Estimating the Costs of Specialised Care: Updated Analysis Using Data for 2009/10

We were commissioned by the Department of Health’s Payment by Results (PbR) team to use 2009/10 data update the analysis we performed using 2008/9 data to estimate the marginal costs of providing specialised care (Daidone and Street, 2011). The objectives of the original work were to investigate: 1. Whether the costs associated with specialised activity are significantly different from nonspecialised activity within the same HRG; 2. Whether any differences in costs between specialised and non-specialised activity are due to differences in productive efficiency. The objective of the update is: 1. To see whether the results obtained on the 2008-09 data are robust to 2009-10 data. 2. To investigate whether there is a case for differentiating payment on the basis of marginal cost differences arising when patients transferred between providers.