Investigating the relationship between costs and outcomes for English mental health providers: a bi-variate multi-level regression analysis

Original Paper


Provider payment systems for mental health care that incentivize cost control and quality improvement have been a policy focus in a number of countries. In England, a new prospective provider payment system is being introduced to mental health that should encourage providers to control costs and improve outcomes. The aim of this research is to investigate the relationship between costs and outcomes to ascertain whether there is a trade-off between controlling costs and improving outcomes. The main data source is the Mental Health Minimum Data Set (MHMDS) for the years 2011/12 and 2012/13. Costs are calculated using NHS reference cost data while outcomes are measured using the Health of the Nation Outcome Scales (HoNOS). We estimate a bivariate multi-level model with costs and outcomes simultaneously. We calculate the correlation and plot the pairwise relationship between residual costs and outcomes at the provider level. After controlling for a range of demographic, need, social, and treatment variables, residual variation in costs and outcomes remains at the provider level. The correlation between residual costs and outcomes is negative, but very small, suggesting that cost-containment efforts by providers should not undermine outcome-improving efforts under the new payment system.


Mental health Costs Outcomes Bi-variate model Multi-level model Provider performance 

JEL Classification

C55 I18 



This work is funded by a Centre for Health Economics (University of York) PhD Studentship held by Valerie Moran. Under a Data Sharing Agreement with NHS Digital the MHMDS dataset is released on condition that it is not shared with any third party. Copyright © 2011/2012–2012/13, re-used with the permission of NHS Digital. All rights reserved.


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Copyright information

© Springer-Verlag GmbH Germany 2017

Authors and Affiliations

  1. 1.London School of Hygiene and Tropical MedicineLondonUK
  2. 2.Centre for Health Economics, University of YorkYorkUK

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