This extract from a newspaper article comments on comparisons between the public sector National Health Service and the private sector provision of healthcare, quoting the British United Provident Association (BUPA) which owns private hospitals that charge fees to patients.

Looking at Tory policies in any detail shows that the party isn’t seriously preparing for government. Its health policy, for example, would let private clinics treat National Health Service patients, but only if they can do an operation for the same price or below. Examine the detail, and this policy disintegrates for a simple reason: the official NHS price list is cheaper in every case. BUPA’s price list shows

£2,100 for a cataract removal, against the NHS’s £1,000, and £8,100 for a hip replacement, against the NHS’s £4,800.

A fair comparison? Absolutely not, says BUPA; its prices include all costs – building, equipment, capital, sick pay, the works. The NHS price list is not inclusive of overheads – nor, crucially, the phenomenal pensions bill for its one million staff.

For the Tory policy to work, a new and fair NHS tariff must be compiled.

Discussion points 

1 What is the complaint of the author of the article?
2 How does the complaint in this extract match the information in Real World case 5.1 extracted from the NHS costing guidance?

Real World case 5.1

The Department of Health publishes guidance to those recording the costs of health service activities. This is an extract from the Guidance manual.

Costing The principles for costing in the NHS are set out in chapter 2 of the NHS Costing Manual.

The fundamental principle is that reference costs should be produced using full absorption costing. This means that each reported unit cost will include the direct, indirect and overhead costs associated with providing that treatment/care.

The costing guidance states that as far as possible costs should be directly allocated to specialty level. Where this is not possible, appropriate apportionment methodology should be used. The costing manual provides guidance on appropriate apportionment methodology and the treatment of indirect and overhead costs. Given maintained audit involvement for 2005, it is vital that decisions and processes undertaken in apportioning costs are defensible.

Discussion points 1 What problems might be faced in apportioning overhead costs?
2 Why might it be important that decisions and processes used in apportionment are defensible?