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Chapter 2

8.2 Issues

 The intangibility of what is provided means that it is difficult to define the
‘service and attribute costs; in the NHS, it is challenging to define what a
‘procedure’ is. Clinical specialties cover a wide range of disparate treatments,
and services include high levels of indirect cost. Consistent methods of cost
attribution are needed, and this is not always straightforward. Direct charging is
not always possible and there are different configurations of cost centres across
providers. This may limit the consistency which can be achieved.

 Inseparability/simultaneity of production and consumption: although the
manufacturer of a tangible good may never see the actual customer, customer
often must be present during the production of a service, and cannot take the
service home. No service exists until it is actually being experienced/consumed
by the person who has brought it.

 Heterogeneity – The quality and consistency varies, because of an absence of
standards or benchmarks to assess services against. In the NHS, there is no
indication of what an excellent performance in service delivery would be, or any
definition of unacceptable performance.

 Perishability – the unused service capacity from one time period cannot be
stored for future use. Service providers and marketers cannot handle supply-
demand problems through production scheduling and inventory techniques.

 No transfer of ownership – Services do not result in the transfer of property.
The purchase of a service only confers on the customer access to or a right to
use a facility.

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