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CHAPTER 9: VALUE FOR MONEY

Summary

How to assess value for money?

1. As stated in Chapter 1 (see paragraph 1.11), one of the objectives of this review is to:

"Assess PATH's performance in providing value for money in delivering the key outcomes agreed in June 2005".

2. Assessing the delivery of value for money requires identifying one or more comparators against which PATH's expenditure and achievements can be considered:

• The cost-effectiveness of smoking cessation;
• Smoking-related costs borne by the NHS;
• Other personal and societal costs associated with smoking;
• Comparisons with expenditure on other health improvement services;
• The benefits for the Scottish Government and Health Boards of PATH's work.

9.3 A variety of shortcomings are associated with each of the above measures, but when considered together they enable some conclusions to be reached about PATH's performance in terms of providing value for money.

9.4 It should be noted that it is not appropriate to link expenditure on PATH with decreases in national smoking rates. Smoking rates have been falling steadily in recent years, from about 45% in Scotland in the late 1970s ⁵³ to their current levels (in 2003/04) of about 27% (see paragraph 3.3). Rates have fallen steady during PATH's lifetime, including during the period when its key outputs were being prepared. The main impact of its work is only starting to influence the delivery of smoking cessation services, and this is at a time when all providers of smoking cessation services believe that they will be working mainly with hard-to-reach smokers. Indeed, even with PATH's work, the rate of decrease in smoking rates may slow in the future as services try to influence the behaviour of 'hard core' smokers. However, there is no way of determining what would have happened to smoking rates in the absence of PATH.

PATH budgets, income and expenditure

9.5 Table 9.1 summarises PATH's budgets, income and expenditure in 2005/06 and 2006/07 and for the first three months of 2007/08. It also includes budgetary information for the first six months of 2008/09 (as underspent funds have been extended to cover this period).

Table 9.1: PATH budgets, income and expenditure: 2005/06 - 2008/09

Source: ASH Scotland

9.6 Although the vast majority of each year's funding comes from the Scottish Government, limited amounts are provided by NHS Health Scotland and from student fees and training courses.

9.7 Tables 9.2a and 9.2b summarise the amounts spent each year on PATH's main functions. It shows that the reduction in total expenditure (from about £720,000 in 2005/06 to budgeted expenditure of about £565,000 for 2007/08) is due to ending the funding for supported projects. Some projects have repaid unspent allocations to PATH in 2007/08. Expenditure on Training and Development (T&D) has increased each year (from about £200,000 in 2005/06 to budgeted

expenditure of almost £330,000 for 2007/08) as the accredited courses have been introduced across Scotland. Expenditure on PATH excluding T&D has remained relatively constant (at about £230,000 - £270,000). The values of the percentage shares reflect these changes.

Table 9.2a: PATH's expenditure by main function: 2005/06 - 2008/09 (£)

* includes publications and dissemination
Source: ASH Scotland

Table 9.2b: PATH's expenditure by main function: 2005/06 - 2008/09 (% shares)

* includes publications and dissemination
Source: ASH Scotland

9.8 Table 9.3 focuses on the two main elements of PATH expenditure during its second tranche of funding - PATH excluding training and development, and training and development. The majority of expenditure on these two functions was on salaries (between about two-thirds and three-quarters), with most of the rest of the expenditure (just over one-fifth) being on infrastructure costs. As expected, travel costs account for a greater proportion of training and development expenditure than for expenditure relating to other PATH activities (4.5% compared with 0.5%), but nevertheless are responsible for less than 3% of expenditure on these two functions.

Table 9.3: Actual expenditure during 2006/07 on PATH's two main functions

* Other = premises/furniture, hosting of meetings, development and resources etc, and depreciation
Source: ASH Scotland

9.9 The above tables show that annual expenditure by PATH is relatively modest, with a budget of about £565,000 for 2007/08. To determine whether or not this offers value for money, it is necessary to identify some comparators. These are discussed below.

Costs of smoking to the NHS and others in Scotland

9.10 Despite searching a number of key databases ⁵⁴, very little has been published on the costs of smoking to the NHS. The following paragraphs explore a variety of ways of estimating the costs associated with smoking to the NHS in Scotland.

9.11 Buck et al (1997) ⁵⁵ estimated that the NHS in Scotland spent £140 million on hospital treatment for diseases caused by smoking. Uplifting this to 2006/07 values using the Hospital & Community Health Services Pay and Price Index ⁵⁶ indicates a cost of smoking to the NHS of just over £200 million. Given that there were an estimated 1.05 million adult smokers in Scotland in 2005/06 (see paragraph 3.1), this equates to annual NHS expenditure of about £190 per smoker based on costs uplifted to values for 2006/07.

9.12 In an article in the British Medical Journal on the economics of smoking cessation, Parrott and Godfrey (2004) ⁵⁷ state that:

"Smoking imposes a huge economic burden on society - currently up to 15% of total healthcare costs in developed countries".

9.13 The annual Costs Book⁵⁸ presents information on expenditure on hospitals and community care by 16 Health Boards (the 14 regional Health Boards and two special Boards - the State Hospital and the Golden Jubilee National Hospital ⁵⁹). Costs Book 2007 shows that their total operating costs in 2006/07 were £7,800 million. The majority of this expenditure (60%; £4,700 million) was on hospital services. Family health services accounted for just over a quarter of their expenditure (27%; £2,100 million) and community services were responsible for the remaining expenditure (13%; £1,000 million).

9.14 If it is assumed (possibly conservatively) that 10% of total hospital expenditure in Scotland is due to smoking-related conditions, this equates to smoking-related hospital expenditure of £470 million in 2006/07. This gives an average annual cost of about £450 per smoker for hospital services.

9.15 If it is assumed that 10% of all of the £7,800 million operating costs of the 16 Health Boards included in Costs Book 2007 are due to smoking, this indicates that annual NHS expenditure is about £740 per smoker in 2006/07.

9.16 An alternative approach is to consider the cost data for inpatient hospital cases for 2006/07 in Costs Book 2007, which are shown in Table 9.4:

Table 9.4: Inpatient numbers and average costs by hospital type: 2006/07

Source: Scottish Health Service Costs 2007 (Costs Book 2007)

9.17 If it is assumed that 10% of the total inpatient cases are admitted for smoking-related conditions (i.e. 87,420 cases), and that the average cost per inpatient case is £2,400, then NHS expenditure on inpatients with smoking-related conditions was about £210 million in 2006/07 (which equates to about £200 per smoker).

9.18 These different calculations give a range of annual expenditure by the NHS in Scotland on smoking-related services of £190 - £740 per smoker.

9.19 A more recent study published by NHS Health Scotland considers the health and economic impact of the regulation of smoking in public places. ⁶⁰ It combines a literature review with a modelling exercise to consider:

• The health impacts of exposure to environmental tobacco smoke ( ETS) or passive smoking;
• The impact of restrictions on exposure levels;
• The impact of restrictions on tobacco use behaviour;
• The economic impacts of restrictions on the hospitality sector;
• The costs of workplace smoking;
• The costs of smoking-related diseases.

9.20 This study focuses on the health and economic impacts over a 30-year period so that the full effect of health impacts are realised. Furthermore, the data tend to be highly aggregated. Nevertheless, the study highlights some of the wider societal impacts of smoking, including its effects in the workplace, such as productivity loss, absenteeism, fire hazards, and cleaning and redecorating costs.

9.21 In terms of consumer spending on cigarettes, the Office for National Statistics ⁶¹ calculated that in 2006 the average Scottish family spent £39.60 on food, £6.90 on cigarettes and £6.70 on alcoholic drinks every week. The Tobacco Manufacturers Association ⁶² calculated that people living in Scotland in 2007 who smoke 20 cigarettes a day pay an average of £5.23 per packet, adding up to £1,908 over a year.

Expenditure on smoking cessation and other NHS health improvement services

9.22 Although comparisons must be undertaken with considerable caution, expenditure on smoking cessation across Scotland is significantly less than expenditure on drug treatment services and on alcohol misuse. For example, the Scottish Budget Spending Review 2007 ⁶³ shows planned expenditure on tobacco control of £13.8 million per year for 2008/09 - 2010/11 (see paragraph 3.30), whereas planned expenditure relating to alcohol misuse is £32.4 million in 2008/09, £42.4 million in 2009/10 and £47.4 million in 2010/11. ⁶⁴

9.23 Undertaking comparisons of substance abuse mortality in Scotland is fraught with problems. However, various studies suggest annual figures of:

• 13,500 smoking-related deaths (2004); ⁶⁵
• 2,372 alcohol-related deaths (2005); ⁶⁶
• 421 drug-related deaths (2006). ⁶⁷

9.24 In 2003/04 the Scottish Government provided £28.8 million of direct funding to support drug treatment and rehabilitation services. ⁶⁸ This comprised:

• £17 million 'ring-fenced' treatment funding through NHS Boards;
• £6.8 million for drug rehabilitation within local authority Grant Aided Expenditure;
• £2 million to support criminal justice treatment interventions in the community;
• £3 million for prison-based treatment.

9.25 In addition to this, the 2003/04 Corporate Action Plans from the Drug Action Teams estimate additional spending on treatment and rehabilitation services of some £13.5 million by NHS Boards and around £13 million by local authorities, although some of this focused on tackling both drugs and alcohol misuse. £2.2 million was also made available for local projects to encourage drug users back into training and employment. ⁶⁹

9.26 Even though these figures do not provide a comprehensive overview of total expenditure on smoking cessation and tobacco-related services, alcohol misuse services and drug treatment services, they nevertheless suggest the amount of money invested in tobacco and smoking cessation services is relatively modest when compared with other areas of substance misuse, especially when the associated annual mortality data are considered. However, it is also recognised that alcohol and drug misuse have significant societal impacts (e.g. on crime).

Efficiency and cost-effectiveness of smoking cessation interventions

9.27 While it was not the purpose of this review to undertake a review of the literature relating to the cost-effectiveness of smoking cessation interventions, a couple of examples are provided below to illustrate their relative effectiveness.

9.28 A study by Buck et al (1997) published by the Health Education Authority in 1997 ⁷⁰ estimated that the costs per life year gained through a variety of smoking cessation interventions ranged from £21 to £711 when costs to the NHS and smokers were taken into account. Few medical interventions of any kind have the potential of smoking cessation to deliver such cost-effective health gains. ⁷¹

9.29 This finding is reinforced by a paper by Raw et al (2002) ⁷² which stated that:

"Smoking cessation interventions are more cost-effective than many medical interventions. Medical interventions cost on average £17,000 per life year gained, whereas smoking cessation interventions cost between £212 and £873".

Discussion and Conclusions

9.30 Although it is not possible to attribute reductions in smoking - and their associated cost savings to the NHS - directly to the work of PATH, smoking-related diseases are nevertheless a major area of NHS expenditure. By contributing to reducing smoking rates, PATH would appear to offer considerable value for money.

9.31 As well as having a significant effect on NHS costs - with an estimated range of annual expenditure by the NHS on smoking-related services of £200 million to £780 million (i.e. £190 - £740 per smoker) - smoking also has societal effects through its costs on workplace productivity and absenteeism. Furthermore, smokers can spend a considerable proportion of their weekly household income on tobacco.

9.32 When compared with expenditure on other types of substance misuse (i.e. alcohol and drugs), annual government expenditure on services relating to tobacco misuse is relatively low, especially when the effects on mortality are considered. Furthermore, in terms of costs per life year gained, studies show that smoking cessation services are highly cost effective.

9.33 Although some Health Boards have developed their own training materials, there is no doubt that considerable economies of scale are associated with central development and provision of a range of training courses by PATH. Central provision should also ensure consistent, high quality courses are available to professionals from a variety of services across Scotland (including social care, education, youth work, pharmacy and dentistry).

9.34 Central provision also promotes equity across all Health Boards, as smaller Boards may lack the internal resources and expertise to develop their own training materials.

9.35 Many stakeholders pointed out that although monies have been allocated to Health Boards for smoking cessation work, budgets are often very tight and money for training is often one of the first areas to be reduced (especially if travel costs are high). Local delivery can widen access to such training.

9.36 Although the benefits of the MDS, national database and the findings of the supported projects have yet to have a significant impact, there are strong indications that these will help to promote the delivery of more effective and cost-effective services in the future.

9.37 All of the material discussed above suggests that PATH has delivered excellent value for money since 2005. In addition, one of the strongest themes to emerge from the stakeholder interviews was the view that the "real work" is about to start, as services try to engage with traditionally hard-to-reach groups and communities. Many respondents felt that considerable potential benefits would be lost if PATH funding were to cease in 2008 (which in turn would undermine the cost-effectiveness of the investments made to date). Comparisons were made with expenditure on HIV/ AIDS services, where funding was reduced prematurely in terms of its effectiveness.

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