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The NHS should improve the way it records data on the cost of services Monitor said yesterday. The regulator stated that costs collected from the NHS should in future be based on the actual cost of providing services for individual patients rather than the average cost.

Determining prices for NHS services will be an important regulatory lever for Monitor to achieve its core duty of protecting and promoting the interests of patients. We have set our direction of travel in: Costing patient care: Monitor's approach to costing and cost collection for price setting. It articulates an NHS that effectively costs services at the patient level from the bottom up rather than allocating costs from the top down.

At the heart of this approach is Monitor's proposal to collect Patient Level Information and Costing Systems (PLICS) data on costs from providers in 2013. This draws on data already collected by many providers and has the potential to open up opportunities for more sophisticated methods of correctly pricing patient care in the NHS.

Monitor is also proposing immediate changes to improve existing reference costs because these are expected to continue to inform prices for the next few years.

A Monitor spokesperson said: "We recognise moving the NHS to a pricing system using PLICS data is a long term aspiration despite its widespread usage by many providers. Over 80% of trusts either have implemented or are planning to implement these systems.

"We want to encourage providers to share their PLICS data with us. This collection will be voluntary and will refer to 2012/13 costs.”

We have also issued Approved Costing Guidance for stakeholder comment before 11 December to underpin the PLICS collection. The guidance will be published in early 2013 and will consolidate and streamline existing guidance into a coherent framework.

Notes to editors

• For media enquiries please contact Emma Shepherd on 020 7340 2438
• Monitor welcomes stakeholder comment on Approved Costing Guidance: A draft for stakeholder feedback by 11 December 2012. 
• Costing patient care: Monitor’s approach to costing and cost collection for price setting builds upon previous reports published by Monitor: Evaluation of the current re-imbursement system and Strategic options for costing.  Both were published for stakeholder comment and we have discussed their conclusions in a number of forums, including a Strategic Options for Costing webinar: a discussion of PwC's recommendations to Monitor with over 500 people attending. 
• Under the Health and Social Care Act 2012 Monitor's main duty will be to protect and promote the interests of people who use health care services by promoting the provision of services which is economic, efficient and effective and maintains or improves the quality of services. More information about Monitor's new role can be found here.
• Monitor's new responsibilities, jointly with the NHS Commissioning Board, include setting the prices that commissioners pay to providers for NHS-funded services.  Good cost data is essential for setting prices.
• The NHS needs better costing data if it is to cope with the challenge of improving the quality of patient care in this financially constrained environment. All health care providers should understand what drives their costs and how operational decisions will impact on costs and the quality of their services for patients.