Health Policy, 25 (1993) 95-108 0 1993 Elsevier Scientific Publishers Ireland Ltd. All rights reserved. 1168-8510/931.$06.00

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HPE 00558

Needs assessment: developing approach

Cam Donaldson and Shelley Farrar

an economic

Health Economics Research Unit, Department of Public Health, University of Aberdeen, Aberdeen, UK

Accepted I3 April 1993

Summary

Health authorities and health boards in the UK are required under the provisions of the NHS Act, 1990, to assess the needs of their resident populations for health care and, through contracting, to act as purchasers of services informed by those needs. This paper presents an economic approach to informing the purchaser on priority setting for contracting. For illus- trative purposes, the technique is applied to services for elderly people with dementia. The paper demonstrates that an economic approach to needs assessment is both desirable and practicable.

Needs assessment; Economic evaluation; Priority setting

Introduction

One way of informing the new process of contracting between NHS pur- chasers and providers of care, it is thought, is to assess the health and health care needs of the populations for which purchasers are responsible. Asses- sment of need and contracting have been linked ever since the Government, in the White Paper Workingfor Patients, advocated that districts and regions (and, by implication, boards) concentrate on ensuring that the health needs of the population for which they are responsible are met [I].

Needs assessment is seen as important because contracts between pur- chasers and providers will have to specify amounts and types of care to be purchased and provided, and, therefore, priorities will have to be set [2]. In

Addressfor correspondence: Mr Cam Donaldson, Health Economics Research Unit, Department of Public Health, University Medical Buildings, University of Aberdeen, Foresterhill, Aberdeen AB9 2ZD, Scotland. UK.

this context, ‘needs’ would determine what types of health care should be purchased and to what extent. One problem with this, however, is that not all needs can be met. Some technique is required to match resources to those areas of health care which go furthest in meeting need. The technique which is proposed and outlined in this paper is one based on economic evaluation. The main advantages of this approach are that its application would lead towards a situation where health gain (or met need) is maximised from the health care resources at the community’s disposal and that it avoids the necessity to measure need in every situation and in any total sense.

The aim of this paper is to demonstrate how an economic approach can be used in priority setting for contracting. In the following section, the prin- ciples of the approach are compared to those of the more traditional epidemiological approach to needs assessment, and the specific methods which should be used in the application of the economic approach are described. This is followed by a report of an application of the method to services for elderly people with dementia. In concluding, we discuss the implications of the results for contracting and for the future development of methods for needs assessment.

It should be noted that the approach, as reported and applied here, relates only to priority setting within an existing health board/authority programme for dementia. This is because, as a demonstration exercise, it was thought important to examine whether comparisons of services within a programme can be made. Only if this can be done, can we then progress to comparisons across programmes (e.g. dementia services versus acute services). It is par- ticularly important to make this point in the case of dementia which, in Scotland, is currently considered the top priority for expansion of services t31.

The economic approach to needs assessment

The principles

The case for an economic approach to needs assessment has been outlined in detail elsewhere [4]. Setting priorities starts from the fact that resources are scarce; the system is constrained by resource availability. Using resources to tackle one particular health problem denies society the opportunity of using those resources to tackle other health problems. Likewise, in contract- ing, some types of care will be purchased whilst others will not. Benefits are sacrificed as a result of opportunities forgone; they are opportunity costs. The aim of priority setting and contracting is to ensure that the health benefits resulting from health care are maximised and that the opportunity costs of health care are minimised. This can be done only by comparing health care interventions with each other in terms of health gains produced for resources spent. Ensuring health gains are maximised can be equated to

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meeting the most need possible with available resources, without having to measure total need through studies of incidence and prevalence.

Policy questions often relate to changing the scale of a health care inter- vention - providing more of it or less of it. Evaluation must then take account not of the total costs and benefits of the whole programme but of the incremental (or marginal) costs and benefits (that is, the difference be- tween costs and benefits before and after the change in scale). For example, as a programme is extended, the marginal benefits are likely to fall and marginal costs may rise. Programmes which have been identified as ‘good value for money’ should not be expanded indefinitely.

The traditional epidemiological approach to needs assessment would seem to be to measure the amount of ‘ill health’ in the community, categorised by disease. Thereafter, this would be taken as a picture of relative needs created by different diseases, and used to set priorities for the allocation of resources to the treatment or prevention of the different diseases. ‘Need’ in this sense could be measured by lives lost, life years lost or measures of morbidity and lack of social functioning.

The major problem with using such data in the contracting process is that they provide no resource allocation rule. Needs will always outstrip available resources and, therefore, priorities will have to be set. The implication of the epidemiological approach is simply that more resources should go to treat- ment and prevention of diseases which are big killers, although no indication is given as to how much should go where [4].

Furthermore, the priorities established by using such a form of needs as- sessment are likely to be different from those established through economic evaluations. For instance, foot problems are unlikely to rank highly in soci- ety’s list of health care ‘needs’, yet chiropody appears to represent good value for money in terms of health gains relative to extra resources spent [5].

This conflict arises because there are two major flaws in the epidemi- ological approach. First, ‘need’ per se is a red herring. It is changes in need met (or marginal met need) that should be the outcome factor. Second, changes in costs resulting from interventions are ignored.

Despite these shortcomings, it is still being recommended nationally that incidence and prevalence data are of crucial importance in needs assessment [6]. One recent study attempted to measure the need for cataract surgery by epidemiological methods [7]. The study team tried to estimate age- and sex- specific prevalence rates of cataract within an assumed district population. Not only was the estimate highly uncertain, but also the study could not establish whether more or less surgery should be done because of a lack of marginal cost and benefit data. The document even stated that ‘this sort of information helps to establish the relative priority of cataract extraction as against other services’ [7]. Yet no attempt was made to measure such costs and benefits. It is our contention that even crude estimates of costs and benefits, representing conditions prevailing in the local context, would serve priority setting better than attempting accurate measurement of the wrong thing.

Donaldson and Mooney [4] have proposed four key points underlying the economic approach:

(I) Resources are scarce in the sense that not everything desirable can be done with what resources are available;

(II) Ineffective therapies (i.e. ones that literally do no good) should be dis- carded;

(III) Even if therapies are effective, they should only be pursued as long as benefits are greater than costs;

(IV) The key consideration in deciding on priorities is to weigh up possible mixes of services in terms of costs and benefits of altering the mix and to move to implement the mix for which the greatest benefit can be achieved from the resources available. In other words it is the costs and benefits of change in service delivery that are the focus.

In an ideal world, what would follow from this would be an assessment of all therapies at all possible levels of provision in terms of costs and benefits and the selection of those that yield the greatest benefit per pound spent. In practice, such an enormous task is not possible and, to a large extent, not necessary. A more pragmatic approach can be taken. As a starting point, analyses should look within programmes of care. In selecting a programme to study, it is important that there is some degree of homogeneity in its out- puts and that the costs of activities within the programme can be measured. The basic approach should then be based on the following principle:

The mix of services within the programme should be examined to see if some reallocation within the existing spend would result in more benefits.

To assist in this, the following steps might be pursued:

(a) identify which therapies are so valuable that it would be a waste of time analysing them;

(b) of the remainder, start by assessing which areas are most open to change;

(c) identify the options for carrying out the change; (d) identify the costs and benefits of the options; (e) measure and value the costs and benefits by use of research and the

existing literature; (f) move to more and more difficult areas.

The demands of (a)-(f) are very considerable. However, these principles have been applied in the NHS for some time in the field of option appraisal of capital development and have been proposed in practical guidelines to priority setting in purchasing [8,9]. In principle, there is no obvious reason why they should not be applied to health care purchasing. The next sub- section illustrates how this might be done.

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An application to services for elderly people with dementia

Stimulating thought about options for appraisal involved thinking about the programme under consideration in terms of sub-programmes and, thereafter, posing the following questions:

6) if spending were to be reduced by say &200 000 per annum, what would go and what would the effect be - if possible in terms of both services and health but, failing the latter, then in any terms in which an estimate can be made?

(ii) if spending were to be increased by 5200 000 per annum, what would you spend it on and what would the effect of this be in terms of both services and health?

The figure of E200 000 was selected so as to be a substantial sum but equally a small proportion of the total amount of monies expended on the particular programme which we examined: dementia services for elderly people. These questions reflect the marginal changes in resource allocation which are the usual situation in health care developments [lo].

The above questions were asked of service providers, possible purchasers and consumer groups, all associated with dementia services within the area covered by Grampian Health Board in the north east of Scotland. A variety of people were approached because no one purchaser, or purchasing group with knowledge of the full range of existing and possible future services could be found. A series of meetings with people from the following groups was arranged: - general practitioners (2); - consultant psychogeriatricians (1); - community psychiatric nurses (1); - medical and nursing officers for registration of private nursing homes

(2); - paramedical representatives of the priority services unit (5); - the local branch of Alzheimers Scotland (consisting of 19 carers, two

people with dementia, one person from the Mental Health Unit, one person from Eventide Homes and one person who was ‘interested’);

- development ofticer for carers (1); - social work department of Grampian Regional Council (1).

Given time constraints, ‘representatives’ of each of these groups were selected arbitrarily. The numbers from each group are in brackets above. The meetings did not simply consist of asking questions (i) and (ii) above. Much background information was obtained before focussing in on priorities for expansion and contraction of services.

The crucial parts of the content of meetings on which we will focus are ‘wish lists’ for the possible expansion and contraction of services. In this con- text a ‘wish list’ is simply a list of desired service developments which has

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been produced while considering resource constraints. For the setting of priorities for purchasing, it is important then to attempt some kind of mea- surement of costs and benefits of service changes (margins) in line with the ‘wish lists’.

In the results section, it will be seen that we focussed on two margins. The assessment of the costs and benefits of these margins took two forms:

- a detailed review of the economics literature in the field of services for elderly people with dementia; and

- augmentation of this by a local assessment of the costs of changes in service provision.

There is a small literature on economic evaluation of services for elderly people with dementia [11,12]. However, we also used studies from the more general literature on care of frail elderly people as examples of useful direc- tions for future work [13-161.

Difficulties arise when the preferred option in terms of health outcome is also the higher cost option. It then has to be decided whether the extra costs are justified given the extra health outcome gained. In the absence of ade- quate benefit measures, this responsibility of ranking one programme above another has to be entrusted to decision makers/service planners/purchasers. Better measures of benefits would not in themselves help to identify the pre- ferred programme but would assist the decision-making process.

The quality adjusted life year (QALY) has been proposed as the ‘ideal’ tool for outcome measurement for prioritisation [ 171. However, there are considerable difficulties in applying QALY measurement to services for elderly people. These include the insensitivity of QALYs to changes in health, failure to account for effects on informal carers or for variations in the value of QALYs gained at different stages in life, and lack of coverage of an adequate range of aspects of health-related quality of life [18-201.

Instead, we concentrated on more limited measures of effectiveness from other published studies in the field of care of elderly people; for example, the Crichton Royal Behavioural Rating Scale (CRBRS) and the Life Satisfaction Index (LSI). These measures have been well validated and are reliable [21].

On the cost side, earlier studies where the costs have been measured have presented these as averages. However, we seek to examine marginal changes which might provide greater benefit for patients from a given level of re- sources. Therefore, it is necessary, where possible, to look at the marginal costs of providing a service to one patient (or a small group of patients) or the marginal savings of withdrawing a service from that patient (or small group of patients).

The savings associated with one less patient will normally be less than the average cost per patient. The difference between the two measures will de- pend on the size of the fixed element of the total cost, e.g. labour (nurses, doctors, caterers, domestics) and capital. Also, establishing what is a fixed and what is a variable cost is determined by the scale of change being con-

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sidered. For our purposes, therefore, marginal costs per patient would be preferable to average costs as a more accurate reflection of the resource im- plications of a change. However, where the scale of change is considerable, average costs may be an accurate reflection of marginal costs.

Local cost data have been collected to enhance those collected in previously-published studies. These data were obtained from health board accountants and are limited to traditional ward-based care and local authori- ty residential care.

The costs of ward care are for a standard 60-bed unit. The information on the 60-bed unit consists of staff whole-time-equivalents and salary costs and total supplies and services. StaRpatient ratios were calculated for each cate- gory of staff. This allowed a schedule to be drawn up which illustrates staff reductions achievable as patient numbers decline. Supplies and services were then divided into variable and fixed costs and added to the schedule. Because of the indivisibility of staff time and other costs the result was a stepped curve as shown in Fig. 1.

Results

Wish lists

The ‘wish lists’ for expansion and contraction of services resulting from the meetings are displayed in Table 1. To add to this, we obtained the list

TOTAL COSTS

SERVICE 8 SUPPLY

NUMBER OF BEDS

Fig. 1. Stepped cost schedule for reduction in size of a 6Med unit.

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Table 1

‘Wish lists’ for expansion and contraction of services

Expansion Extended home help services (e.g. night nursing/sitting, bathing). Transport for day care in rural areas. Sheltered housing. Flexible day and respite care. Support groups and social services support for carers. Smaller (more homely) homes. NHS nursing homes. Register of information. Register of people willing to do work. Keyworker(

Contraction Hospital beds (particularly 30-bed units). Highly-trained and technical staff.

of desirable characteristics for services for people with dementia from the Dementia Services Development Centre at the University of Stirling (see Table 2). The wish lists produced fit with many of the criteria listed in Table 2, as well as with the views of Scottish Action on Dementia [22].

The most frequently mentioned wishes for expansion were information and flexible support services such as day care and respite care. The most fre- quently mentioned ‘wish’ for contraction was hospital beds.

There is literature on flexible day and respite care with a keyworker being assigned to each client-carer unit to help them decide when to use such ser- vices. Use of a key worker is an alternative to less-coordinated community care in combination with long-term institutional care. This is one of the margins of care which will be examined in the following sub-section. The

Table 2

Dementia Services Development Centre, University of Stirling: desirable attributes of dementia services

What we want to see in services for people with dementia: - small - local - domestic scale - affordable - accessible - properly designed - well-trained staff - well-supported staff - flexible - 24 hII days - can respond in a crisis - based on good knowledge of individuals - empowers carers

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other relates to an issue about which there is also an established literature - comparison of the relative merits of NHS nursing homes and hospital care. This literature is largely from the field of care of frail elderly people but is useful for illustrative purposes.

Measuring costs and benefits of specific programmes

Coordinated community care versus uncoordinated community care This comparison has been made possible by adapting data from another

study which attempted to measure the costs and benefits of two community care packages [I I]. The coordinated package, centred around a Family Sup- port Unit (FSU), is for elderly mentally infirm people and their carers:

The aim of the Unit is, by helping carers, to enable confused elderly people to remain at home for as long as possible. Day care and respite care is provided, and evening care and special occasional residential care can be negotiated [l I].

The Unit is innovative in that it provides a flexible and coordinated group of services designed to be responsive to the needs of individuals, to a large extent meeting the requirements specified in the ‘wish lists’.

In the FSU study, the experimental group of clients attended the FSU and, therefore, received a package of coordinated care. The control group con- sisted of clients of community services without the FSU and, therefore, without as much coordination or such a range of services available to them.

Table 3

Total service costs (1989/90 prices)

Service Cost (E) per person per day maintained in the community

Key worker Control

FSU Day Care 1.54 0.08 Respite 1.29 0.01

Local Authority day care 0.26 0.28 Day hospital 0.35 0.19 Travelling day hospital 0.03 0.01 Alzheimer’s Disease Society 0.31 0.04 Social Worker 0.79 0.81 Home help 0.39 0.28 Meals on wheels 0.01 Local Authority residential 0.05 0.15

care (for respite) Private residential care 0.03

(for respite) Hospital care (for respite) 3.55 1.17

Total 8.54 3.07

Sources: Donaldson and Gregson [l 11, NHS deflators, Grampian Health Board costs.

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Table 4

Costs of care over and above an uncoordinated community care package

f per extra day

Continued Coordinated Community Care 24.19 Hospital care (1) 49.00-51.00 Regional Council residential care (2) 39.43 Voluntary sector residential care (3) 27.29

Weighted average of 1, 2 and 3a 45.41

“Calculated on a pro rata basis using placement figures from Donald and Lawrie [23].

Cost data from the previously published study [l l] have been updated to 1989/90 prices and modified to local circumstances. It can be seen from Table 3 that it is less costly to provide community services without an FSU than with an FSU. However, clients in the FSU group were maintained at home for a longer period of time from the initial assessment by a psychogeriatri- cian; 172 days longer on average.

Thus, it is necessary to compare the cost per extra day spent in the com- munity by clients in the FSU group with the cost per day of spending that time in hospital care. From Table 4, it can be seen that these costs per person per extra day in the community were estimated to be E24.19 and the cost of long-term care on a psychogeriatric ward as &49-5 1.

Although the majority of elderly people with dementia going into long- term residential care enter hospital, there are a significant number who enter local authority residential care. The costs per day of these are compared with the costs per extra day in the FSU group in Table 4 and though they are less expensive than hospital care, the FSU remains the least costly of the options. The costs of hospital, residential and voluntary care are averages. The pro- portion of these averages which would be saved by having less beds is unclear, and would depend on local circumstances. If only small numbers of beds were closed the marginal cost savings would be small. If large numbers of places could be closed the marginal costs savings would be close to the average figures presented in Table 4.

The indications from the ‘wish lists’ are that it is preferable for both the client and carers of the client to be maintained in the community for as long as possible while there is no detriment to either client or carer. Therefore, given the cost data presented, it may be assumed that the FSU or an equiva- lent form of community care is a more cost-effective means of caring for elderly people with dementia. As long as there are clients who are currently in long-term hospital care who could be cared for in the community with some enhanced form of service provision, it may be an improved use of resources to extend this form of care and reduce long-term care provision.

NHS nursiug homes versus long-term hospital care To produce an indication of the comparative cost-effectiveness of the two

types of long-term care, it is necessary to examine their respective health out-

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comes. In an earlier paper on the evaluation of NHS nursing homes, Bond et al. [21] measured outcomes by comparing survival rates, personal well- being, changes in behavioural ability, mental state and perceived health status of the people randomly allocated to NHS nursing homes and conven- tional hospital care. There were no significant differences between the two groups for any of these factors. However, the views of the patients as consumers of the two services suggested that the NHS nursing homes were preferred by residents. NHS nursing-home residents expressed more positive views about staff, daily routines, visiting, food, self-care activities and per- sonal belongings.

The annual cost of a standard 60-bed unit in a hospital is &936 000 giving an average cost of El5 600 per bed (or per patient, in a long-term ward). The average cost of a hospital patient exceeds that of an NHS nursing-home patient (El4 352) which suggests that it would be viable on cost grounds to move patients from the hospital to the nursing home. However, because of the fixed cost element involved in running a 60-bed unit the movement of any proportion (particularly a small proportion) of patients to NHS nursing homes would not produce the equivalent proportion of cost savings. Therefore, as explained earlier, for the purpose of our analysis it would be more relevant to present the costs on a marginal rather than an average basis as this reveals the real cost savings associated with reducing the number of patients in a particular ward.

Note also that there are still problems with over-estimation of the savings associated with moving patients to a nursing home. This arises if low- dependency patients are first to be discharged from the hospital. They will be the least costly of the hospital patients because of their lower demands on staff time and medical supplies [24]. The marginal costs that we have calculated may, therefore, overestimate cost savings as they are based on average dependency in the unit.

The cost schedule has been constructed using staffpatient ratios and sup- ply and service costs as a guide to what savings would be released with each reduction of one bed on the ward. The marginal cost or cost saved per bed closure, as illustrated in Fig. 1, varies according to the position on the cost schedule and is determined by the indivisibility of nursing staff; three less pa- tients might mean one less nurse, whereas one less patient will not mean one third of a nurse less. The marginal savings are held above the average savings by the fixed costs. As the 60-bed unit is made up of two 30-bed wards, a halv- ing of the patient numbers allows fixed costs associated with one ward to be realised, at which point average and marginal costs will be similar.

Using data from the marginal cost schedule, it can be seen from Table 5 that if 30 hospital beds could be saved, more fixed cost savings can be realis- ed producing overall savings. This is true to an even greater extent if all 60 beds can be closed, as all fixed cost savings are then realised, but is not the case for smaller reductions, such as 15 beds. Given that NHS nursing-home care is also generally preferred to hospital care, whilst there are patients for whom such a move would be suitable, it would be more cost-effective to

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Table 5

Cost per patient for NHS nursing-home care and cost savings for hospital care

30-bed NHS Nursing Home

Hospital care’ 60-bed margin 30-bed margin 15bed margin

aBased on cost schedule for a 60-bed ward.

f. per year

14 352

15 600 14 570 11 128

redirect the resources from either one or two wards in a 60-bed unit. Higher costs may have to be endured in the interim for the long-term gain in patient welfare.

Discussion: Towards contracts

In this study, an economic approach to needs assessment has been applied to the area of services for elderly people with dementia. Two examples of ‘margins’ of care were studied in depth. The results demonstrate that it is possible to reorientate resources within dementia services to produce greater benefit overall.

The results coincided with the views of consumers. However, such coinci- dence will not always occur. Boards have to balance the views of consumers of many different types of health care and those of the population at large. In this process, consumers’ views can be taken into account but not always met.

Contracts for hospital beds, based on the results of this (demonstration) study, would be determined by previously existing throughput minus the reduction in throughput resulting from the expansion of services which pro- vide an alternative to long-term care. Similarly, contracts for NHS nursing- home places and coordinated community care will be determined by the throughputs resulting from the expansion of services which provide an alter- native to long-term care. Similarly, contracts for NHS nursing-home places and coordinated community care will be determined by the throughput resulting from expansion of these services. Therefore, for purposes of placing contracts, it is important to have baseline data on existing services (or throughput) and information on whether there are enough clients to utilise fully proposed service expansions. However, the crucial data for priority set- ting are those on costs and benelits of changes in service provision.

Improvements in data used in such studies are required; in particular local decisions should be based on local data. In this study, many of the data were ‘imported’ from other studies. Health board information services should be geared more towards provision of marginal cost data which should come

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largely from providers of care. To date, the clear message from the NHS Management Executive is that under the new internal market arrangements, purchasers and providers will exchange information which is relevant to the functioning of the bodies involved.

The logical conclusion of this study is that contracts in the field of demen- tia services for elderly people should be based on assessments of the marginal costs and benefits of changes in the service mix. This will make it more likely that the welfare of the community is maximised given the health care resources at its disposal.

References

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19 Donaldson, C. and Wright, K., Programme-specific QALYs: a reply, Journal of Health Economics, 8 (1989) 489-491.

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