The practical problems of applying cost-effectiveness analysis to joint finance programmes

Joint finance is money allocated by the Department of Health to NHS authorities to promote policies of inter-agency collaboration which prevent people being admitted to hospital or facilitate earlier discharge from hospital or save on NHS resources generally. Worries have been expressed that joint finance has not been used as effectively or efficiency as it might have been. This paper is concerned with the practical application of cost-effectiveness analysis to policies or schemes which typically use joint finance. Intensive case-studies with five English local authorities and seven NHS authorities attempted to apply cost-effectiveness analysis to items contained in their joint finance programmes over the period 1981-87. In some cases it was possible to find self-contained schemes which benefited from such an appraisal, but it also found that there were several features about the programme which either ruled out the case of cost-effectiveness analysis or indicated the need to analyse policies which were funded in part but not wholly by joint finance. Cost-effectiveness analysis was particularly difficult to apply where joint finance was used to fund relatively minor items such as a small, one-off grant to voluntary organisations or when it was used to increase the provision of existing services such as home help or residential care, since it is generally accepted that these services meet a well-recognised need. The most fruitful use of cost-effectiveness analysis occurred where joint finance was used to develop new services in a particular locality and comparisons were available of similar services in other localities. The general lesson of the work was that economic appraisal needs to be targeted at major service provision which may or may not use joint finance rather than just at the joint finance programme.