The Hidden Costs of the UK's National Health Service (NHS)

Written by Dr. Simon Lowe

Introduction

The UK’s National Health Service (NHS) is a beacon of public health care, providing medical services largely free at the point of use. However, the intricate costs behind this system are often unseen by the general public. This article delves into the lesser-known financial aspects of the NHS, spotlighting the hidden costs that sustain this healthcare giant. The NHS, funded primarily through general taxation and National Insurance contributions, is a complex entity with myriad costs. It covers everything from routine appointments to emergency services. The National Cost Collection publication provides key insights into these expenses, revealing both aggregated and patient-level costs.

One of the more direct costs is that of ambulance services and emergency care. A call to an ambulance incurs about £7, and if an ambulance is dispatched, this cost rises to approximately £252. Further treatment in the Accident and Emergency (A&E) department adds another £160, while an overnight hospital stay costs around £303. [1] These figures underscore the extensive resources required for emergency healthcare. A less obvious cost comes from delayed discharges in hospitals. Patients who are medically fit to leave but remain in the hospital due to various reasons, such as waiting for a care package or a place in a nursing home, incur significant costs. The direct costs of delayed discharges were estimated to be at least £1.7 billion for 2022/23, with each delayed night costing approximately £395. [2] These delays not only strain financial resources but also indicate a sub-optimal use of beds that could serve other patients. Inflation significantly affects the NHS’s purchasing power for medical products and services. Between October 2021 and October 2022, the UK’s inflation rate reached a 40-year high, greatly influencing the costs of goods and services for the NHS. Estimates suggest that inflation alone could cost the NHS between £6bn to £7bn in the 2023-24 period, about 4% of the NHS England budget. This inflationary pressure highlights the financial challenges faced in maintaining service quality.

While the NHS provides indispensable services to millions, the financial backbone that supports this system is often underappreciated. From the costs of emergency services to the impacts of inflation, it becomes clear that the NHS operates in a complex and financially demanding environment. Understanding these hidden costs is crucial for appreciating the value of the NHS and the challenges it faces in delivering quality healthcare. Looking ahead, the NHS must navigate these financial challenges while continuing to provide top-tier healthcare. This balancing act is not just a matter of economics but also of ensuring the well-being of a nation. The NHS’s journey is an example of the intricate interplay between healthcare delivery and economic sustainability.

Patient Level Impacts

Expanding on the hidden costs of the UK’s NHS and their implications at the individual patient level, these manifest in a variety of ways. For example, high operational costs can lead to longer wait times for treatments and procedures. As the NHS grapples with budget constraints, patients might face delays in receiving care, affecting their health outcomes. Financial pressures can impact the quality of care. For instance, if resources are stretched thin due to high emergency service costs, other areas might suffer, leading to potentially compromised care quality in non-emergency departments. Financial constraints might limit the availability of certain treatments or medications, reducing the range of options available to patients. This limitation can affect patients’ ability to receive the most effective or preferred treatments. The stress associated with long waiting times and uncertainty about treatment availability can take a toll on patients’ mental health. Anxiety and stress related to healthcare can exacerbate existing health conditions or contribute to new ones.

While the NHS provides free healthcare at the point of use, the indirect costs, such as travel for frequent hospital visits or costs associated with delayed treatments, can be significant for patients, especially those with chronic conditions. Financial challenges might lead to unequal access to care across different regions or demographics, exacerbating health inequalities. Patients in underfunded or overstretched areas may not receive the same level of care as those in better-funded regions. Delays in treatment due to financial constraints can lead to worsened health outcomes over time. For example, delayed surgeries or treatments can result in more complex health issues later, requiring more extensive and expensive care. Understanding the costs associated with healthcare can encourage patients to use services more responsibly, such as choosing pharmacy advice over A&E visits for minor ailments. This awareness can help in reducing unnecessary healthcare expenditures. These implications highlight the need for strategic financial management within the NHS to ensure that both the quality and accessibility of healthcare are maintained for all patients.

Viable Economic Solutions

Addressing the financial challenges of the NHS requires a multifaceted approach, focusing on efficiency, strategic planning, and collaboration. For a start, the NHS needs to ensure that its performance and financial targets are realistic and achievable. This involves making difficult prioritisation decisions at the national level or empowering local areas to make these decisions. Historical evidence shows that the NHS is capable of effective long-term planning when supported by adequate funding and stability. [3] The finance strategy should align with the overall direction of the NHS, emphasising collaboration and avoiding overly complex market-like incentives. The focus should be on a publicly funded service that guarantees equal access and supports current priorities.

As the NHS is an interconnected system of many institutions, it’s crucial to build the wider system from well-led organisations. This involves supporting these institutions to thrive amid a shift towards a system-led approach. [3] Trust leaders believe that long-term efficiency opportunities lie in better system working. This means collaborating with commissioners, local councils, and other partners to join up the delivery of currently separate services. Effective working with partner organisations, investment in prevention and community services to reduce levels of more expensive acute care, and pooling budgets are seen as key opportunities for efficiency improvements. [4] Setting over-ambitious efficiency targets can lead to larger provider sector deficits. A more sustainable approach would involve setting realistic targets and ensuring trust leaders have a voice in the efficiency debate. This approach should be developed in partnership with national and local system leaders to ensure it is achievable and aligns with other priorities, such as addressing workforce challenges and rising demand.[4] Looking at examples like Canterbury in New Zealand, where a non-market approach to strategic finance in a publicly funded healthcare system has been implemented, can provide valuable insights. In Canterbury, public health care budgets are allocated based on a plan developed with stakeholders, emphasising collaboration and open-book approaches across providers. [3] 

Efficient use of resources also involves addressing workforce challenges. Ensuring that financial resources are distributed fairly and equitably across different areas is critical to maintaining high-quality care standards and improving the overall efficiency of the system. Implementing these strategies requires a collective effort from all stakeholders in the NHS. It involves balancing the need for financial discipline with the goal of providing high-quality care, ensuring equitable access, and fostering a culture of collaboration and innovation. [3] 

In summary

In conclusion, addressing the hidden costs of the UK’s NHS and its implications at the individual patient level requires a comprehensive and multi-faceted approach.

The key solutions involve:

  1. Realistic Planning: Setting achievable financial and performance targets, informed by historical successes in long-term planning.

  2. Strategic Financial Strategy: Aligning financial strategies with overall NHS goals, emphasising public service and collaboration, while avoiding complex market-like incentives.

  3. Supporting Institutions: Fostering well-led organisations within the NHS to ensure a robust, interconnected healthcare system.

  4. Enhanced System Working: Encouraging collaboration between trusts, local councils, and other partners to improve care efficiency and reduce expensive acute care through community services and prevention.

  5. Setting Achievable Efficiency Targets: Implementing realistic efficiency targets that consider local system capabilities and broader NHS priorities, including workforce challenges and rising demand.

  6. International Learning: Drawing lessons from successful models like Canterbury, New Zealand, which employs a non-market approach to strategic finance in a publicly funded healthcare system.

  7. Workforce Challenges: Tackling workforce issues to ensure equitable distribution of resources and maintain high-quality care standards.

Implementing these strategies is critical for the NHS to overcome financial challenges while ensuring high-quality, accessible care. This requires collaboration among all stakeholders, balancing financial discipline with the essential goal of delivering effective healthcare.

References

  1. Barry, N. (2020, February 3). How much it costs the NHS when you miss an appointment. WalesOnline. Retrieved from https://www.walesonline.co.uk/news/uk-news/how-much-costs-nhs-you-17677461

  2. Gardner, T. (2023, March 6). The hidden problems behind delayed discharges. The King’s Fund. Retrieved from https://www.kingsfund.org.uk/blog/2023/03/hidden-problems-behind-delayed-discharges

  3. The King’s Fund. (n.d.). Reforming the finances of the NHS. Retrieved from https://www.kingsfund.org.uk/publications/reforming-finances-NHS#:~:text=%2A%20Support%20well,run%20institutions

  4. NHS Providers. (n.d.). Improving NHS efficiency: A different approach is needed. Retrieved from https://nhsproviders.org/news-blogs/news/improving-nhs-efficiency-a-different-approach-is-needed