Value and funding

What is the current state of value and funding?

Pathology activity is rising, but the system does not yet have a consistent national framework for defining, counting, costing or pricing tests. Funding remains fragmented across block contracts, local arrangements, ad-hoc programme allocations and wider NHS Payment Scheme flows. These arrangements can support stability, but they often weaken visibility of cost, activity, investment decisions and reinvestment routes.

Available benchmarking shows material variation in cost and productivity between service models. Some of this reflects genuine differences in operating maturity, procurement discipline, automation and workforce deployment. Some reflects inconsistent test definitions, incomplete cost capture, variable managed service contract scope and local accounting practice.

The value challenge is therefore not simply to reduce cost per test. It is to make the true cost of safe, timely and resilient testing visible, and to understand whether operational integration is improving value when quality, access, workforce sustainability and resilience are taken into account.

What are the key challenges?

Current arrangements make it difficult to distinguish the cost of delivering activity from local funding arrangements and wider payment flows; to compare productivity fairly; or to determine whether apparent efficiency reflects better operating practice, different case mix, under-reported overheads or local accounting practice.

This weakens the basis for value improvement and for any future tariff or activity-based pricing framework. Prices cannot be set safely without standardised activity definitions, fully loaded cost data and safeguards for quality, workforce and resilience.

The scale of the opportunity is material. Scenario modelling for this review indicates that aligning most activity to benchmarks associated with fully integrated service models could release an indicative efficiency opportunity of around £450 million per year, with a cumulative opportunity of approximately £1.4 billion by 2029/30.

Benchmarking also indicates a material workforce productivity opportunity. Scenario modelling suggests that tests per FTE could improve by around 27%, and potentially up to 50%, where services combine fully integrated service models, role redesign, automation and digital tools. Skill-mix analysis points in the same direction, with fully integrated service models delivering higher weighted activity per advanced scientist than partially integrated or non-integrated models.

These figures show why better value and funding infrastructure matters. They are conditional planning estimates, not savings, but a reinvestment opportunity to enable Pathology services to sustainably meet healthcare demands in the decades to come, invest in training and development, whilst controlling costs.

How can these challenges be addressed?

The first requirement is to make value measurable. This means standardising test definitions and activity counting, creating comparable cost and activity data, developing fully loaded service-model costing, and distinguishing the cost of delivering activity from local prices, charges and funding flows.

Tariff or activity-based pricing should then be tested cautiously, not implemented as a full national model. It should start where definitions and costing boundaries are robust, be linked to quality, access, workforce and resilience safeguards, and include clear routes for reinvestment. Its purpose should be to make cost, activity and value visible enough to support better service-model decisions, not to impose a national savings mechanism on pathology.

What improvements would integrated service models bring?

Completed operational integration can improve value by enabling standardisation, procurement discipline, automation, digital maturity, workforce redesign and better use of scale. It can also make it easier to compare productivity and reinvest benefits across the service model.

These benefits are conditional. Integration will not improve value if activity remains inconsistently counted, costs remain partially captured, local prices remain opaque, or efficiency gains are extracted without protecting quality, access, workforce and resilience.

Core conclusion

Value and funding reform is therefore a case for transparency, accountability and reinvestment. Pathology cannot manage improvement consistently while activity, cost, price and funding remain opaque. The purpose of reform should be to make the value opportunity visible and deliverable through completed operational integration, while protecting quality, access, workforce and resilience. It should support service-model improvement and reinvestment, not become a blunt mechanism for extracting savings from pathology.