In the Model Hospital, we apply the 'market forces factor' (MFF) to some metrics, to take account of the fact that local costs such as wages, land and buildings are different depending where you are in the country. So for example, the cost per 'weighted activity unit' (WAU) is adjusted for the fact that buying some land might cost more in the middle of London than elsewhere.
The MFF we use is the scaled underlying MFF from reference cost data. The reference cost data contains information submitted by each trust about how much it costs them to provide health care to patients, and gives the national average costs.
The MFF takes the form of an index. This allows a provider’s location-specific costs to be compared with every other organisation. It is also used to compensate providers for the cost differences of providing healthcare in different parts of the country.
The index always has a minimum value of 1.00. The MFF payment index operates as a multiplier to each unit of activity. For example:
- A patient attends an NHS trust for a first outpatient attendance, which has a national price of £168
- The NHS trust has an MFF payment index value of 1.0461
- The income that the trust receives from the commissioner for this outpatient attendance is £176 (£168 x 1.0461)