the average hospital

Accounting, Organizations and Society 30 (2005) 555–583

www.elsevier.com/locate/aos

The average hospital q

Sue Llewellyn a,*, Deryl Northcott b

a The School of Management and Economics, The University of Edinburgh, The William Robertson Building, 50,

George Square, Edinburgh EH8 9JY, UKb The Auckland University of Technology, New Zealand

Abstract

In 1998, the UK government introduced the National Reference Costing Exercise (NRCE) to benchmark hospital

costs. Benchmarking is usually associated with ‘‘excellence’’; the government emphasised the raising of standards in the

1997 White Paper ‘‘The New NHS: Modern, Dependable’’ that heralded the NRCE. This paper argues that the UK ‘‘New

Labour’’ government’s introduction of, and increasing reliance on, hospital cost benchmarking is promoting ‘‘average-

ness’’. Average hospitals will be cheaper to run and easier to control than highly differentiated ones; they may also score

more highly on certain measures of service improvement. The paper aims, through empirical investigation, both to

demonstrate how the activities and processes of hospital life ‘‘become average’’ as they are transformed to comply with the

cost accounting average and to indicate how the ‘‘average’’ is being promoted as the norm for hospitals to aspire to. To

benchmark to average costs, comparisons are necessary. To compare hospital costs involves the creation of categories and

classification systems for clinical activities. Empirical evidence shows that as doctors, patients and clinical practices are

moulded into costed categories, they become more standardized, more commensurate and the average hospital is created.

� 2004 Elsevier Ltd. All rights reserved.

Introduction

Health care is expensive; funding it puts a sig-

nificant burden on national governments world-

qThis paper has been presented at the seminar series, the

University of Liverpool, January 2002, the 6th International

Research Symposium on Public Management, Edinburgh,

April 2002, the Critical Perspectives on Accounting Conference,

New York, April 2002, the seminar series at the University of

G€otenburg, Sweden, June 2002 and the 18th EGOS Colloquium‘Organizational Politics and the Politics of Organizations’

Barcelona, Spain, July, 2002. Thanks are due to participants

at these events and to two anonymous reviewers for their

helpful comments, which have greatly assisted in the develop-

ment of the paper.* Corresponding author. Tel.: +44-131-650-8341; fax: +44-

131-668-3053.

E-mail address: [email protected] (S. Llewellyn).

0361-3682/$ - see front matter � 2004 Elsevier Ltd. All rights reservedoi:10.1016/j.aos.2004.05.005

wide. Acute care in hospitals is particularly costly

and an explosion in medical technologies, associ-

ated with the rapidly growing science of genetics,

looks likely to make it more so. 1 Hospitals

are diverse and differentiated places, controlled

by medical elites––and not readily transparent

1 The Wanless Report (2002) into the appropriate fu-

ture funding of healthcare predicted a major expansion in

medical technology worldwide, particularly in the area of

genetics. During 2002, New Labour announced the establish-

ment of six new genetic knowledge parks and two new

genetic reference laboratories. The, then, Health Minister, Alan

Milburn, said, ‘‘There is no other health care system in

the world better placed to harness the potential of genetic

advances than the NHS’’ (see: news.bbc.co.uk/1/hi/health/

1763951.stm).

d.

mailto:[email protected]

http://news.bbc.co.uk/1/hi/health/1763951.stm


2 HRGs are a variant on the Diagnostic Related Groups

(DRGs) developed in the USA for pricing healthcare services.

The UK National Casemix Office constituted HRGs to

‘‘. . .group together treatments that are clinically similar, con-

sume similar quantities of resources and are likely to be similar

in cost’’ (DoH, 1998a, p. 4).

556 S. Llewellyn, D. Northcott / Accounting, Organizations and Society 30 (2005) 555–583

to organizational review. Yet spending on health-

care, investment in hospitals and demonstrations

that illness is being ‘‘conquered’’ are persuasive

symbols that any government ‘‘cares’’. Giventhis situation, it is to be expected that govern-

ments would like more control over both hospi-

tal costs and the medical profession. The

‘‘average’’ hospital may offer a way of achieving

the goals of less costly healthcare and less sover-

eign clinicians.

The average hospital has a cost index score of

100; this paper tracks the complex processesthat create the hospital of average cost. Mapping

costs on to the highly differentiated activities of

health care to create averages is difficult and

problematic. Yet, in the UK, there is a strong

political will to use the average cost both as a

specific measure to compare hospital performance

and, generally, as a benchmark to control activities

in health care. In this paper we aim, throughempirical investigation, first, to demonstrate how

the activities and processes of hospital life ‘‘be-

come average’’ as they are transformed to comply

with the construction of the cost accounting

average and, second, to indicate how the ‘‘aver-

age’’ is being promoted as the norm for hospitals

to aspire to.

Walgenbach and Hegele (2001) point out acentral paradox of benchmarking: through

benchmarking, organizational processes become

increasingly similar (DiMaggio & Powell, 1991).

This similarity erodes competitive advantage,

hence, in the longer term, all an organization

can expect from benchmarking is to become a

‘‘good average’’. In the private sector, striving

to be ‘‘average’’ is not an, obviously, advantageousstrategy. However, for an expensive public sec-

tor activity like health care (which is financed

from taxation and where competitive advantage

between institutions for ‘‘customers’’ is not an is-

sue) a benchmarking strategy that results in all

hospitals becoming ‘‘more average’’ has political

appeal. Average hospitals would be cheaper to run

and easier to control than highly differentiatedones.

Before government intervention, evidence did

not indicate that UK hospital costs tended to the

average; rather there were some quite astonishing

Healthcare Resource Group (HRG) 2 compari-

sons. Below, two particular HRGs (one surgical,

one medical) are illustrative of the range of re-

ported cost variability. The British governmentproclaimed that these differences pointed to dif-

fering underlying levels of efficiency (see next sec-

tion).

Differential efficiency in cost performance can

arise in three ways: first, from differences in the

unit cost of resources used in hospitals (e.g. direct

costs such as salaries and consumables); second,

from differences in the running costs for hospital

facilities (e.g. infrastructure costs and overheads);and, third, from variations in the clinical practices

that drive cost (e.g. the skill mix employed in pa-

tient care, the use of diagnostic tests, the allocated

theatre time and the designated length of stay in

hospital post-procedure). Clearly, not all of these

costs are controllable; in particular, infrastructure

costs are fixed. Moreover, cost reduction may

impact adversely on the quality of care delivered;despite this, hospitals are considered responsible

for controlling their costs. But the extent of the

HRG cost variations reported initially in hospitals

raised questions about the meaningfulness of the

Surgical HRG

(1997/98)

Medical HRG

(1998/99)

Example: surgical

HRG H02 (primary

hip replacement––elective inpatient)

Example: medical

HRG D15 (bron-

chopneumonia––non-elective)

Average HRG cost

£3755

Average HRG cost

£1211

Range of HRG costs

£ 213–£19,960

Range of HRG costs

£96–£13,443

Variation across

range 9270%

variation across

range 13,900%

Compiled from data in: DoH (1998b, 1999). Medical HRG data

first became available in 1998/99.

S. Llewellyn, D. Northcott / Accounting, Organizations and Society 30 (2005) 555–583 557

efficiency comparisons being made; there were

other factors––besides efficiency––impacting upon

the costs reported above.

Northcott and Llewellyn (forthcoming) identi-fied 10 different influences on reported costs and

grouped them into four categories: first, differences

in costing approaches (variations in cost allocation

practices and differences in how costed ‘care pro-

files’ are produced); second, variations in under-

lying clinical activities ‘‘legitimately’’ related to

patient need but not adjusted for in HRGs 3; third,

issues of information quality (differences in clinicalcoding, differences in the counting of activity and

variations in the data collection capacity of Trusts’

information systems); and fourth, the ‘‘efficiency’’

differences outlined above.

In sum, before government action, the reported

costs of supposedly similar clinical activities across

hospitals varied, dramatically. In part, this re-

flected the complexity of measurement but thestartling extent of the variability also resulted from

the hospitals’ not taking the costing of medical

work ‘seriously’ (see empirical sections below).

From the government’s perspective, these ‘mea-

surement muddles’ (real or intentional) obscured

the efficiency question: were some hospitals wast-

ing resources? Put more formally, were there

‘‘unacceptable variations in performance’’ (seenext section) in UK hospitals?

Until measurement practices were ‘tightened

up’ or ‘modernized’ the relative efficiency of UK

hospitals could not be assessed. So the government

introduced the National Reference Costing Exer-

cise (NRCE) and the National Reference Costing

Office (NRCO) first, to prescribe cost measure-

ment protocols, second, to calculate cost resultsand, finally, to publish information on relative cost

efficiency of hospitals. But ‘‘measurement’’ is not

3 In terms of clinical complexity, HRGs attempt to aggregate

clinical procedures in ways that dissolve differences between

case mix and length of stay but they do not totally succeed in

doing so. The NRCE recognises the impact of clinical

complexity by ‘‘trimming’’ the cost of length of stays (presumed

to be consequent upon clinical complexity) that exceed a

specified maximum and excluding these amounts from average

cost calculations. However, differences in both case mix and

length of stay can still be observed within costed HRGs and

these negate assumed comparability between them.

only a technical issue; all measures, ‘‘. . .construct acommensurability that did not exist before their

calibration’’ (Latour, 1993, p. 113). HRG costing

necessitates the classification, counting and codingof clinical activities and, actually through these

processes, work in hospitals becomes more stan-

dardized.

Moreover, once a cost average is published it

becomes the visible standard against which insti-

tutions compare themselves––in the absence of

other measures the average, by default, being the

operational norm for hospital activity. Thebenchmarking of British hospitals via the NRCE

compares their performance against a standard, in

this case an average cost. The concept of the

‘‘standard’’ is equivocal: either an exemplary or an

average performance can be implied. The ‘‘average

cost’’ benchmark plays on this ambiguity by

establishing the average performance as the one to

be aimed for. The complex processes of classifi-cation, coding and counting (entailed in the mea-

surement of the average cost) standardize hospital

activities. The publication of the average cost

encourages hospitals to aim for the average. This

‘encouragement’ is now backed up through a

‘‘standard tariff’’ for HRGs; since 2002, UK hos-

pitals must ensure that their activities take account

of the average as they are now funded on the basisof the average cost.

This paper is structured as follows. The next

section explores the policy background to the

introduction of the National Reference Costing

Exercise (NRCE), and introduces the theoretical

underpinnings to the paper––work drawn mainly

from Latour and writers in the sociology of science

tradition. Then the research design is explained,before the empirical sections (‘‘Being Average’’;

‘‘Constructing Commensurability for Averages’’

and ‘‘Making Clinical Activities More Average’’)

are presented. The interview data for the study is

explored through critical discourse analysis. Iden-

tified themes are: the uniformity introduced by

classification; the contemporary significance of

information; and the construction of commensu-rability. These themes contribute to a fuller

understanding of standardization and ‘‘average-

ness’’. The paper ends with a discussion on the

impact of ‘‘the average’’ on hospitals, finally there


are some concluding comments on the interna-

tional interest generated by the UK’s cost index

for hospitals.

Governance, modernization and averages in health

In advance of the 1998 publication of the results

of the first UK cost benchmarking exercise (see

below), the government emphasised ‘‘comparison’’

rather than ‘‘competition’’. (DoH, 1997) White

Paper ‘‘The New NHS: Modern, Dependable’’ was

a background to this commitment,

‘‘Our new approach will tackle unacceptable

variations in performance and raise overall

standards across the NHS. We will achieve

this. . .by sharing information and comparingperformance; not by financial competition.

The publication of unit cost information is a

central feature of this new approach and fulf-

ils a key commitment in ‘‘The New NHS’’ toproduce costs on a consistent basis and to

publish these’’.

The advent of New Labour 4 intensified the

political emphasis on benchmarking––through

league tables and standards––for informing and

assessing multiple aspects of health care perfor-mance. Indeed, as Webster (2002, pp. 246–247),

argues, the principal way in which the government

attempted to differentiate itself from the New

Public Management 5 policy thrust of the Con-

servatives 6 (which, as he points out, was largely

4 ‘‘New Labour’’ was the self-styled descriptor for the in-

coming 1997 Blair government in the UK. It connoted a

definitive break with the past that was intended to highlight the

modernization agenda discussed in this section. The ‘‘New’’

Labour label distanced Blairite policies from the left wing

Socialist associations of, in comparison, ‘‘Old’’ Labour (i.e.

previous Labour agendas and political cultures, both whilst in

government and in opposition).5 See Hood (1991, 1995) for an exposition of the facets of

New Public Management, including the role of performance

standards.6 The Conservatives are the other (than Labour) main UK

political party.

continued under New Labour) was through the

imposition of standards,

‘‘Labour’s attack on the record of the Con-servatives revolved around accusations that

inadmissible variations of standards were

permitted and indeed encouraged by the

internal market. . .Since 1997 a whole bat-tery of agencies have been introduced with

the idea of laying down national stan-

dards. . .’’.

New Labour criticised the market, as a regula-

tory mechanism in health care, because it led to

variability in standards. But although the govern-ment devolved responsibility for results to the

hospitals (as provider units) rather than leaving

‘‘results’’ to the vagaries of the market, standards

and standardization are as much a form of regu-

lation as markets or organization (Brunsson &

Jacobsson, 2000, p. 1; Robson, 1992). On perfor-

mance standards, New Labour introduced a de-

gree of central regulation that would have beenanathema to the Conservatives. Hence, if there is a

distinguishing feature of the New Labour policy

on health governance it is this centralised focus on

comparative performance metrics (or measure-

ment standards).

Standards are also useful to policy makers in

health as they permit challenge to the autonomy

of clinicians over judgements about medicalwork. Politicians and managers without special-

ized clinical expertise can set ‘‘standards’’ for

clinical care (Allsop & Mulcahy, 1996, p. 23).

Moreover, governance exercises through bench-

marking, can impose sanctions if the ‘‘standard’’ is

not met (Baldwin & Cave, 1999). The Prime

Minister, himself, when the cost index was intro-

duced, indicated that intervention in public ser-vices would, in future, be in inverse proportion to

their (comparative) success (Blair, 1998). In

healthcare this indication has now been formalised

in two developments. First, hospitals, can now

‘‘win’’ the right to autonomy through bench-

marking; the status of independent ‘‘foundation

Trusts’’ is to be bestowed on the top perform-

ers (see news.bbc.co.uk/1/hi/health/2001047.stm);conversely ‘‘failing’’ Trusts will be franchised out



to new management teams, with bids from the

private sector allowed. Second, and most signifi-

cantly in our view 7, hospitals are now to be ex-

pected to improve their performances whileoperating on the basis of average funding.

In 2002, there was a new government policy

announcement that related to the funding of hos-

pitals. Alan Milburn, the (then) Health Minister,

announced, ‘‘Hospitals will be offered financial

incentives, paying them by results to achieve

higher standards’’ (news.bbc.co.uk/1/hi/health/

1937327.stm). Later in the same year the detail ofthis ‘‘payment by results’’ became clear. In

‘‘Reforming the NHS Financial Flows: Introducing

Payment by Results (DoH, 2002b)’’ the govern-

ment introduced a standard price tariff based on

the average cost.

‘‘The tariff will be based on the average refer-

ence cost for the relevant HRG.’’ (p. 23)

The government recognised the risk of financial

instability for those hospitals with costs still sig-

nificantly higher than the average and proposed to

give these Trusts a ‘‘period of time’’ to adjust to

being average.

‘‘The key issue of concern to the NHS in usinga standard tariff is the risk of financial insta-

bility for NHS Trusts and PCTs [Primary

Care Trusts]. Some NHS Trusts have costs

per HRG significantly higher or significantly

lower than the average. . .We see a need togive Trusts and PCTs a period of time to

bring higher costs down in line with the stan-

dard price tariff.’’ (p. 14)

This approach to funding––on the basis of the

average cost––is directed at countering the pro-

pensity of the NHS to fail to deliver enhanced care

after increased injections of cash, ‘‘. . .past experi-

7 Parliamentary debate and press speculation has focussed

much more on the matter of ‘‘Foundation Trusts’’ than on the

issue of funding on the basis of the average cost. Yet we would

argue that the latter has more significance for the governance of

health care than the former because it involves the standard-

ization of medical work.

ence has repeatedly shown that the NHS possesses

the capacity to swallow up resources without

yielding the advantages of improved services’’

(Webster, 2002, p. 235). In 2002 the governmentannounced ‘‘Billions for the NHS’’ (see news.

bbc.co.uk/hi/english/health/newsid_1933000/

1933940.stm), spending was set to increase from

£65.4 billion in 2002–2003 to £105.6 billion in

2007–2008. Scepticism over whether the additional

money would improve services was immediately

expressed. A report from the Office of National

Statistics (2002) showed that over a five year per-iod when NHS funding had increased by 25%,

services had only increased by 15%, which

‘‘. . .raises doubts over whether the extra billionspromised by the government over the next few

years will make any difference’’ (news.bbc.co.uk/1/

hi/health/1984792.stm). A further report by the

Office for Health Economics warned that, ‘‘NHS

billions may disappear. . .and that the record in-creases could be swallowed up by extra pay for

doctors and nurses’’ (news.bbc.co.uk/1/hi/health/

2282803.stm). And in the same vein, ‘‘A leaked

report from the head of the Downing Street

delivery unit suggests the health service will fail to

achieve key targets. . .because the money is notbeing spent properly’’ (news.bbc.co.uk/1/hi/health/

2637591.stm). Press speculation that the additionalNHS funds, financed through taxation, may be

‘‘wasted’’ is contributing to the government’s

enthusiasm for standards of measurement (or

metrics) to demonstrate that the money is being

spent properly.

In the UK, the shift from a ‘‘markets’’ gover-

nance approach to a ‘‘metrics’’ one has taken place

under the umbrella term of ‘‘modernizing’’. Cas-tells (2001, p. 65) posits information as pivotal to

modernizing; he describes New Labour’s ‘‘Third

Way’’ as ‘‘. . .info-capitalism with a human face

(which amounts to social democracy with an en-

hanced brain)’’. Anthony Giddens (as an early key

New Labour policy adviser) shaped the neo-liberal

‘‘modernizing’’ of New Labour. The concept was

both the starting point and a recurrent theme in aseries of government pronouncements and initia-

tives: the 1997 White Paper ‘‘The New NHS––

Modern, Dependable’’; the 1998 spending plans for

the public sector ‘‘Public Services for the Future:



http://news.bbc.co.uk/hi/english/health/newsid_1933000/1933940.stm









8 UK hospitals have ‘‘Trust’’ status. They are directly

accountable to the Secretary of State for Health but have some

freedom to manage their own affairs in the areas of capital

investment (subject to external financing limits) and workforce

planning.


Modernization, Reform, Accountability’’; the 1999

White Paper ‘‘Modernizing Government’’; the 2000

‘‘Modernization Action Committee’’; and the 2000

‘‘Modernization Agency’’. Modernization is on-going: in 2002, the government declared that

‘‘Delivering the NHS Plan’’ set out the next steps

of the modernization programme (DoH, 2002b).

Webster (2002, p. 236) points out that New La-

bour mobilised the messages of modernization and

standardization to emphasize policy differences

from the ethos of the internal market. The Prime

Minister is an enthusiast, ‘‘You have got tounderstand I am a man with a mission to trans-

form and modernize the country. . .I want mod-ernization to happen quicker, faster, better’’ (Blair,

1999, quoted in Rose, 2001). As Latour (1993, p.

10) points out, modernization comes in many

versions, but, if the concept has an essential

meaning, it designates an accelerated new regime

that achieves a break from an archaic, stable past.‘‘Modernizing’’ is a central, albeit ambiguous,

precept of ‘‘Third Way’’ politics (see Blair, 1998;

Giddens, 1998; Halpern & Mikosz, 1998; Harg-

reaves & Christie, 1998; Le Grand, 1998; White,

1998; Fairclough, 2000 for attempts to pinpoint the

content and direction of the ‘‘Third Way’’). Defi-

nitions of the ‘‘Third Way’’ are difficult as ‘‘mod-

ernizing’’ is an idea with centrifugal tendencies in itsattempt to encompass the triumvirate of ‘‘. . .man-agerialism, centralism, and localism’’ (Brooks,

2000, p. 596). Given this difficulty, information is a

convenient centripetal concept as it integrates these

three divergent themes. Informational metrics pro-

vide the operating basis for managerialism, whilst

supporting localism and feeding centralism. Gid-

dens (1990, p. 38) defines the central feature ofmodernity to be that ‘‘. . .practices are constantly re-examined and reformed in the light of incoming

information about those very practices, thus con-

stitutively altering their character.’’

Governing through metrics––to identify cost

averages––has an absolute reliance on incoming

information, as the compilation of averages takes

place in a government sponsored centre, remotefrom the participating hospitals. In(form)ation (or

‘‘forms’’ of these far-off hospitals) is required to

overcome the problems entailed by the control ‘‘at

a distance’’ exercised in such regulatory settings

(Robson, 1992). In(form)ational representation

gives the form of something in its absence (Latour,

1987, p. 243). The centre does not directly observe

the practices in hospitals but mobilises incominginformation that has translated these remote prac-

tices into forms of knowledge that the centre can act

upon. The next section looks in more detail at this

centre (and its costing regime) and, in doing so,

explores the theoretical underpinnings of the paper.

The NRCE as a data swamp, the ‘‘Index’’ as a more

mobile and combinable form, and the national

costing office as a centre of calculation and an arena

In 1998, the National Reference Cost Exercise

(NRCE) imposed a mandatory requirement on all

British Trust 8 hospitals to report their costs for a

comprehensive range of health care activities. The

resulting National Reference Costing Index(NRCI, henceforth, the ‘‘Index’’) ranks hospitals

on their relative cost efficiency by presenting a

single figure for each Trust that ‘‘compares the

actual cost for its case-mix with the same case-mix

calculated using national average costs’’ (DoH,

1998b, p. 17). An index score of 100 is an ‘average’

cost performance, whereas scores above or below

100 indicate above or below average cost perfor-mance respectively, e.g. a score of 102 reflects costs

that are above the average whereas a score of 98

may indicate a more efficient hospital performance.

As pointed out in the introduction, governance

through metrics has a fundamental reliance on

information. Donald (1991, p. 355) argues that

both the modern era and the modern mind are

especially characterized by their dependence oninfo-systems (or external memory banks). Cooper

(1990, p. 169) points out, ‘‘. . .that representation[through information] is a necessary part of the

‘knowing’ process’’; as the world is not directly

knowable, it is experienced through representa-

tions (Sayer, 1992, pp. 45–84). Yet the very famil-

iarity of representations fosters a ‘‘forgetting’’ of


the absences inherent in the representational act.

There is a tendency to assume that representations

allow unmediated access to the world and therein

lies their power. Douglas (1982, p. 37) argues thatonce a representation is accepted from the flux of

possible forms, this particular representation clar-

ifies and fixes knowledge of the external ‘‘reality’’.

Through the NCRE, hospitals become a ‘‘79’’, a

‘‘100’’ or a ‘‘121’’. A single number on a compar-

ative Index has the power to represent the com-

plexity and ambiguity of the external ‘‘reality’’ of

patient episodes, clinical procedures, activity costsand hospital performance.

In order to tabulate, compare and publish the

Index numbers for individual Trusts, the govern-

ment created the National Reference Costing Of-

fice (NRCO). This office is comparable to Latour’s

(1987, p. 232ff) ‘‘centres of calculation’’. Latour

raises two questions in regard to these centres: how

they avoid being swamped by the accumulation ofthe data they require (p. 232ff) and how they en-

sure that their calculations have some bearing on

practices in the periphery (p. 247ff).

With regard to Latour’s first question, the ref-

erence cost data set is vast; in 2002 it encompassed

2.1 million items (DoH, 2002a, p. 39). From this

huge number bank the NRCO calculates the ‘‘re-

sults’’ (the Trusts’ individual Index scores) andinforms them of their comparative performance.

The reduction of the enormous complexity of the

reference cost information to the single scores on

the ‘‘Index’’ allows the NRCO to cope with the

problem of swamping by producing the Index as

‘‘. . .another more mobile, more combinable paperform’’ (Latour, 1987, p. 234). Without this sorting,

tabulating and aggregating into more mobileforms, calculation centres would be overwhelmed

by the data supplied to them (Robson, 1994).

In respect to Latour’s second question, the

NRCO has a bearing on the practices in hospitals

even before they send their data into the centre.

The NRCO introduces both categories (HRGs)

and numbers (reference costs) into the hospital

domain. Counting, coding and costing for anaggregate measurement system, such as HRGs,

that operates away from a centre of calculation

(such as the NRCO) involves the construction of

‘‘forms’’, ‘‘measuring standards’’ or ‘‘landing

strips’’ out in the ‘‘field’’––otherwise the system

cannot ‘‘take off’’ and become operational (La-

tour, 1987, p. 253; 1993, p. 113). Latour (1987, pp.

253–254) refers to how this works in accounting,

‘‘Accountancy, for instance, is a crucial and

pervasive science in our societies. Its extension

however, is strictly limited by the few paper

forms that make accurate book-keeping pos-

sible. How do you apply book-keeping to

the confusing world of goods, consumers,

industry? Answer: by transforming each ofthese complex activities, so that, at one point

or another, they generate a paper form that is

readily applicable to book-keeping.’’

The signs and symbols of accounting are nowthe most significant financial representations of the

organizational world. Porter (1995, p. 43) concurs

(with Latour) that cost accounting systems could

not ‘‘take off’’ until production was standardized,

‘‘Accounting systems and production pro-

cesses are mutually dependent. Cost account-

ing, for example, was impossible untilmanufactured products, as well as machinery

and the workers were highly standardized.’’

In this study, the signs and symbols of

accounting are integrated with the signs and

symbols of clinical activity to transform the con-fusing hospital world of patients, doctors and

clinical procedures into a domain that can gener-

ate the HRG category. The HRG simultaneously

creates standardization in hospitals and imposes it.

The initial problem for the whole NRCE exercise

was that hospitals were such highly differentiated

places that making comparisons between them was

not possible––they were too dissimilar. But theNRCE makes hospitals more standardized

through the processes involved in categorizing and

costing clinical activities.

In order to code activities to HRG categories

and then to cost these categories, hospitals have to

render their activities and processes more com-

mensurable. Commensurability begins with pro-

cesses of integration as dissimilar categories arealigned. Integration dictates that things shall be


put together (Bernstein, 1971). The HRG classifi-

cation integrates dissimilar patients, diseases and

diagnoses into a single category (or product)

through a focus on the resource implications of theprocedures that are related to clinical diagnosis. As

de Bruijn (2002, p. 13) points out, measurement

requires that products become simple, isolated and

uniform––as clinical activities become products,

they assume a more commensurate form.

In the reference cost process, clinical products

have costs attached to them and costs, as numbers,

have integrative power, as they sum up, summariseand totalise. As the word total indicates, numbers

bring together elements that are not actually there

(Latour, 1987, p. 234). An HRG cost average

represents the division of the total costs attributed

to the HRG divided by the total number of epi-

sodes occurring within that HRG. Elements that

are widely differentiated in space and time, that

reflect both tangible and intangible aspects ofhospital performance, are all instantiated in the

total HRG category. The production of average

costs involves constructing commensurability for

both costs and activities. This commensurability

proceeds both within hospitals and between them

to accommodate the NRCO’s demands for com-

parative data; commensurability is assured as

categorisation erases local differences in favour ofuniversal distinctions (Bowker & Star, 1999, p.

240).

New Labour required hard evidence as the basis

on which to build the new ‘‘modern, dependable’’

NHS of the 1997 White Paper. The NRCO makes

‘‘facts’’ about the NHS transparent. By drawing

on these facts, the government can claim that its

policy-making with respect to hospitals is evi-dence-based rather value-based (Ham, Hunter, &

Robinson, 1995; Powell, 1997, p. 195), But facts

have to be created, constructed and accepted as

evidence so that comparisons can be made. The

NRCO ensures that the hospitals accept their

scores on the Index as universal distinctions by

presenting these scores as ‘‘facts’’. The office is

assisted in this endeavour by reminding the hos-pitals that their scores are compiled from their

own data; the NRCO merely ‘‘feeds it back to

them’’ (see later empirical section). Only after

offices such as the NRCO have put facts in place

may ‘‘factually based’’ policymaking be ‘‘. . .facil-itated, permitted and afforded. . .’’ (Latour, 1999,p. 274).

Rose and Miller (1989) comment that offices(such as the NRCO) are required to render gov-

ernment programmes of action politically accept-

able and operationally possible; they connect the

aspirations of politicians to the activities of pro-

fessional groups, such as clinicians, through con-

stituting networks or relays for the implementation

of governance norms. The government set up the

NRCO; they then, in terms of Latour’s principles(1987, p. 259), enrolled it as an ally in a network

that extends the power of government into the

clinical domain. Hence, the NRCO is a ‘‘stan-

dards’’ bureau that lies at the intersection between

public services and regulation; the task of such

bureaux is to provide governments with specifica-

tions and tolerances for various kinds of measure

(Porter, 1995, p. 27). Standards create similarityand homogeneity between organizations (Brunsson

& Jacobsson, 2000, p. 1).

But the NRCO is also an ‘‘arena’’ for the dis-

semination of the average, the norm and the

standard as an ideal. ‘‘[There] are many organi-

zations whose task is to be arenas: they should

provide information and comparisons, report and

propose initiatives for change, and generallyfacilitate exchange of experience, ideas and ideals ’’

(Sahlin-Andersson, 2000, p. 100 emphasis added).

Arenas translate non-accounting discourses and

rationales (such as those that govern the clinical

realm) into accounting ones (Burchell, Clubb, &

Hopwood, 1985; Robson, 1991). Once accounting

norms are established, they can be mobilised to act

back on the non-accounting discourses in accor-dance with the specific aims and ideals promul-

gated by the arena (Robson, 1992). Harper (2000)

provides a context for understanding norms as

ideals. He argues that conversions of ‘‘raw’’ data

into usable and acceptable ‘‘cooked’’ information

actually constitute moral transformations, as the

‘‘cooked’’ numbers exist in a moral field––they

have passed the selection ‘‘test’’ for inclusion. TheNRCO engages in such processes in order to

proffer the average cost as an ideal. The practice is

not exclusive to the clinical realm, Edwards, Ezz-

amel, and Robson (1999, p. 491) also found that


average expenditures were being promoted as

ideals in schools, where a ‘‘. . .simple correspon-dence between the norm and the normative seems

to reign.’’Costs can easily be promoted as both ‘‘norms’’

and ‘‘ideals’’ as costs express cash (and, hence,

opportunities) forgone and money is the language

that everyone understands. Through its principles,

‘. . .all distinctions of character, station, sex, age,strength, and colour. . .are dissolved’ (Buchan,2001, p. 34). Money reduces, absorbs and/or de-

nies the uncertainty that attaches to human valuesby acting as a ‘‘. . .medium through which dissim-ilar desires, needs, and expectations are somehow

made commensurable’’ (Porter, 1995, p. 86). The

promulgation of the average cost as an ideal is

intended both to reduce ambiguity in the clinical

realm and to focus the attentions of both manag-

ers and clinicians. The next sections make detailed

reference to the empirical material on which ourarguments about the average cost are based, in

order to explore ambiguity and commensurability

but, first, the research design and methodology are

explained.

Talk and text: research methodology and design

This study relies on both text and talk to pres-

ent its arguments. The question of what constitutes

a text is variously defined in the literature but‘‘text’’ is, generally, taken to be a communicative

event of some sort. Our understanding is taken

from Fairclough (1993, p. 166) who includes, as

texts, both written texts and transcripts of spoken

interaction between people. Thus a text could be a

traffic sign, a newspaper article, an academic

textbook or a transcribed conversation. We dis-

tinguish ‘‘talk’’ from ‘‘text’’ because the transcriptsof the interviews we undertook are better under-

stood as the speech acts of our interviewees rather

than ‘‘conversations’’ between them and us. We

wish to analysis ‘‘text’’ and ‘‘talk’’ in relation to

the issues of control, power and resistance that are

central to the constitution of the average hospital

but which are, frequently, masked by ostensibly

neutral language. Our research reflects, ‘‘. . .thesubtle means by which text and talk manage the

mind and manufacture consent, on the one hand,

and articulate and sustain resistance and chal-

lenge, on the other’’ (van Dijk, 1993, p. 132).

Text and talk are also central to how the NRCEhas been actively mobilised by managers and reg-

ulators to manage minds and manufacture consent

in the NHS; likewise discourse is pivotal to how

some clinicians and managers have sought to

challenge it. The New Labour government, who

initiated the NRCE, have been uniquely associated

with the use of language, rhetoric or ‘‘spin’’.

Fairclough (2000, p. vii) comments, ‘‘. . .languageis crucial to the politics of New Labour. . .thepublic relations industry. . .is at the heart of NewLabour, which calculatively manipulates language.

The phenomenon is not new, but the scale and

intensity certainly are.’’

Research methodology

We approach ‘‘talk’’ and ‘‘text’’ through dis-

course analysis, which is operationalized as a

method of textual investigation of accounts inTitscher, Meyer, Wodak, and Vetter (2000) and

Wodak and Meyer (2001). This paper draws on

both of these sources, but it is guided, in the main,

by Fairclough’s (1995) critical discourse analysis

(henceforth CDA)––as outlined as a method in

Titscher et al. (2000, pp. 144–154). CDA was

chosen over other methods of discourse analysis

(see Titscher et al. (2000) for a review of methods)as first, it is concerned with social problems (rather

than language use per se), second, it claims that

both economic and cultural dimensions are sig-

nificant in power relations, third, it focuses on

structure and agency and, fourth, it analyses both

the form and the content of texts. All of these

features are significant for this research on the

average hospital.CDA is ‘‘. . .so to speak, discourse analysis ‘with

an attitude’’’ (van Dijk, 2001, p. 96); its attitude is

focussed on power relations. Power relations are

exemplified in discourse. CDA studies both power

in discourse and how power is exercised over dis-

course (Titscher et al., 2000, p. 146). CDA also

looks at the relationships and levels of dominance

between discourses in institutions, drawing onFoucault’s (1981) ‘orders of discourse’––this is


appropriate as the articulation between the dis-

courses of medicine, management and regulation

in hospitals is of primary interest in this research.

As Titscher et al. (2000, p. 144) comment CDA is‘‘. . .far from implying a homogeneous method

within discourse analysis.’’ The approach used in

this paper reflects this diversity in using concepts

from CDA to support the theoretical concerns and

empirical focus of the research. CDA distinguishes

‘‘discourses’’, ‘‘genres’’ and ‘‘styles’’ to structure

textual investigation.

The concept of ‘‘discourse’’ refers to thelinguistic representation of specific areas of

knowledge, ‘‘[a] way of signifying experience from

a particular perspective’’ (Fairclough, 1995, p.

135),––here, medicine, management and govern-

ment policy are seen as discourses. ‘‘Genres’’ are

broader categories that may draw upon a range of

discourses and which relate to different practices

involving, ‘‘[the] use of language associated with aparticular social activity’’ (Fairclough, 1995,

p. 135), ––in this research, genres describe the

activities of information production, regulatory

management, political intervention and clinical

resistance. ‘‘Styles’’ are modes of semiotic expres-

sion that capture identities; these may frequently

have dominant role representations but also enact

personal and idiosyncratic ways of being, ‘‘Semi-osis in the performance of positions constitutes

styles’’ (Fairclough, 2001, p. 124)––in this paper,

styles express the identities of clinicians, managers

and regulators. In analysing the transcripts we

decided whether the quote under review was pri-

marily an articulation of a discourse (i.e. what the

person was saying reflected their experience from a

particular knowledge basis in management, medi-cine or government policy), a genre (i.e. the talk

was rooted in the social practice of information

production, regulatory management, political

intervention and clinical resistance) or a style (i.e.

the speech articulated the personal identity of the

speaker from within their role as a clinician,

manager or regulator).

Research design

Several sources and types of text were employedin this study. First, statistics related to the NRCE

and its associated published Index of reference

costs were collected; this documentary evidence

was obtained from the NHS Executive. Second,

access was gained to documents and working pa-pers produced within the costing divisions of the

six NHS Trusts selected as the major sites for

investigation. Third, government White Papers

and policy statements for the NHS, in general, and

the NRCE, specifically, were analysed. Fourth,

press comment on issues relevant to the NRCE

was gathered. And, finally, academic texts were

used to conceptually frame the issues under dis-cussion.

The research was also designed to analyse the

talk of the regulators, managers and clinicians who

mobilise, negotiate and challenge the NRCE. The

main tranche of interviews to record this talk were

carried out at the selected Trust sites (and in other

locations detailed below) between December 1999

and September 2000. Further follow-up interviewswere undertaken between November 2001 and

March 2002. Thirty-eight interviews were con-

ducted in total. They took place in the two

years prior to the government’s announcement of

funding on the basis of the average cost in October

2002. So, respondents were working out the sig-

nificance of the NRCE and speculating on its im-

pact before government policy became clearer.Semi-structured interviews were carried out

within each selected Trust site. The personnel

interviewed (and their designations for quotation

purposes) were: Management Accountants (MA)

involved in compiling reference costs; the Finance

Director (FD); two Clinical Directors (CD) from

one surgical and one medical specialty area; and

Information Management (IM) staff involved inproducing patient activity data. The Trusts were a

mixture of large teaching hospitals, non-teaching

metropolitan hospitals and non-metropolitan

hospitals serving more disparate, rural popula-

tions. The six sites were spread around England––

one in each of the North West, Trent, South West

and London regions, and two in the South East.

Thirty of the interviews were carried out in theseTrusts.

Several significant agencies are involved in col-

lating, interpreting and disseminating the reference

costs and health authorities use them for commis-


sioning. Therefore, eight further interviews were

undertaken with: personnel at the NRCO involved

in setting up the NRCE and with preparing rele-

vant materials and directives; finance and com-missioning personnel in selected regional Health

Authorities (HA); a senior Financial Analyst in a

large NHS Executive Regional Office (FA); and

members of a private sector healthcare bench-

marking agency (BA). All interviews ranged from 1

to 2 h in duration. They were tape-recorded and,

later, transcribed. Both researchers read all the

interviews and, then, discussed them to identify keythemes. We treated the transcripts as ‘views from

somewhere’ i.e. we took them as reflecting both the

role and personality of the interviewee.

The research method with regard to identifying

the key themes of the interviews was, broadly,

constructivist. Silverman (2001, pp. 86–87) distin-

guishes the ‘‘constructivist’’ position from both

‘‘positivism’’ and ‘‘emotionalism’’ in the followingterms:

‘‘According to positivism, interview data

give us access to ‘facts’ about the world. . .According to emotionalism. . .The primary is-sue is to generate data which give an authentic

insight into people’s experiences. . .Accordingto constructivism, interviewers and intervie-wees are always actively engaged in construct-

ing meaning.’’

In this research, the constructivist method im-

plies a focus on the interview transcripts as ‘‘con-

structed accounts’’. These accounts made reference

to ‘‘facts’’ and ‘‘experiences’’ but the primary re-

search interest was not on the authenticity of thesebut on the perspective (regulatory, managerial or

clinical) that shapes the meaning of the facts,

experiences or events retold. The research em-

ployed CDA (see above) to access and structure

perspective and meaning in the respondents’ ac-

counts.

Being average

‘‘The normal management response is to say,

‘‘You are more expensive than other people’’.

To say, in very simplistic terms, ‘‘You are

above average, please become average.’’

(CDM, T4)

The above quote is from a clinician who is

reflecting on the ‘‘everyday injunctions’’ of the man-

agement discourse to ‘‘please, become average’’.The challenge from the medical discourse is that

this is ‘‘very simplistic’’––implying that managers

do not understand the complexities of modern

medicine in the institutional setting of the hospital.

Indeed, historically, hospitals have not pre-

sented as average entities, tending to an organi-

zational norm and transparent to review at the

inter-organizational level. Webster (2002, p. 247)has described the culture of the NHS as

‘‘. . .masonic and secretive. . .’’ to an extent that has‘‘. . .the potential to undermine the essential dutyof public trust’’. This secretive culture has been

exacerbated by the complexity of the NHS. The

size, treatment philosophy and function of hospi-

tals have varied tremendously across the organi-

zational spectrum (Richman, 1987, p. 137). Aslabour intensive workplaces, hospitals encompass

three spheres of human activity: regulation; man-

agement; and medicine. Mintzberg (1997) has ar-

gued that these three have constituted fragmented

worlds whose members have ‘‘talked past each

other’’ and, hence, systemic problems, reliant on

inter-group dialogue, have not been resolved. A

research focus on discourses (see above) seeks toexplore how this is changing––through analysing

how and why regulation, management and medi-

cine are becoming intertwined.

As structural units, hospitals are divided into

specialisms. More than forty clinical specialties are

recognised; with little co-ordination between the

specialists who rule them as a collection of work-

shops (Hogg, 1999, p. 165; Strauss, Fagerhaugh,Suczek, & Weiner, 1985; Turner, 1987, p. 158).

The proliferation of specialisms, with discrete

cultures, has had advantages for doctors; it mili-

tated against an unwanted management overview

of hospital activities (Richman, 1987, p. 139). As

clinicians negotiated and influenced priorities

(Harrison & Pollitt, 1994; Llewellyn, 2001;

Morgan, 1991), hospitals have worked througha ‘‘. . .‘crazy’ patchwork of rules, power and


status. . .’’ (Richman, 1987, p. 142). In conse-quence, Seedhouse (1994, p. 99) argues that the

‘‘fortress’’ NHS has defied rational inspection.

Powell (1997, p. 5) summarises on the internaldifferentiation of the hospital: complex because

health care provision relies on a wide range of

skills; heterogeneous because it supplies a variety

of very different medical services through special-

isms; uncertain because relationships between in-

puts, outputs and outcomes are indeterminate;

ambiguous because organizational objectives are

ill defined. Review of hospital activities at theorganizational level has been impeded as much by

a lack of information as by the deliberate veiling

by clinicians of their decision-making processes;

the information window on to hospital activities

has been frosted (Klein, Day, & Redmayne, 1996).

National comparisons across hospitals have been

confounded by their differing function, size, case

mix and geographical location. Difference (withlittle information on the nature of that difference)

rather than commensurability, has characterized

hospitals. Indeed, a media report on the applica-

tion of complexity theory to the NHS declared it

to be, ‘‘. . .in a state called ‘edge of chaos’. . .’’(news.bbc.co.uk/1/hi/health/1683280.stm).

Empirical research into the extent to which

clinical practice deviates from norms both acrossand within hospitals has been limited (Fitzgerald,

Sandell, Harvey, Kelly, & Dolan, 2002) but work

undertaken supports the conclusion that clinical

services provided vary considerably and, also, that

they differ in ways that are not closely related to

patient need. Morgan (1988) concluded that length

of stay for the same patient condition varied be-

tween different areas of the country and differenthospitals. Internationally, average length of stay

for the same clinical procedure varies consider-

ably; for example, for an appendicectomy, length

of stay is 9.4 days in Germany, 4.9 days in the UK

and only 3.3 days in the USA (Baggott, 1998, p.

57). Wennberg (1988) also found considerable

variability in clinical practice and argued that this

was not related either to patient characteristics orbed supply. He concludes that the practice style of

doctors was an important and significant driver in

variations. Goncalves (2002, p. 248) in another

study of clinical variability found that, ‘‘. . .the

same procedure might last 5 min or 50 min. . .wasperformed by a nurse aid in one place and by a

specialised physician in another. The materials

employed were also different’’. These differentialpatterns in service delivery follow from the choices

made by key clinicians within professional elites.

Aside from individual choice, clinical decisions are

also influenced by the history of service configu-

ration in the hospitals concerned––resulting in a

perpetuation of idiosyncratic practice (Fitzgerald

et al., 2002).

Hence, ‘‘being average’’ is a new aim for NHSTrust hospitals. A lack of ‘‘averageness’’ in orga-

nizational terms has been compounded by the

ethos surrounding the British NHS, a rhetoric of

striving for ‘‘excellence’’ rather than aiming for an

‘‘average’’ performance has shaped public expec-

tations. The British National Health Service was

created in spirit of profound hope, ‘‘. . .theassumption behind the 1948 Health Act was thatthere existed a backlog of illness which could be

removed by a short injection of funds aimed to

restore the nation to good health after the devas-

tation of warfare’’ (Turner, 1987). As a universal,

comprehensive and tax-financed system aiming for

an egalitarian service, the British NHS was pro-

claimed, ‘‘. . .the greatest Socialist achievement ofthe Labour Government. . .’’ (Foot, 1973) andcontinues to function as a symbol that the gov-

ernment (indeed any government) cares (Hogg,

1999, p. 158). The NHS trades on its reputation as

Britain’s only immaculate institution (Klein, 1995,

p. 229). Offering the best, not supplying medioc-

rity, has been the articulated goal, ‘‘Unlike much

of the rest of the welfare state, which aims only to

provide minimum standards, the NHS is meant todeliver the best services to all British citizens’’

(Powell, 1997, p. 2). The public has wholeheartedly

embraced the myth of excellence in health care,

wanting to believe in heroic clinical interventions

and great strides in medical progress (Hogg, 1999,

pp. 162–164). Healthcare is constituted as a sacred

trust (Cybulski, Marr, Milton, & Truthwaite,

1997), and the NHS is the most publicly valuedpart of both the welfare state and the wider public

sector (Tilley, 1993). Indeed, the NHS has become

a British icon, a treasured symbol of national pride

and unity (Llewellyn, 1997). And, as the empirical



accounts below demonstrate, clinicians mobilise

the myth of excellence in health care in their

resistance to the NRCE. Yet alongside ‘‘excel-

lence’’, financial crisis has stalked the NHS sinceits inception, as, in practice, illness has turned out

to be a bottomless financial pit (Baggott, 1998;

Harrison & Pollitt, 1994; Klein et al., 1996; Rob-

inson & Steiner, 1998; Pollitt & Bouckaert, 2000;

Turner, 1987).

Being cost average

The advent of the NRCE, with its requirement

to be ‘‘average cost’’, counters the propensity of

the NHS to be a financial ‘‘black hole’’. New

aspirational talk of aiming for the average is now

evident across all the different organizational

groups involved in this study, i.e. clinicians, per-

sonnel at the National Costing Office, Finance

Directors, Management Accountants and the Pri-vate Sector Benchmarking Group. ‘‘The average’’

is part of the usual hospital ‘chitchat’––the concept

is an established part of the normal ‘‘repertoire’’

(Fairclough, 1995, p. 38) of the hospital as a

speech community. The voices that follow (from

within the management discourse) speak, in dif-

ferent ways, of the ‘‘desire’’ to be average––posi-

tioning ‘‘averageness’’ as an ambition for thehospital as a social institution.

A management accountant at the NRCO quo-

ted below underplays the office’s part in enforcing

the average. Through the use of the word ‘‘gravi-

tating’’ she suggests some power that is attracting

hospitals to a ‘natural resting place’. And the

phase ‘‘where everyone wants to be’’ indicates

that ‘the average’ is a sought-after position, in anycase.

‘‘You find everyone is gravitating to the 100

[the average]––which is where everyone wants

to be.’’ (MA, NRCO)

A Finance Director in one of the Trusts speaks

from a genre that is accustomed to working within

‘‘margins of safety’’. How far can one stray from

the average and still be in a safe place? No one

knows––because this is a piece of work that theNRCO has chosen not to undertake. Without any

secure statistical leeway (the ‘plus or minus X

percent’), the average is everyone’s objective.

‘‘What is a reasonable tolerance on the aver-age cost performance, the plus or minus · per-cent? No one knows yet because no one has

done the work. No one knows what is the

acceptable statistical variability so everyone

aims for the average.’’ (FD, T6)

A management accountant at one of the Trusts

echoes the idea of the average as a secure natural

resting place through the phrases ‘‘sense of com-

fort’’ and ‘‘not standing out too much’’. He also

emphasises the idea that being above average is

perilous; this is ‘‘obviously’’ going to set you up as

a ‘‘target’’. Also being in the ‘‘middle’’ appears tobe more advantageous than being ‘‘cheap’’––this

‘‘isn’t bad’’––but is not characterised as a good

place to be. The accountant may have passed

quickly over any consideration of what ‘‘being

cheap’’ implies both because it invites challenge

from the clinicians and can lead to interrogation

from the NRCO, if you are too cheap to be

believable (see later sections). After exploring theovert dangers associated with being expensive, he

mentions a slightly cheaper than average (99/98)

position as an alternative to the 100––indicating

that this is quite safe. He ends on the word

‘‘cosy’’––conveying the sensation of snug warmth

associated with being in the middle.

‘‘There is a sense of comfort in being aroundthe middle and not standing out too much,

being cheap isn’t bad but obviously being

expensive is going to make you a target and

it seems the standard at the moment is to be

at 100 index or 99/98––to be cosy around

the middle.’’ (MA, T4)

The next respondent is from the private sector

benchmarking agency that assists the Trusts in

their aspirations to be average, so he speaks from a

genre that takes benchmarking forward as a

practice. Like the management accountant from

the NRCO he makes oblique reference to the

processes through which Trusts become averagerather than concentrating only on ‘‘the average’’ as


an outcome state––the place to be. But instead of

indicating some innate gravitation force that nat-

urally pulls the Trusts into place, he narrates that

the Trusts have ‘‘worked hard’’ to ‘‘come down’’from being above the average. He implies that the

Trusts think carefully about where they are on the

Index, portraying them as ‘‘unhappy’’ when they

reflected on their ‘‘30% above the average’’ posi-

tion. From such a place they have asked to be

‘‘spoken to’’––clearly they need expert advice.

And, in only one year, it is possible, through active

agency (rather than reliance on gravitational for-ces) to become average.

‘‘Organizations are now more aware of their

HRG reference costs and they are keen to

be average. Just looking at the year on year

changes between between 99/00 and 00/01

where I’ve spoken to Trusts and they were un-

happy with their Index at about 30% abovethe average, they worked hard to come down

to around 89/99 [on the Index]. . .Trusts aspireto be average––average is the place to be.’’

(BA, 3)

The next respondent is a clinician. He also

stresses the ubiquity of the average and, similarly

to the benchmarking consultant, he believes thatagency rather than ‘‘gravitational forces’’ are be-

hind the move to ‘‘the average’’ but he pinpoints

the government as the agent seeking ‘‘average-

Key national reference cost statistics

1997/98 1998/99 1999/00 2000/01 2001/2002

NRC Index

rangea)33% to+62%

)33% to+86%

)37% to+74%

)46% to+112%

)39% to+99%

% of Trusts

within 10% of

the average

60% 61% 62% 58% 72%

Compiled from data in: DoH (1998b, 1999, 2000, 2001, 2002a).a This range is around the average. All index statistics presented here are based on the trimmed index adjusted for ‘market forces’

(i.e. differential regional costs). This is the index selected for comment in the published reference cost documents.

ness’’. He, also, through the phase ‘‘at the mo-ment’’ signals a hope that this may be a passing

fad. He expresses his disquiet at current develop-

ments (although he, through the use of the word

‘personally’, emphasises that this is not necessarily

the view of others––a tactic that may indicate a

degree of caution in challenging the regulatoryagenda of the government).

‘‘I think that the problem with the way things

are being generated at the moment is that they

[the government] are seeking to make every-

one as average as they can and I, personally,

don’t think that that is a good thing.’’

(CDM, T4)

By 2002, and despite a consistently reported

wide range of costs, a ‘‘clustering’’ around a re-

ported average cost, indicated in the interview

evidence above, was also evident in the reported

reference cost data––the proportion of hospitals

within 10% of the average cost had jumped to 72%

(from being around 60% over the first four years ofthe exercise). This change is evident despite the

progressive ‘‘rolling out’’ of the NRCE across all

clinical specialisms (from its start in surgery) over

the years of the initiative. In 1999 the NRCE was

extended to medicine; the year 2000 added A & E

services, some community based services and

outpatients to the scope of the exercise. In 2001

the NRCO asked for greater detail on acute ser-vices and extended coverage of community ser-

vices. Further detail on all services was required in

2002.

The above data is collated in the NRCO (seeabove discussion) and the published reports have

commented on the progressive ‘‘move towards the


average’’––particularly in those Trusts with expe-

rience in producing the data. In DoH (2001, p. 19)

it was noted that ‘‘Some NHS Trusts, particularly

those that provide their services through hospitalshave been producing reference costs for several

years. The range of scores for these providers is

more compact, from 71 to 173 [i.e. from )29% to+73%], a range of 102, which is a 10 point reduc-

tion from the 2000 Collection.’’ In DoH (2002a, p.

22) it is stated that the ‘‘overall range of costs for

NHS Trusts is 20 points lower than in 2001

showing a narrowing of the range of costs over-all.’’

The NRCO receive frequent queries from cli-

nicians who are under pressure from managers

over costs. The style of the clinician quoted below

mixes anger and arrogance with a hint of desper-

ation in the phase, ‘‘For God’s sake, we operate on

brains!’’ He is instructed by staff at the National

Costing Centre to rely on the media currency ofthe ‘‘unique centre of medical excellence’’ to justify

expensiveness.

‘‘We had someone ring up from the Trust that

came top of the Index by miles, and he said,

‘For God’s sake, we operate on brains! Our

patients are in here for two years, of course

we’re expensive. We’re the only centre in thecountry who does this kind of operation.’ So

I said to him, ‘Well, tell that to the press

and you’ll be fine.’’ (MA, NRCO)

Although there are centres that are still able to

mobilise the medical discourse of ‘‘special-ness’’

there is increasing evidence of the power of the

NRCO over the hospitals in enforcing ‘‘average-

ness’’. However, the clinicians have other modes

of resistance. The style of the clinician quoted

below conveys the identity of the regulators inthis central agency as closed, closeted and com-

plicit in their blindness to the ‘‘complexities’’ of

hospitals. The ‘‘windowless rooms’’ in the centre

do not allow the regulators to see clinical activi-

ties nor is there any transparency of the regu-

lation process. Respect is dependent on visibility

in clinical discourses (Llewellyn, 2001) and this

clinician did not exhibit much respect for theNRCO.

‘‘There are people who sit in windowless

rooms and think that things can be neatly cat-

egorised and analysed when they don’t really

know what’s going on or how complex itis.’’ (CDS, T3)

This section now turns to review conduct in

these ‘‘windowless rooms’’.

Creating cost averages in the arena

In the first quote here, the Head of the NRCOreflects on how the management genre in the

Trusts during the internal market ‘‘played the

game’’ with costs but now the regulatory genre,

under her guidance, is ‘‘very strict’’ about how

costs are constructed.

‘‘The central database is one of the things that

I wanted to do since I came here four yearsago. . .Although they had this costing princi-ple when I came, ‘cost equals price’ we all

knew that it wasn’t true. . .I worked in the ser-vice [the NHS] and I played the game as well

as everyone else out there and we were al-

lowed to play those games. . .They [the Trusts]weren’t costing on the same basis. . .I’ve beenvery strict about the costing guidance.’’(Head, NRCO)

New Labour’s desire for policy-making to be

‘‘factually-based’’ explains the government’s focus

on benchmarking ‘‘actual’’ costs. The Head of the

NRCO, quoted again below, presents the genre of

cost regulation as ‘‘hard’’ through the descriptors

of ‘‘real’’, ‘‘reconcilable’’ and ‘‘retrospective’’. Yetthe style of the government is portrayed in rather

equivocal terms, their aggression is suggested in

the phase ‘‘first hits’’ but ‘‘softness’’ and

‘‘impressionability’’ are hinted at in the phase

‘‘they liked it’’ rather than, for example, ‘‘they

were convinced by it’’.

‘‘OK, well what we were asked to do with theincoming government was to prepare brief-

ings on what they had identified in their

manifesto as being some of the things that

they wanted to go for as first hits. . .We got


instructions that they [the government] were

interested in benchmarking performance,

moving away from the internal market. . .Sowe said this is what we actually want toachieve from working with costing informa-

tion and they liked it and wanted us to devel-

op it into a consultation document. . .I thinkthe thing that won it for the vast majority of

people, who objected to costing in the internal

market, was the fact that we went to actual

costs and that we were retrospective, that it

was a good indication of what things actuallycost––that it wasn’t, ‘Well, I am going to bud-

get at this cost knowing that these budgets

may not be realistic.’––that it could be recon-

ciled to the final accounts, so it was real. . .’’(Head, NRCO)

Having won the approval of government for

‘‘real’’ (actual and retrospective, rather than bud-geted and predicted) costs, the reference cost ini-

tiative was established as ‘‘new’’ government

policy. However, as Webster (2002, p. 238) re-

marks, New Labour’s health policy is in a constant

state of flux,

‘‘One hastily contrived plan is soon succeeded

by another, sometimes involving a reversal ofdirection. As in the case of the internal market

reforms, there is evidence of competition be-

tween the Number 10 Downing Street Policy

Unit, the Treasury and Health Department

for command of the direction of policy.’’

Fairclough (2000, p. viii) comments on New

Labour’s rhetoric of reconciliation as one policy‘‘use’’ is reconciled with another––notwithstanding

that, sometimes, the ‘‘uses’’ are at variance. Like-

wise, the policy direction behind the reference cost

initiative is seen as shifting, emergent and depen-

dent on particular stakeholder positions (even

within government) as requirements, climates and

goals for the exercise change and ‘‘uses’’ accumu-

late. The policy discourse is seen as fickle from theregulatory perspective.

‘‘Unfortunately, it feels like every week policy

changes and the requirements change and

the climates change and the goal posts

change. And three years into the project peo-

ple have different views about what it (the

NRCE) is going to be used for and it isvery different from what it was when we

started––which was 98. People used it initially

or it was seen as one thing but then people

said ‘Oh’ but you could use it as another.

‘‘Uses’’, particularly from the Treasury per-

spective, are not necessarily what were con-

ceived when we did the consultation exercise

with the NHS. . .The Treasury look at it [theNRCE figures] and say ‘Why can’t you all

do it at the lowest quota [cost].’’’ (Head,

NRCO)

In this study, the process that results in the

average as an ideal begins with the selection test of

‘‘not being more than 1 percent out’’ in order for

the ‘‘raw’’ data to be translated into the published‘‘cooked’’ information (Harper, 2000).

‘‘We do a check. What I did last year was a 30

percent check on reconciling back to the final

accounts. If they were more than 1 percent

out they were sent back. Because it is fast

track information, we accept a 1 percent var-

iation. (Head, NRCO)

The arena sets the measurement protocols that

determine how and what data is supplied. Arena

officials can question the truthfulness of the data

and/or demand further information. The Head of

the NRCO points out the moral power of the

regulatory genre over the internal Trust manage-

ment discourse in this respect.

‘‘We had one Trust who told us they did lung

transplants at £2000 each, now the going rate

for a lung transplant is £25,000. We were in

contact with their Director of Finance who re-

fused to change because that was what his

management information system said. We

gave him six opportunities to change it. Healso said in a statement of complaints that

he had complied with the national costing

guidance and he was comfortable for this to

be published. So I published them, but he is


no longer the Director of Finance at that

Trust.’’ (Head, NRCO)

The Index is a mobile and combinable formthat constitutes a ‘‘ladder of success’’ (Northcott &

Llewellyn, 2003) that ranks the Trusts in order; the

regulatory genre positions this league table as a

focus for Trust concern and media attention.

‘‘It’s the Index they [the Trusts] care about.

Well, it’s a league table isn’t it. . .[It’s] theone the press always take and everyone al-ways calls it THE INDEX.’’ (MA, NRCO,

emphasis in speech)

Once in the comparative moral field of the In-

dex, evaluations of hospitals can take place,

‘‘winners and losers’’ are created, and hospitals

can ‘‘earn’’ independence as Foundation Trusts on

this basis (see earlier discussion). When the powerof the arena is consolidated as a moral arbiter,

arena officials can proselytize and extend the scope

of their endeavours. What Latour (1988, pp. 219–

228), terms a ‘‘cycle of accumulation’’ 9 is set up as

more information is gathered from new sources.

‘‘They [the NRCE national office] go on re-

gional road shows, extending reference coststo mental health or to the community or

whatever. I think that [the road shows] is

what helps them keep in touch.’’ (FD, T5)

The legitimacy of the reference cost information

produced for commissioning purposes is con-

firmed and enhanced by the source of the ‘‘raw’’

data supplied. A commissioner comments below.

‘‘The great thing about reference costs it that

it is their [the Trust’s] data. We haven’t made

it up. It is their data and we feed it back to

them.’’ (HA, 4)

9 By ‘‘cycle of accumulation’’ Latour implies the process

through which people go out, bring things (or information)

back to the centre, deposit them (or it) there and, then, set out

on a new ‘‘gathering ‘‘ expedition. Iterations of this process

ensure that the centre becomes knowledgeable about what is

happening in the periphery.

Again, the ‘‘hard’’ authenticity of the regulatory

genre is emphasised in the phrase ‘‘We haven’t

made it up. It is their data. . .’’. Significantly, the‘‘feeding’’ metaphor is introduced to convey theidea that Trusts must swallow this data (once

‘‘cooked’’ in the arena) back into their systems.

Hence, the power of the regulatory genre lies in the

‘‘feed-back’’ that they give the Trusts on their

‘‘own data’’.

Four years into the NRCE, the government

intention is to bring all areas of health care into the

exercise, to eliminate the potential for cross-sub-sidization and to extend governability to all clini-

cal activities.

‘‘You know that the Secretary of State has a

timetable by which he wants reference costs

to cover the entire range of NHS activity, that

is national policy and that is set.’’ (FD, T5)

The comprehensive ability of the regulatory

genre to capture ‘‘anything that moves’’ in the

clinical realm is underlined in the quote below. The

burgeoning power of the regulatory network

forged between regulators and politicians is ex-pressed in a cry for ‘‘help’’ from the perspective of

an information manager in one of the Trusts.

‘‘Everything that moves [now] seems to have

an HRG associated with it and, hence, a ref-

erence cost. . .a memo on some minor refine-ments [to the reference costs] was copied

from the Chief Statistician at the Departmentof Health to the Secretary of State! It’s at that

level of interest, help!’’ (IM, T2)

This section has reflected on the pursuit of

‘‘averageness’’ in hospitals and the power of the

regulatory arenas that publish these averages. Thenext section explores the complexities of con-

structing commensurability for the creation of

averages.

Constructing commensurability for averages

In order for HRGs to become operational andachieve commensurability hospitals have to first,


count activity in the same way, second, code the

same activities to same HRG categories and, third,

adopt the same measurement protocols for cost-

ing. How the regulatory genre addressed the issuesof comparability, visibility and control that relate

to ‘‘robust and reliable’’ counting, coding and

costing is considered in this section.

There are immense problems (both technical

and organizational) attached to constructing

modes of quantification that align units so that

they report measures in the same form and follow

the same measurement protocols (Porter, 1995, p.28). HRGs are costed clinical classifications and all

classification systems increase comparability, visi-

bility and control (Bowker & Star, 1999). Many

clinicians are likely to challenge measures that

make their work more transparent and controlla-

ble in managerial terms. Equally, many managers

may baulk at the increased workload that the

reference cost exercise represents and the ‘‘spot-light’’ on management that being too far from the

average cost brings about. Press comment from

both clinicians and managers on the performance

assessment framework that encompasses the ref-

erence costs has been negative. The Chairman of

the British Medical Association’s consultant

committee commented that league tables created a

‘‘pressure cooker atmosphere’’ in hospitals; theChief Executive of the NHS Confederation that

represents health service managers said that ‘‘more

robust and reliable’’ data is needed if an accurate

picture of the NHS is to be provided (news.

bbc.co.uk/1/hi/programmes/breakfast/2150539.stm).

One way of resisting the NRCE is for the Trusts

not to take the exercise ‘seriously’; the resulting

degree of variability then casts the validity of thewhole project in doubt and claims for ‘more robust

and reliable data’ can be voiced. There is evidence

that Trusts do vary in their diligence in compiling

HRG data.

‘‘ They [reference costs] are taken with differ-

ent degrees of seriousness. Some Trusts will

do a ‘‘back of the fag pack’’ calculation atthe year-end and others will work on it all

year and try to refine the process. There is

no standardization of quality as long as they

balance back to the accounts––there is no

audit on them in terms of reasonableness.’’

(FD, T4)

However, from the perspective of the regulatorydiscourse, unless hospitals comply fully with the

NRCO their comparative performance differences

cannot be identified. The current policy discourse

dictates that a state of fundamental similarity

between hospitals must be achieved; illegitimate

differences (with respect to the mode of quanti-

fication) must be erased so that significant dif-

ferences (in this case, cost efficiency) becometransparent. As Brunsson (2000a) remarks,

‘‘. . .fundamental similarities make differences trulyinteresting and measurable.’’ In the arena, per-

sonnel are very aware that their commensurability

systems are connected into a policy genre that is

ultimately backed by the power of government.

‘‘We just point out that if they [the Trust in

question] would like not to do this [conform

to the NRCE] then would they like to explain

to their Chief Executive or their Director of

Finance why they just might get a phone call

from the Secretary of State’s office.’’ (Head,

NRCO)

The paper now explores counting, coding andcosting in more detail.

Counting

HRG costing divides the total costs attributed

to an HRG by the total activity occurring within

that HRG. In order to register lower costs per

HRG there is clearly an incentive for Trusts tomeasure activity in ways that boost levels. The

basic unit of activity in hospitals is the ‘‘finished

consultant episode’’ (FCE); this category does

not always equate to an admission. Some hospi-

tals take advantage of this to count additional

FCEs.

‘‘We do a lot of orthopaedics because we havea lot of elderly people in the area. But we

count them as one finished consultant episode

right the way through from them being admit-

ted as an emergency, going under the ortho-

http://news.bbc.co.uk/1/hi/programmes/breakfast/2150539.stm

http://news.bbc.co.uk/1/hi/programmes/breakfast/2150539.stm


paedic surgeon for a new hip, the length of

stay post-operatively and then the rehab.

But in some hospitals that would be three fin-

ished consultant episodes because it would gounder one consultant when they are admitted

as an emergency, under another for the oper-

ation and then another for the rehab. Three

FCEs––when we would only count one.’’

(FD, T5)

Moreover, obstetrics gave hospitals an oppor-

tunity to boost activity levels!

‘‘We had a big problem with well babies.

When mothers gave birth some of the Trusts

were counting the mother as one FCE and

the baby as another. What if they [mothers]

had twins, would that be three [FCEs]?

(MA, NRCO)

Statistics generated by the National Casemix

Office (NCMO, 2000) show average FCEs:

admissions ratios range from 1.0 up to 1.30 for

large, apparently comparable Trusts. The table

below shows selected results for the six Trusts that

formed the focus of this research, and reveals an

almost 9% difference in activity counting.

Once an FCE has been ‘‘counted’’, it must then

have a ‘‘code’’ assigned to it. This coding aims to

attribute an FCE to a particular and unambiguouscategory.

Average ratio of FCEs to admissions for the

six studied Trusts

Total

FCEs

Total

admissions

FCE:

admissions

ratio

1 39,283 38,651 1.016

2 56,035 53,842 1.041

3 38,422 36,355 1.057

4 81,216 76,787 1.0585 22,162 20,832 1.064

6 53,876 48,649 1.107

% variation 8.96%

Coding

Bowker and Star (1999, p. 240) comment on

how all classification systems introduce an imper-ative, ‘‘. . .to abstract away from the local. . .’’ sothat all entities become the same wherever they

appear. But in following abstract rules (such as

these coding ones), actors have to translate the

general rule into terms that ‘‘fit’’ their local situa-

tion (Brunsson, 2000b). In the NRCE there is an

incentive to code to produce a result that lowers

total costs.

‘‘Anything that affects the labelling of proce-

dures will affect the cost. . .For example, ifyou are admitted into Trust X with an ortho-

paedic problem to do with your hand, they

will say that’s plastics because it’s to do

with the structure of your hand and the

appearance. But plastics is more expensivethan orthopaedics and Trust Y may code

orthopaedics for the same admission.’’

(FD, T1)

Another coding issue is how to code incomplete

procedures; if ‘‘unfinished episodes’’ are included

total costs are relatively lower.

‘‘You get the question how can someone do a

heart transplant for £200––well they can’t.

But what happens if someone is admitted

for a heart transplant and they die half way

through or they get a cold and are sent home.

So the heart transplant doesn’t carry on but

the way that the coding systems are set up

means that it’s coded as a transplant.’’(MA,NRCO)

The fundamental coding problem is that from

the perspective of the clinical genre a particular

clinical practice can be defined in several ways,

each implying a different classification.

‘‘Think of a [clinical procedure] as a prod-uct––a car, for example. You can call a car

a ‘‘car’’ and it goes in one category or you

can call it a ‘‘four-wheeled automotive vehicle

for carrying five passengers’’ and it would go


in another. It’s all a question of how you label

things. I can think of one operation we do

that could go into four different HRGs,

depending on how it’s categorised and howcomplex it’s judged to be.’’ (CDS, T3)

As coding is crucially dependent on clinical

discourses, it is particularly difficult for the regu-

lators to rationalise the coding rules and the Trusts

are aware of this.

‘‘If we don’t code as accurately as possible weare going to shoot ourselves in the foot on ref-

erence costs. But I know that we don’t spend

a lot of time trying to code to get a result. We

code for what we think is right. So if other

people are doing it differently then I’m sure

that will explain variation.’’ (FD, T5)

After coding has been completed, costs areattributed to HRGs.

Costing

Approximately 40% of hospital costs are indi-

rect (MacKerrell, 1993, p. 148). Hence, scope for

differential cost allocations will produce non-

comparable reference costs. To combat this, the

regulatory arena has tightened up on the control

of allocation methods.

‘‘They [the Trusts] shouldn’t be using different

apportionments any more, because there is a

standard set now.’’ (Head, NRCO)

However in hospitals ‘‘direct’’, ‘‘indirect’’ and

‘‘overhead’’ cost categories are not always clear-

cut, hence, raising comparability issues.

‘‘What I think that you will find is variation

on how people attribute direct, indirect and

overheads. We’ve said that there is a mini-

mum standard that should be treated as direct

but this has never been audited––that bothers

me.’’ (Head, NRCO)

Moreover, it is not always straightforward todecide how to allocate the direct costs between

different clinical ways of dealing with a certain

procedure.

‘‘For example, you have a day case area with-in the ward area. There are two ways of look-

ing at it. Either you have just a ward cost that

gets allocated just to the inpatients or the

ward costs get shared out, to a certain extent,

to the day cases as well.’’ (GMS, T4)

Basically, hospitals may take advantage of any

ambiguities within counting, coding and costing

that allow them to report lower HRG costs––so

long as this does not result in ‘unbelievably’ low

costs (from the point of view of the NRCO).

Consequently, the regulatory genre has been in-

volved in an on-going project to erase as manyambiguities as they can.

Making clinical activities ‘‘more average’’

The government introduced casemix based

‘average HRG’ payment on the expectation that

this will ‘‘. . .incentivise NHS Trusts to managecosts efficiently [and]. . .create greater transpar-ency. . .in the system’’ (Reforming NHS Financial

Flows, 2002, p. 13); they also comment,

‘‘In the past decade, there has been a growing

trend internationally towards the use of case-

mix adjusted payment for healthcare. . .Case-based payment has led to increased use ofday surgery and reductions in lengths of stay

in hospital.’’

Costing for HRGs involves building up costs

from ‘‘care profiles’’ for specific clinical procedures

(each HRG comprises a weighted average of theseprocedure costs). The table below sets out a costed

care profile for one surgical procedure within

HRG HO2. The information used to construct

these care profiles puts a spotlight on clinical

practices. In particular, the ‘‘length of stay’’ asso-

ciated with each consultant comes under scrutiny.

In the table below ‘‘length of stay’’ is clearly the

dominant cost category; it is also used as the costdriver for four other cost items.

A costed care profile for primary hip replacement within HRG HO2

Cost pool Cost driver Units of cost driver

consumed

Cost/unit £ Cost per FCE £

Ward costs Length of stay 8.84 days 137.05 1,211.51

Theatre costs Average theatre time 2.5 h 286.7 716.76

Pathology Weighted average cost 0.5 202.04 101.02

Radiology Length of stay 8.84 days 3.66 32.32

Physiotherapy Average hours 4.5 16.32 73.46Occ. Therapy Length of stay 8.84 days 4.52 39.99

Cardiomeasure Length of stay 8.84 days 0.17 1.51

Others Length of stay 8.84 days 33.41 295.35

Total cost per FCE (patient episode) £2,471.92

Source: A Trust’s Finance Department NRCE working papers, October 2000.


This type of analysis makes it clear why HRG

costing has the potential for a significant impact

on medical decisions on such issues as length ofstay. This has been particularly the case since

hospitals have been funded on the basis of average

cost. Where clinical judgement on length of stay

raises costs above the average yet appears to have

an arbitrary aspect, managers have a lever to argue

against clinical decisions.

Diversity in clinical practice on length of stay

was found in this study. The table below showsaverage length of stay (LOS) data for three of the

six Trusts in the study. Behind these ‘‘averages’’ is

LOS data for procedure W371 (primary hip replacement) within HRG HO2

Trust 1 Trust 2 Trust 3

Number of FCEs for procedure code W371 356 157 103

% of H02 activity made up of procedure W371 80% 77% 90%Average length of stay for Elective

(waiting list) inpatients

8.84 days 9.84 days 8.75 days

Average length of stay for non-Elective

(emergency) inpatients

11.89 days 12.73 days 13.43 days

Source: data compiled from Trusts’ Finance Department NRCE working papers, September 2000.

the range of individual decisions on length of stay

made by particular consultants.

One of the management accountants at

the NRCO commented on how the HRG regula-

tory genre opens up an overview of clinical prac-

tice.

‘‘I’ve worked in the NHS and I know that you

are very insular, you have to be, you only see

your own organization and it’s only when youwork here [the NRCO] that you realise that

no two clinicians do anything the same at

all, so you think in your Trust, ‘‘Oh this is a

standard procedure’’ but six miles down the

road nobody has ever heard of what you are

doing.’’ (MA, NRCO).

The availability of costs allows the clinical genre

to be interrogated and challenged from within

management discourses.

‘‘So why does Mr X [consultant] cost double

Mr Y? Our consultants are very different;

one wonders why one does far more day cases

than another and why one is far more conser-

vative at keeping patients in than another.

The useful information challenges practice


and says your cost per hernia is double what

this one is.’’ (GMS, T4)

The style of the finance director quoted below

conveys confidence in the ability of HRGs toconnect management discourses into clinical ones

in ways that will impact on the clinical genre.

‘‘My job is not to go and beat the clinicians

with HRGs but to make sure that all clini-

cians have the right information to draw their

own conclusions and to say, ‘I need to

change.’’’ (FD, T3)

Sometimes, the individual decision-making style

of the clinical genre had impacted on issues such as

‘‘length of stay’’ in rather idiosyncratic ways.

‘‘At one Trust orthopaedics was very expen-

sive and they boiled it down to one consul-

tant. He did his ward rounds before the

physio came around on a Friday afternoonand the consultant wouldn’t discharge them

until after they had seen the physio. So every

one of his patients had a 3 day longer length

of stay because none of them were discharged

until Monday. . .The nurses realised but therewas no common communication––the nurses

never got to tell anyone. But when people

start talking money, it brings it into commonterms and people start listening.’’ (MA,

NRCO)

Nurses cannot normally ‘‘talk in common

terms’’ with doctors because of the power differ-

ential between them, but money acts to mediate

the relations between individuals (Simmel, 1978, p.

174) as, ‘‘Money blurs the edges of ideas, of

groups, of personalities’’ (Bretton, 1980, p. xxvi).‘‘Talking costs’’ mediates the power relationship

between nurses and doctors. Through its facilita-

tion of social interaction, money makes possible an

ever-widening span of interdependence amongst

people; money may begin to dissolve the bound-

aries between dissimilar ‘‘communities of know-

ing’’ (Boland & Tenkasi, 1995) or ‘‘social worlds’’

(Bowker & Star, 1999; Star & Griesemer, 1989)whose members have espoused different values and

held differing status positions. Backed by the reg-

ulatory genre, costs also give leverage to manage-

rial discourses over clinical ones. Talking in cost

terms has organizational purchase:

‘‘Reference costs give managers the ability to

go to doctors and to start to beat them

around the head which is what the govern-

ment wants managers to do to doctors, for

the most part. . .now there is real power formanagers to take direct action against clini-

cians––before it was impossible––even whenyou knew that harm was occurring to pa-

tients.’’ (BA, 3)

Money, as a universal medium, incorporates

both people and things, allowing very differentpriorities to be negotiated (Simmel, 1978, p. 174;

Buchan, 2001, p. 7). Speaking from the perspective

of the health authority, the respondent quoted

below is commenting on the power and knowledge

that HRGs transfer to the managerial commis-

sioning function from the clinical domain. In terms

of ‘‘orders of discourse’’ (Foucault, 1981), the

availability of reference costs has disturbed thedominance of clinical discourses within the hos-

pital as a social institution.

Having this data [on HRGs] has given us a

weapon that we have never had before. Like

trying to get hold of simple information like

what is the average length of stay for a hip

replacement––you just couldn’t find out-now you can just go into a massive database

and pull the information off and it’s building

up over the years so you can see movements

in the costs as well. And we can find out what

is happening as you move certain procedures

down the pecking order for costs, from in-pa-

tients to out-patients to primary care––bring-

ing it closer to the patient which is what PCGs[Primary Care Groups] want to do. . .Whenyou have this sort of data it sort of opens

things up over a wide range of things.’’

(HA, 4)

Money cuts across both clinical and managerialperformance indicators by translating everything


into a ‘‘pound note sign’’. Frankel (1977, p. 7)

points out how, ‘‘Money direct[s] our attention

from a subjective to an objective realm of

thought.’’ A Finance Director comments on theobjective power of money to transcend the sub-

jective orders of discourse that characterize the

hospital.

‘‘If you look at any other indicators than

money, my suspicion is that clinicians would

do exactly what I would do, that is to take ac-

count of the things that show you where youare good in performance and quietly turn a

blind eye to anything that is inconvenient.

Translating it all into a pound note sign is

as good a way as anyone has yet devised

to look at the efficiency of the whole

system––assuming we have translated into a

pound note sign reasonably accurately!’’

(FD, T5)

As argued earlier, the founding objectives of the

NHS were to aim for excellence rather than aver-

ages (Powell, 1997) and excellence does not always

come cheap. Indeed, there has always been an

equation between high quality and high cost in the

mind of the professional service provider (Llewel-

lyn, 1998). The Finance Director comments belowon the clinical style, which is affronted by being

labelled ‘‘low cost’’.

‘‘In this Trust in the first [reference cost] index

we were low cost. That actually upset the cli-

nicians more than being high cost. We got a

lot of internal enquiries about why we were

so cheap. From the point of view of the inter-nal perspective of the Trust, being high cost is

easier to handle than being low cost.’’ (FD,

T1)

Moreover, clinicians have been accustomed to

negotiating for more resources on the basis of

‘‘. . .the money is finished, more is obviously nee-ded’’ (Brunsson, 1994, p. 326). Being low cost hasbeen problematic, from the clinical point of view,

as it has impeded advocacy for more resources––

indeed, it has resulted in resources being taken

away.

Being high cost may allow for the attainment of

high quality, on the other hand, it may afford more

organizational slack to clinicians. New Labour

have continued with the Conservative argumentthat the NHS should be judged on its outputs ra-

ther than its inputs (Powell, 1999). The doctor

quoted above has departed from the dominant

clinical discourse to adopt a more managerial

style, which focuses on ‘‘targets’’ and ‘‘efficiency’’;

the one quoted below is also speaking with a

managerial voice when he expresses his opinion

that some of his peers may not be as productive asthey should be.

‘‘While many of the consultants working in

the NHS are extremely efficient people, that’s

not true of all of us, of course. I’d say 20 per-

cent––I may be wrong––are not working as

efficiently as you would expect the average

doctor to do.’’ (CDS, T4)

The HRG classification system costs the out-

puts of the clinicians. When HRGs are higher than

average cost then this prompts a closer look at

deviation from average clinical practice. Informa-tion on activity, ‘‘length of stay’’, complications

and mortality is assessed to pinpoint wherever the

outputs of individual consultants may be incurring

these higher than average costs. Moreover, a

managerial focus on controllability points to the

direct costs incurred by clinicians as possibly

reducible in the short term.

‘‘Although scope for changes in direct costs

may be limited, that’s where there is most

scope. Indirect costs such as buildings etcetera

you can’t do anything about year on year.’’

(BA, 2)

Allsop and Mulcahy (1996, p. 107) comment on

the ‘‘rule of optimism’’ within clinical discourses

that has underwritten the myth that all doctors are

equally competent and remain so throughout their

careers. But the personal style of the clinician cited

below departs from the ‘‘rule of optimism’’ and

breaks clinical ranks by drawing attention to a

clinician whose practice is publicly assessed as lessthan satisfactory and whose professionalism is


impugned through being identified as an ‘‘opera-

tor’’.

‘‘If somebody [a clinician] isn’t prepared todeliver the standard care that is expected then

they shouldn’t be there. The problem is get-

ting into the position where you are collecting

the data and looking at it and it is not a secret.

Once you have got that you have cracked it.

We found that we have one particular opera-

tor whose complication rate was at the upper

limit of the normal range and in our weeklyaudit meeting we discussed it. . .Now we havenational audit figures to look at, we know if

we have things above the national average.’’

(CDS, T3)

As HRGs link costs and activity measures

they bring into focus multiple aspects of clinical

performance. Johnson (1995) noted that theemergent expertise in performance measurement

and monitoring had the potential to undermine

medical dominance in health care. A member of

the private sector benchmarking group, quoted

below, articulates the greater power of the mana-

gerial genre in hospitals through its imposition of

an ‘‘integrated suite’’ of clinical performance

measures. His identity as a person with leverageover the medical profession is buttressed by his

rather derogatory labelling of consultants as

‘‘dabblers’’ or as constituting a ‘‘whole tail of

people’’.

‘‘The main thrust, at the moment, is what we

call ‘clinical governance reporting’ which is an

integrated suite of performance mea-sures. . .that covers all aspects of data quality,activity by consultant, mortality rates, one-

offs against consultant––procedures that are

low volume, an example would be major

amputations, have you got some dabblers?

These are areas you would expect one or

two consultants to home in on, but quite a

few Trusts have a whole tail of people whohave been given the task of doing these. We

take a firm of clinicians and, taking two or

three indicators of performance, we ask is

there significant diversity across consultants

who are basically doing the same procedures?

We present a whole range of indicators, some

of which are clinical, some managerial. . .Andif they [the consultants] don’t believe it, wesay, it’s you Mr or Ms Consultant who are

responsible for the quality of this data, for

how it is transmitted from patient to clinician

to clinical coder. How tight is that process?’’

(BA, 1)

As indicated in the previous section, resistance

to HRGs from within clinical discourses has fre-

quently centred on data quality issues. A strong

governance aspect to HRG reference costs is that

clinicians are made responsible both for makingtheir activities ‘‘more average’’ (if average costs are

exceeded) and for the veracity of the data on which

average costs are calculated. Notwithstanding the

inherent complexities of counting, coding and

costing, clinicians are now put in a position where

they have to ‘own’ the financial metrics created for

the NRCE and be held accountable for the cost-

driving consequences of their non-average clinicalpractices.

Discussion and concluding comments

The key argument of this paper is that hospitals

are more average places as a consequence of the

introduction of HRG reference costs. The text andtalk presented here support this conclusion in

several ways. First, statistics gathered over the five

years of the reference cost exercise show that in

2001/2002 the percentage of Trusts within 10% of

the average cost jumped to 72% (having been

around 60% across the first four years); this

movement toward the average seems likely to

continue consequent upon the governmentannouncement in 2002 that hospitals are to be

funded on the basis of the average HRG cost.

Second, the talk of key players concerned with the

reference costs (regulators, clinicians and manag-

ers) indicated that they believed that hospitals

were becoming more average (in cost and practice

terms) as a result of HRG costing. Third, theo-

retical discussion on the impact of regulation,categorization, and standardization posits that


these processes result in more similarity, homoge-

neity and ‘‘averageness’’ in practices.

This ‘‘averageness’’ comes about in several ways

as peoples’ behaviour and organizational practicesare moulded so as to fit into categories (Bowker &

Star, 1999, p. 53). In the case of the NRCE, the

governing ‘‘category’’ is the HRG. To produce

HRG costs hospitals have to standardize and

simplify their ‘‘production’’ processes so that they

can count, code and cost activity in the same ways.

Once the average cost for a particular HRG across

all UK hospitals is known and funding is on thisbasis, there is political and managerial pressure on

hospitals not to exceed this average. Consequently,

it becomes more difficult for clinicians to engage in

practices that may cause costs to rise; ‘‘clinical

divergence’’ comes under scrutiny whenever an

HRG category exceeds the average.

Does the NRCE modify the behaviour of clini-

cians? The earlier empirical section, based on talk,signals so. Does text also indicate an impact on

clinical behaviour? The sheer complexity of the

factors that drive reported costs renders any

assessment of what, precisely, is resulting in the

trend towards the average very difficult. However,

some tentative conclusions are possible. Northcott

and Llewellyn, forthcoming, discussed earlier, re-

port ten different factors operating to produce costvariability. However, if reliance is placed on the

assessments of finance directors and cost accoun-

tants within Trusts on which of these ten possible

drivers of reported cost differences are most influ-

ential, survey evidence in 1999 revealed that three

factors were thought to dominate: differences in

cost allocation practices; differences in fixed run-

ning costs for hospital facilities; and variations inthe clinical practices that drive costs (Northcott &

Llewellyn, forthcoming). Evidence presented in this

paper indicates that scope for differential cost

allocation has decreased over the five years of the

NRCE, as the NRCO made more standardization

mandatory. Moreover, in the short term, possibili-

ties for decreases in ‘‘fixed’’ costs are limited. There

is, therefore, some prima facie calculative evidencethat standardization of clinical practices has played

a major part in the trend to the average cost.

Why should variability in clinical practice make

hospitals more costly? First, in hospitals, the

individual (and different) aspirations and career

goals of providers have driven the content of ser-

vices (Champagne et al., 1997) and providers had

little incentive to control costs. Rather the con-verse was the case, as providers were accustomed

to arguing for more resources on the basis of

overspent budgets and the unmet needs of patients

(Brunsson, 1994, p. 326). Moreover, in the context

of the hospital as a loosely-coupled proliferation

of very different specialist workshops (Hogg, 1999,

p. 165), ‘‘difference’’ became a platform from

which to launch individual advocacy campaignsfor additional funding. Second, clinical ‘‘produc-

tion processes’’ and ‘‘case management’’ proce-

dures have been non-standardized; there is

considerable evidence from the private sector that

the standardization and simplification of produc-

tion processes reduces costs (Ezzamel & Willmott,

2002).

Third, clinicians have made individual diagno-ses of patients based on their (differing) judge-

ments. The practice of judgement has gaps and

idiosyncrasies (Porter, 1995) and involves reason-

ing by exclusion (Abbott, 1988) as different pos-

sible solutions are tried and found incorrect. A

clinical judgement proceeds (with its associated

diagnoses, tests and interventions) until an ade-

quate ‘‘solution’’ is found. In addition, varyinglevels of clinical competence result in differential

outcomes for patients. These issues drive the

‘‘clinical divergence’’ (differing ‘‘length of stay’’,

varying theatre time and abnormal mortality and

complication rates) discussed in this study.

Judgement and differential competences (as com-

pared to standardization) are expensive.

As argued earlier, the NHS is a very high profilearea in the UK public sector and attention to

healthcare serves to demonstrate that any gov-

ernment ‘‘cares’’ (Hogg, 1999, p. 158). On the basis

of the Wanless (2002) report, the UK government

made its unprecedented financial investment in the

NHS (see earlier discussion). This funding (from

tax rises) increases the pressure on the government

to use ‘‘metrics’’ to demonstrate ‘‘results’’ in termsof better hospital performances, to show that re-

sources are flowing to ‘‘good’’ performers and to

avoid ‘‘waste’’ by directing funds on the basis of

average costs. The Prime Minister wagered his

10 Australia and New Zealand are using a ‘reference cost’

type approach to governance although their costs are based on

diagnostic related groups (DRGs) rather than HRGs. The key

difference between DRGs and HRGs is that the former

aggregates clinical activities via diagnoses, while the latter

groups them through clinical procedures.11 Information given at interview.


political future on raising standards in health-

care declaring, ‘‘Judge Me on NHS Challenge’’

(news.bbc.co.uk/1/hi/uk_politics/1941949.stm).

Will ‘‘averageness’’ raise standards in hospitals?This is a complex question that this study did not

set out to answer, being focussed on ‘‘the average’’

as a consequence of the reference cost exercise,

however some initial thoughts can be set out. NHS

performance continues to improve in terms of

numbers of patients treated; Allsop and Mulcahy

(1996, p. 128) argue that this is due to changes in

clinical practices (e.g. reductions in length of stay,increases in day cases and more intensive use of

plant). As discussed above, the government clearly

believe that funding on the basis of average costs

will intensify this trend to increased productivity,

however it may deter clinicians from meeting the

very expensive care needs of particular patients.

Patients may find day cases (and reduced length of

stay) more convenient but ‘less care’ may be ‘lessgood care’ and the latter may externalise costs-

passing them on to other agencies. Moreover, gi-

ven that the predominant performance indicator

for productivity is reduced waiting times, this in-

centivises clinicians not to prioritise the complex

and more severe cases on the waiting lists. Also,

there may be a trade off between productivity and

innovation. In the past, there was evidence thatdoctors pre-empted additional NHS monies di-

rected for service ‘‘growth’’ into continual clinical

innovation (Harrison & Pollitt, 1994; Hunter,

1980). A policy climate that relies on standards

may constrain innovation through reducing pro-

viders’ propensity to take risks (Hood, Rothstein,

& Baldwin, 2001; Newman, Raine, & Skelcher,

2001; Power, 1994a, 1994b, 1997). Also the extentto which patients may benefit from more stan-

dardised care is unclear. On the one hand, they are

protected from ill-judged idiosyncratic practice but

on the other, complex cases may require finely

tuned medical expertise. In sum, an assessment of

whether a focus on averages and standards im-

proves health services hinges on both the dimen-

sions of health care under consideration and theways in which these aspects are being measured.

The study on which this paper is based was

limited in several ways: first, the primary focus was

on costing, hence, any conclusions regarding clin-

ical practices should be regarded as suggestive ra-

ther than in any way definitive; second, although

sources of evidence comprised both talk and text, a

greater reliance has been place on the former andthe extent to which ‘talk’ is indicative of actual

practices in hospitals is uncertain; and, third, the

interviewees spoke from within a discrete time

period so their opinions and expectations are likely

to change over time. Health care is a dynamic area

and to trace the further impact of the NCRE on

hospitals clearly more research is called for. In

particular, policy development requires moreunderstanding of the impact on clinical practice of

funding on the basis of the average cost. Another

crucial unanswered policy question is whether the

‘‘average’’ can be taken as the standard for hos-

pital performance, currently, by default, it is but to

what extent is this justified?

Personnel at the National Reference Costing

Office (NRCO) reported that the UK is alone,internationally, in consistently publishing com-

parative hospital cost data on an annual basis.

There was no international ‘‘blueprint’’ from

which to develop the NRCE. 10 Given the UK’s

‘‘leading edge’’ practice in cost governance metrics

for hospitals, it is unsurprising that there has been

international interest in the NRCE. The NRCO, at

a regional office in Leeds, has presented and/oranswered questions on the NRCE to the World

Health Organization, the World Bank, and rep-

resentatives from countries as diverse as Albania,

Belgium, Canada, France, Iraq, Norway, Japan

and the USA. 11 This advocacy positions the UK

as the ‘‘first mover’’ in the dissemination of the

‘‘metrics’’ approach to hospital governance (a

striking example of a regime that equates theintegrity of public services with their transparency

of operations (Strathern, 2000)), and as a prime

instigator in the global spread of the emergent neo-

liberal values that underpin this regime.

http://news.bbc.co.uk/1/hi/uk_politics/1941949.stm


Acknowledgements

The authors gratefully acknowledge the support

of the Chartered Institute of ManagementAccountants (CIMA) for funding the study on

which this paper is based.

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the average hospital

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