Key points

  • Despite the increasing financial pressure on the NHS over the past decades, there has been little research to understand the distribution and concentration of health care costs across the population.
  • This paper explores for the first time the distribution of both primary and secondary health care costs in England, including GP-prescribed drug cost. Identifying high-cost, high-need patients and examining the way in which they use health care services might help to design initiatives to reduce costs or to improve efficiency.

This working paper was produced as part of a research project to better understand the characteristics and health care utilisation of high-cost, high-need populations across seven countries. See the results of the international study.

The paper adopts a rigorous approach to assigning costs to each patient based on their recorded activity and utilisation. Other researchers may find the methods presented in this paper useful when attempting to cost a full range of health care activity. This working paper has not been peer-reviewed, however we are publishing it as we believe it contributes to the literature in this area.

Summary of findings

  • Analysis identifying the top 5% of users of primary and secondary care services by cost, using a large nationally representative sample in the year 2014/15, found that mean annual costs per patient were over 20 times higher in the top 5% of patients compared with all other patients (£9,789 vs £487).

  • The top 5% of patients accounted for around 50% of the total health care budget for primary care, secondary care and GP-prescribed drug therapy. This meant that more money was spent overall for the top 5% of patients (£147m) than all other patients (£139m).

  • Although high-cost, high-need patients (top 5%) have higher costs across all categories analysed - primary care, outpatient care, emergency care and GP-prescribed drug therapies -, spending on this group was dominated by inpatient care (£6,892 inpatient costs per high-cost, high-need patient).
  • Of the mean cost per patient for inpatient care, 9% and 8% was related to Ambulatory Care Sensitive admissions for the top 5% of patients and all other patients respectively. This suggests that initiatives to improve cost-effectiveness could focus on preventing avoidable inpatient hospital admissions, which is a key tenet of the NHS Long Term Plan.
  • The descriptive analysis indicates that the strongest drivers of being in the high-cost, high-need group are age, multimorbidity and deprivation; however, the paper does not explore the relative contribution of these factors. This suggests the need for a system-wide, long-term response to reducing socio-economic inequalities which may yield benefits to health system efficiency.
  • The design, delivery and management of high-cost, high-need patients have important implications for overall health system costs. Interventions that focus on better managing these patients in primary care and the community, reducing the need for unplanned and costly hospital admissions, could help reduce costs and improve the quality of care.

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