology were calculated on a cost per test basis using the Welcan unit of workload measurement. In our model a single Welcan unit was calculated at £0.94, covering non-medical staff costs (scientific, clerical and support staff). An administrative cost fixed at 25 Welcan units (£23.50) was added to cover specimen handling, tissue cut up, slide filing, preparation of tissue processors, reagents, repairs and maintenance. Costs associated with consultant haematopathologist work were incorporated separately into the model and were estimated to be £47.73 per test for haematology laboratory test work and £33.31 per test for histopathology laboratory test work. These costs reflected the number of tests performed in haematology and histopathology work assuming one whole full-time equivalent consultant haematopathologist at a mean full-time equivalent total salary of £117 700. The costs also incorporated consultant time spent at weekly MDMs. Genetic test costs were calculated from block contract values according to associated activity data and from previously defined cost-per-case prices.
Total running costs
The cost for each category by disease group was calculated by multiplying the unit cost of each test for that particular category and disease group with the corresponding proportion of tests per case. The activity over 2 months (October–November 2011) was extrapolated to represent annual data.
Annual running costs
A total of 613 patient episodes, representing 1346 individual diagnostic tests were processed in the 2-month period between 1 October 2011 and 30 November 2011 (table 1). Data from these cases were used to populate a cost model.
Assuming that the data was unaffected by seasonal variation and adequately represented actual activity, annual running costs were calculated at £1 056 726, but if consultant costs, were excluded, annual running costs were estimated to be £733 400. The annual running costs for the haematology, histopathology and genetics laboratories was £301 710, £311 508 and £443 508, respectively. As a proportion of the estimated annual running costs, the cost distribution by department was 28.5%, 29.5% and 42%.
The costs were calculated according to the four subclassifications; diagnosis, staging, disease monitoring and end of treatment assessment. The model projected annual costs of £723 138, £55 302, £184 152 and £94 134, respectively (table 2).
The diagnostic and monitoring pathways accounted for 86% of the total running costs. Within the diagnostic pathways, the myelodysplastic syndromes (MDS) pathway had the highest projected annual cost at £216 336 based on 75 cases over 2 months (450 cases per annum), with a unit cost of £481. All cases that were investigated using the MDS diagnostic pathway had bone marrow aspirate tests and 95% of cases had bone marrow cytogenetics.
The lymphoma diagnostic pathway was the most frequently requested pathway with 125 cases in the 2-month period (750 cases per annum). It was the second most costly pathway overall with a projected annual cost of £168 846 based on diagnostic tests performed on lymph node, bone marrow or other extranodal tissue. When staging for lymphoma was included, this cost increased to £210 552.
The diagnostic pathways for the myeloproliferative neoplasms essential thrombocythaemia (ET) and polycythaemia vera (PV) had unit costs of £189 and £88, respectively, and projected annual costs of £46 482 and £21 204, respectively. Although ET and PV diagnostic algorithms both utilised JAK-2 mutation screening, for ET diagnostic work up, investigations included bone marrow aspirate and trephine in 32%, fluorescence in situ hybridisation in 24% and JAK mutation testing in 76%. By comparison only 8% of PV diagnostic cases had bone marrow aspirate and trephine (table 3), reflected in the different unit costs.
In response to the NICE IOG for Haematological Cancer, and published data underlining the improved reliability and accuracy of diagnosis that is achievable through SIHMDS and expert haematopathology review, a number of UK regional cancer networks have successfully implemented service delivery though various SIHMDS models over the last decade.9–13 These services have varied from bespoke ‘co-located’ units such as the Haematological Malignancy Diagnostic Service3 model or ‘networked’ models such as the one described herein. While both service models offer advantages, full and detailed cost analysis has not been published by any established SIHMDS. The implementation of SIHMDS across all UK networks and regions has proved challenging. One potential reason includes a lack of transparent clinical and economic justification for changes in diagnostic working practices and significant re-configuration of established laboratories.
We have undertaken the first detailed cost analysis of a ‘networked’ model of SIHMDS delivery linking established accredited specialist regional laboratory services for a two-million population base. The analysis estimated annual running costs of £1 056 726 million per year. This figure is substantially higher than the annual running costs originally estimated by NICE of £364 000 for a population of 1.5 million in 2003.1 ,4 Admittedly, our calculated figures are not directly comparable because the original NICE estimates excluded a number of key cost elements such as the cost of fully funded consultant time and other overheads vital for accurate service provision costs as well as being based on National Reference Costs from 2002. However, if Consultant costs were excluded, the annual running cost for HODS was £733 400. Furthermore, if the 2003 NICE running cost estimates are adjusted for inflation and a population size of two million then annual running costs for 2011 would be £628 412 (Sue Ward personal communication). One further reason why annual running costs were higher than those estimated by NICE was a lack of accurate data for the incidence of haematological cancers when the IOG for Haematological Cancers was published as stated in the IOG.1 Subsequent analyses utilising national data have demonstrated that there was an under ascertainment of cases.14 Accordingly, if the costings were based on the estimates of incidence at the time this would have resulted in an underestimation of the cost.
Our calculated running costs were based on a SIHMDS serving a population of two million, the lower end of the threshold population recommended in the NHS Manual for Cancer Services guidance for SIHMDS delivery, a threshold based on consensus opinion rather than any precise economic analysis. This study provides reassurance that specialist collaborative service provision is logistically and economically feasible through networking of existing regional laboratory services with annual running costs of just over £1 million for this two-million population threshold. Further work is required to determine the optimal population base for delivery of the various SIHMDS models.
There are other limitations to our analysis: the ABC model was based on 2006–2007 capital development costs, using 2011 activity data. Although the 2011 activity was extrapolated from two months activity, estimated projections for end of year HODS cases and individual tests were 3678 and 8076 respectively. These figures were similar to the actual end of year figures of 4026 HODS cases and 9676 individual tests.
In summary, we have used ABC modelling to provide estimates of annual running costs of a regional SIHMDS using a ‘network’ of established accredited specialist laboratories linked by common managerial and information systems. We have estimated annual running costs of just over £1 million for a two-million population. Similar cost analyses for other SIHMDS models covering different populations are warranted to optimise quality and cost-effectiveness in delivery of modern HODS s in the UK as well as internationally.
Take home messages
Specialist Integrated Haematological Malignancy Diagnostic Services (SIHMDS) were introduced as a standard of care within the UK NHS to reduce diagnostic error and improve clinical outcomes.
Two broad models of service delivery have become established: ‘co-located’ services operating from a single-site and ‘networked’ services, with geographically separated laboratories linked by common management and information systems.
Detailed systematic cost analysis has never been published on any established SIHMDS model.
We report annual running costs of £1 056 726 for a ‘networked’ SIHMDS serving a population base of 2 million, and advocate the use of Activity Based Cost modelling to benchmark running costs of other SIHMDS models serving varying populations.
Handling editor Mary Frances McMullin
Contributors All authors were collectively responsible for planning, conduct and reporting of the study. The authors responsible for planning the study were CD, JGW, JAS, DP, MF, DB, DH, NRP, GW, AD, DH, SEW, PT, NRP and JTR. Case mix data was collected and checked by DP and CD. Activity Based Model construction and cost analysis was performed by AK, SEW, PT and HB. Reporting of the study was principally performed by CD, JS, SEW, NRP and DB, and all authors contributed to drafting and corrections. CD and JS are joint guarantors for the content of the manuscript.
Competing interests None.
Provenance and peer review Not commissioned; externally peer reviewed.
Data sharing statement Data relating to running costs for SIHMDS by NICE were adjusted for inflation and population size of 2 million. We can provide calculations for these estimates as this work was performed by HB and SEW.