Service Level Agreements
Ref No: BFCR(98)4
3 Basis of Funding/Budgeting
4 Cost Analysis
5 Service Level Agreements - Content
6 Service Level Agreements - Commissioner/Service Deliverer Agreements
Board of Faculty of Clinical Radiology
The Royal College of Radiologists
38 Portland Place
London W1N 4JQ
Telephone 020 636 4432
Fax 020 323 3100
Board of the Faculty of Clinical Radiology
The Royal College of Radiologists (1998)
Service Level Agreements.
Royal College of Radiologists, London.
ISBN 1 872599 39 7
RCR Ref No BFCR(98)4
©The Royal College of Radiologists, August 1998
This Publication is copyright under the Berne Convention and the International
All rights reserved.
One of the present mechanisms of funding Departments of Clinical Radiology
will change with the demise of fundholding general practices. However, as
set out in the White Papers1, the
separation of commissioners and deliverers of healthcare remains a cornerstone
of the new Government's policy. Although individual general practitioners
(GPs) will not be purchasing radiology services, the present trend for fundholding
practices to join together as consortia for purchasing or commissioning
healthcare will be consolidated as part of the Government's plans. These
primary care consortia will commission healthcare for populations of around
100,000, and the majority of large hospitals will, therefore, be dealing
with at least four, and often more, commissioning consortia. The new policy
also focuses the consortia commissioning process on clinical conditions,
so that purchasing will be centred on clinical specialties, for example
gastroenterology and cardiology. It is therefore the view of The Royal College
of Radiologists (RCR) that the principles behind service level agreements
remain important and significant.
The RCR is fully aware of the pressures under which radiologists are working
at the present time. It is hoped that this document will act as guidance
for Departments of Clinical Radiology in managing their workload and in
ensuring that the appropriate funding is transferred from clinical groups
and from purchasing consortia to departments. The College believes that
the management of workload and related costings through service level agreements
will assist radiologists in their discussions with management, and help
purchasing consortia to enable appropriate resources to be provided for
the imaging services. Current RCR guidance will also provide assistance.
Clinical Radiology Quality Specification for Purchasers2
establishes criteria for service specification, operational standards, standards
for the requesting and reporting of radiological examinations, and equipment
and statutory requirements. Contracting in Clinical Radiology3
provides a discussion of different contracting methods and a template service
I would like to thank on behalf of the Faculty Board Professor Iain McCall
for his work in writing this document, and also to acknowledge the contributions
of members of the Clinical Radiology Regional Chairmen's Committee.
Professor Jamie Weir
Board of the Faculty of Clinical Radiology
1.1 The change of Government has led to a shift in policy within the NHS,
reducing the emphasis on business management of hospital services, and increasing
the emphasis on clinical efficacy. There has also been some expansion of
funding for the National Health Service, but this is likely to have a limited
effect in alleviating current pressures. Cost-effectiveness will therefore
continue to have a major role in the delivery of health care.
1.2 The concept of service level agreements is reinforced by the White Paper1,
which specifies that agreements between Health Authorities and Primary Care
Groups and NHS Trusts on the service to be provided for a local population
should replace the annual contracts of the internal market.
1.3 The aim of establishing a service level agreement is to manage the workload
of a Department of Clinical Radiology in an orderly and efficient way, which
is linked to the facilities and resources available on a planned rather
than a random basis. Pre-planning of work volumes should enable Departments
of Clinical Radiology to manage the flow of patients and to respond to changes
in clinical practice. Commissioning procedures should be developed so that
budgets and workload are negotiated in realistic ways, in that:
- the Department of Clinical Radiology's budget should reflect the true
cost of the work undertaken;
- this should be recognised in the contracting process with commissioners;
- the appropriate funds should be transferred to the Department of Clinical
1.4 The RCR is under no illusion with regard to the difficulties involved
in managing service level agreements as new money is rarely available for
extra workload. Nevertheless, it is important, in terms of clinical effectiveness
and achieving high standards of patient care, that departments are not overloaded
and that the agreed workload is managed and monitored on a regular basis.
In the absence of additional resources being provided for excess work or
- the service provision must be reviewed by the Department of Clinical Radiology;
- the consequences of the situation should be carefully considered and discussed
within the Department of Clinical Radiology;
- a clear policy for setting priorities and managing unmet need should be
1.5 All service level agreements should take into account the principles
identified in the RCR advice on risk management4
2.1 Achieving a balance between the resources available to undertake the
work and the level of workload is fundamental to departments that provide
a service to others.
2.2 A service level agreement enables the clinically requesting group and
the radiological deliverer of the service to agree the amount of work that
is possible for an agreed budget and, in particular, to agree the quality
of the service that is to be provided. More fundamentally, it also contains
an agreed mechanism whereby a shift in the workload, or a change in casemix,
will result in a variation of either: (i) the amount of income transferred
from the commissioner of the service to the Department of Clinical Radiology;
or (ii) the agreed workload.
2.3 It is clearly important that a service level agreement is understood
to be enforceable by either party.
3 Basis of Funding/Budgeting
3.1 There are a number of ways of providing the budgets for Departments
of Clinical Radiology. They vary in their sensitivity to workload3.
3.1.1 Item-for-service budgeting
Within health provision, the Department of Clinical Radiology is a service
deliverer. Where each item of service is paid for on an individual basis,
accurate cost analysis of the service delivered will set the correct price
for the work.
In radiology, item-for-service budgeting takes place within the private
sector. The workforce can be expanded or contracted according to the workload,
and the quality of the service delivered can be costed and recompensed.
In the National Health Service, however, the number of transactions undertaken
per day is so large, and the complexity of the funding is so great, that
a complete item-for-service system is not at present feasible. A small sector
of GP fundholders may use the item-for-service system, but the majority,
even in this group, has more broad-based workload contracts.
3.1.2 Health related groups
The total caseload of the hospital is divided up into groups of conditions,
and the treatment of these conditions is costed. There will be a slice for
radiological investigations, and the total cost will represent the contract
price for the group of conditions. The commissioning bodies, be they GPs
or health authorities, would then contract for a specific number of cases
within each group, and the payment to the individual hospital would cover
the total cost of those cases. In these circumstances, it would be expected
that: (i) the Department of Clinical Radiology would be directly reimbursed
for their component of the cases; or (ii) this would be part of the formulation
and content of a block radiological budget.
3.1.3 Cost and volume contracts
Cost-and-volume contracts represent a less sophisticated version of health
related groups. A clinical specialty service or commissioning group may
agree to contract for a block of work at a specific price, which may be
variable in its content, but which would be agreed on the basis of an average
costing of the casemix, and an agreed volume of work.
3.1.4 Top-sliced budget
Finally, the least sophisticated means of funding Departments of Clinical
Radiology is a top-sliced budget, which is usually historical and reflects
the expenditure of the department. This type of funding does not have a
clearly defined income stream and is not formulated with a direct relationship
3.2 In all budgeting arrangements apart from item-for-service budgeting,
a change in workload influences expenditure and affects the agreed budget,
and a service level agreement should be applied between the commissioner
of the service and the service deliverer.
3.3 The most usual arrangement is a hybrid, where the total departmental
budget is made up of all types of income, including historical spend, income
from private patients, GP consortia contracts and regional specialty consortia.
Health Authority or consortia commissioners may make special contractual
arrangements for specific services, such as magnetic resonance, outside
of the overall departmental contract.
3.4 In the majority of Departments of Clinical Radiology within the NHS,
the use of service level agreements appears to be unusual, despite the fact
that most Trusts have types of service level agreements of varying sophistication
with their commissioning Health Authorities for other clinical services.
4 Cost Analysis
4.1 In order to negotiate and conclude a viable service level agreement,
the cost of providing the service must be analysed. Inevitably this will
involve a considerable amount of work, and it would be expected that the
finance department of the Trust would provide appropriate financial support
to fund the initial work and to enable the smooth running of the service
4.2 Cost accounting is an essential tool in accumulating relevant cost data.
It is one of the basic components in evaluating the use of resources in
order that an appropriate service level agreement may be concluded. It assigns
costs to the smallest segment of a business for which meaningful costs can
be calculated, and serves as a database for decision-making and planning.
4.3 Costs can be divided into: (i) fixed costs, which remain constant despite
volume; and (ii) variable costs, which change proportionately with changes
in volume. Other features, such as differential costs (costs that change
as a result of certain decisions) and opportunity costs (economic resources
that have been foregone as a result of accepting one alternative instead
of another), are of less importance with regard to service level agreements.
4.4 Before implementing cost accounting, it is important to decide the level
of accuracy required. Complicated systems ought to be avoided. In developing
such a system it is important to concentrate on the major cost factors,
but the level of detail depends on the accuracy that is required of the
data. Most of the data required can be extracted from examination lists,
inventories and budget sheets.
4.5 Direct costs
These should include the cost of utilised capital, which includes the buildings,
staff, radiological equipment, furniture, and a variety of other equipment.
4.5.1 Capital charges
The costing of x-ray rooms is based on the capital charges, which are divided
into depreciation and interest on building and equipment.
- 18.104.22.168 Buildings
Depreciation of the x-ray rooms is over 30 years and is based on the valuation
of the District Auditor. It can be apportioned over a sessional basis, extrapolating
for the whole year.
- 22.214.171.124 Equipment
The period over which the depreciation for equipment should be calculated
has been recommended by the RCR3.
The cost of equipment may be apportioned either on a block basis or on a
case-by-case basis. Multipurpose general radiological equipment may be apportioned
relative to the radiographer time taken for the examination, or alternatively
by distributing the cost evenly to the total number of examinations performed.
Clear allocation of equipment costs can be made for computed tomography,
ultrasound, nuclear medicine and magnetic resonance.
Labour costs of radiologists and radiographers for the time spent performing
the examination should be included. The radiologist and radiographer costs
are based on the time required for specific examinations.
- 126.96.36.199 The radiologist's time would include:
- assessing the referral;
- performing any clinical examination required;
- performing the examination;
- interpreting the films;
- dictating the report where appropriate;
- demonstrating the case to the clinicians.
- 188.8.131.52 The radiographic time includes:
- guiding the patient to the examination room;
- making preparations for the examination;
- undertaking or assisting with the procedure;
- ensuring an appropriate record is made of the examination;
- caring for and guiding the patient after the examination.
4.5.3 Other direct costs
These should include the examination's specific material and equipment costs,
including costs such as film, contrast, drugs, catheters and dressing packs.
These can be examination-specific, or averaged for certain types of examinations
4.6 Indirect Costs
These should include labour costs of radiologists' and radiographers' time
spent on tasks other than actual examinations, which can be distributed
evenly per examination.
The costs of other personnel, including administrative staff and clerical
staff and also postgraduate training costs, should be distributed either
evenly per examination, or in proportion to the direct radiologist and radiographer
Equipment service costs and items, such as furniture and auxiliary equipment,
should be evenly distributed per examination.
Hospital indirect costs are usually allocated to the Department of Clinical
Radiology, although the department cannot influence them significantly.
Effort should be made to identify the appropriate degree of apportionment
between hospital departments if there is significant variability in the
use of hospital resources.
Where a number of minor cost factors exist, they may be assigned to a general
4.7 Inevitably, radiology services carry some excess capacity, to deal with
a variable service demand, and the contents of the service depend on patient
4.8 The cost of introducing and maintaining a cost accounting system will
be excessive if each and every cost item has to be entered by category of
service. For departments with a wide examination mix, the process should
be started by allocating the most important cost factors, such as personnel
and equipment costs for each examination, in proportion to actual usage,
followed by other cost factors such as materials used by examinations and
general clerical and overhead costs.
4.9 No UK standards for costs of radiological examinations have been published,
although the Cost Diagnostic of the Audit Commission5
applies time elements for radiologists and radiographers to individual examinations.
4.10 Departments of Clinical Radiology wishing to develop meaningful service
level agreements based on appropriate budgets must undertake the process
of cost accounting. The level of detail will be dependent on the necessary
financial support being provided by the hospital and the degree of budgetary
freedom that individual Clinical Directors are given.
5 Service Level Agreements - Content
5.1 Generic components
Some parts of the service level agreement are generic. They are those which
would be accepted as an integral part of the radiological service, including
the agreement to comply with all relevant radiation safety, health and safety,
and data protection legislation. Other features might include the quality
of patient facilities. These should be covered in general terms within the
5.2 Specific components
The specific features of the service level agreement relate to the quality
of the service provided.
5.2.1 Clinical staff
The level of qualifications and skills of the individuals undertaking procedures
and reporting the images should be specified.
5.2.2 The patients
The type of patient within the agreement should be identified. This may
include severely bed-ridden in-patients, more-active patients, and out-patients.
The expected turnaround time of the patient within the hospital should be
The expected numbers of the patients in all categories, with the likely
casemix, must be defined. An analysis of the expected use of different imaging
modalities is vital if the quality of care and necessary expenditure is
to be agreed.
5.2.3 Availability of the service
The timing of service provision should be explicit. The clinical commissioner
would be expected: (i) to identify the likely times for service requirements;
(ii) to expect a guarantee of adherence to those required times; and (iii)
to accept an undertaking not to change them without due consultation and
The agreement may include uninterrupted radiographer availability and on-call
radiologists' service, 24 hours a day, 7 days a week, or may restrict the
service provided to office hours or to specific times. It may also include
the provision of on-ward facilities and the level of access to more sophisticated
investigations. The timing of investigations may include a guarantee of
within-12-hours imaging for in-patient cases, specific waiting list times
for out-patient cases, and agreed access and time factors for more sophisticated
5.2.4 Requests for reports
The quality of requests should be agreed. The referring clinician must agree
to provide adequate clinical information dependent on the complexity of
the case and the sophistication of the investigation or therapy requested.
Clinical commissioners should agree to the level of notice required for
requests, within clearly defined limits. The criteria for non-urgent but
acute and chronic cases should be identified, and the relationship to hospital
expenditure should be clearly defined. It is unsatisfactory for a patient
to come in for a 24-hour period for investigation and have to wait for the
specific investigation. It would also be unreasonable, however, for a clinician
to bring in a patient for a 24-hour investigation programme without agreement
with the Department of Clinical Radiology beforehand, and knowing that there
is a three-month waiting list for the specific investigation.
The referring clinician must identify the level of reporting services that
are required for specific requests, including immediate access to a consultant
radiologist, clinico-radiological conferences, advice levels, and reports.
It is obviously unreasonable to expect radiologists to provide a large number
of reports within a day if they are constantly being interrupted for personal
consultations on individual patients.
5.2.5 Quality of reporting services
The quality of the reporting service should be defined in terms of the speed
with which the reporting is undertaken and the reports are dispatched to
the referring clinician. This may also contain agreements regarding clinico-radiological
conferences and ways of accepting urgent cases by direct access to radiologists.
- 184.108.40.206 Agreements on the speed of reporting may include:
- return of the radiological reports of in-patients within one working day;
- reporting of casualty films within 24 hours;
- reporting of casualty and urgent films on a hot-reporting basis;
- an agreement regarding the reporting of films taken from the Department
of Clinical Radiology and returned after a long period;
- reporting of special investigations.
- 220.127.116.11 The quality of the report in terms of accuracy is expected to be
in line with the accepted professional standards. Assessment of this accuracy
would usually fall outside the remit of a service level agreement, and would
usually form part of the audit commitment that should be undertaken by all
- 18.104.22.168 Formal agreement for the non-reporting of films should be clearly
made within the service level agreement, and alternate arrangements should
5.2.6 Transfer of reports
This would include an agreed speed for typing of reports, the methodology
of transfer of reports to the clinicians, and an outline of the responsibilities
of each party for ensuring that the report is made available for the requesting
clinician. It is not, however, the responsibility of the Department of Clinical
Radiology to ensure that a clinician has read the report of the examination
that he/she has requested. An agreement to inform clinicians personally
of conditions requiring urgent treatment may be included, but the limits
of this service should be defined and the resources required, in terms of
radiologists' time, must be recognised.
5.2.7 Quality of service for the patients
This would include agreement on the type of appointment system used, maximum
waiting times, and the quality of the staff undertaking the care of the
5.2.8 Policy for equipment and future planning
There would inevitably be some statements within the agreement with regard
to the effective management of the department. This would include staffing
levels, grades of staff, costs of consumables, and management of equipment,
to ensure that downtime is kept to a minimum. All aspects of service planning
and development should be recognised in the agreement, with a clear indication
of the implications of any future developments, either by the commissioner
or the deliverer.
5.2.9 Other areas
Other areas which might be covered include the following:
- the mechanism by which complaints are handled;
- the requirements for education and training, for the service deliverer,
the commissioner of the radiological service, and the Department of Clinical
- the level of information technology available in order that the statistical
data for service level agreement monitoring is in place and agreed.
6 Service Level Agreements - Commissioner/Service Deliverer Agreements
6.1 A commissioner of the service would expect to agree a number of specified
criteria regarding volume of work and quality of service required, as set
out in Section 5.
6.2 The agreed volume of work and quality of service must be costed by the
Department of Clinical Radiology.
6.3 Careful cost analysis and an agreed quantum of income budget must be
agreed in order to provide the agreed quality of service.
6.4 Within the agreement, variability clauses must be included. These may
take the form of an increase in income at an agreed level if the workload
increase is beyond a specific percentage overall, or if the casemix changes
to more expensive investigations. Clear examples would include a transfer
of back-pain investigations from plain x-rays to magnetic resonance, or
a change of policy for treating biliary tract stenosis from surgery to stents.
6.5 Penalties for poor service provision should be included, and similarly
a recognition of the implications for the clinical commissioner if the quality
of the referral pattern is not followed. This must be explicit within the
service level agreement.
6.6 Requirements for commissioners must include liaison with the Directorate
of Radiology in relation to strategic planning. The impact of developments
in other clinical fields must be assessed and agreed.
6.7 Facilities that are provided by the commissioner as part of the service,
such as technical equipment, information technology and clerical support,
must be identified and agreed.
6.8 There should be an agreed plan for managing failure of the service level
agreement. This may involve:
- assessing the relative urgency of cases and the implementation of waiting
lists for non-urgent cases;
- limiting access for more sophisticated examinations which do not have
specific consultant radiologist approval;
- ensuring that proper agreement is reached before undertaking delivery
of services for new developments.
6.9 It is important in the management of a service level agreement that
excess usage is identified early, so that appropriate discussions and reviews
can take place, to avoid a sudden cessation of service.
7.1 Service level agreements are required to monitor and assess workload
within a Department of Clinical Radiology.
7.2 Many service level agreements have failed, due to inadequate monitoring
of the agreement and failure to implement the penalty clauses and/or the
financial transfers identified in the agreement.
7.3 Ultimately these agreements will only work if: (i) they are applied
rigorously and effectively by the service departments; and (ii) they are
fully accepted and enforced by the Trust management.
Approved by the Board of the Faculty of Clinical Radiology: 8 May 1998
Approved by Council: 29 May 1998
1 The New NHS: Modern, Dependable. Government
White Paper, 1998; Designed to Care: Renewing the NHS in Scotland.
Government White Paper, 1998; Putting Patients First: The Future of the
NHS in Wales. Government White Paper, 1988; Fit for the Future.
HPSS, Northern Ireland.
2 The Royal College of Radiologists (1995) Quality
Specification for Purchasers (BFCR(95)7). London: The Royal College of Radiologists.
3 The Royal College of Radiologists (1995) Contracting
in Clinical Radiology (BFCR(95)3). London: The Royal College of Radiologists.
4 The Royal College of Radiologists (1995) Risk
Management in Clinical Radiology (BFCR(95)6). London: The Royal College
5 The Audit Commission (1995) Improving your
Image. How to Manage Radiology Services More Effectively. London: HMSO.
Return to Publications list