Signature
M = max(max(BI_1, BI_2), BI_3); X = M - L; met = (X > 0)
| Inputs | Definition | Unit |
|---|---|---|
BI_1 | Net budget impact expected in the first financial year of the technology's use in the NHS, the periodic budget impact of HE-FM-BIA-001 for that year, net of displaced treatment and of savings counted as realisable; negative for a net saving | GBP per year |
BI_2 | Net budget impact expected in the second financial year of the technology's use in the NHS, on the same basis as BI_1 | GBP per year |
BI_3 | Net budget impact expected in the third financial year of the technology's use in the NHS, on the same basis as BI_1; the last year the test reads | GBP per year |
L | Net budget impact a year above which the test is met, GBP 40,000,000 in PMG36 since the June 2025 update, which raised it from GBP 20,000,000 | GBP per year |
M | Largest of the three annual net budget impacts BI_1, BI_2 and BI_3 | GBP per year |
|---|---|---|
X | M minus L, positive when the peak year exceeds the threshold, zero at the threshold and negative below it | GBP per year |
met | Equals 1 (true) when X is above zero, so the net budget impact is expected to exceed L in at least one of the first three financial years, and 0 (false) otherwise | binary indicator |
Function
Budget impact test of the first three years of net budget impact against the NICE threshold
Maps the net budget impact expected in each of the first three financial years of a technology's use in the NHS, and the threshold of the NICE budget impact test, to the peak annual figure, its margin over the threshold and whether the test is met. Each annual figure is a periodic budget impact of HE-FM-BIA-001, E_A_t minus E_R_t, which NICE estimates as the net annual cost to the NHS. The article's per-patient form, n_t times (p minus d minus h) plus K_t, is HE-FM-BIA-001 with the spending of each scenario costed as in HE-FM-COST-001, so it is not restated, and gross spend on the new technology, n_t times p, is HE-FM-COST-001 with one resource. The cumulative total over the forecast is HE-FM-BIA-002 and a present value of the annual series is HE-FM-DR-002; neither is the figure the test reads. Notation follows the Budget Impact article.
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Implementations
Excel
Budget impact test from three named yearly net impact cells
With the net budget impacts in cells named NetImpactFirstYear, NetImpactSecondYear and NetImpactThirdYear and the threshold in a cell named BudgetImpactThreshold (40000000), the three formulas return, in order, cells named PeakNetBudgetImpact, ExcessOverThreshold and BudgetImpactTestMet. MAX ignores an empty year cell, so a missing third year returns the larger of the first two without an error and three empty cells return 0; each year cell should be filled, with 0 for a year with no change in spending. An empty BudgetImpactThreshold cell is read as 0, so any positive peak would then show the test as met.
=MAX(NetImpactFirstYear,NetImpactSecondYear,NetImpactThirdYear); =PeakNetBudgetImpact-BudgetImpactThreshold; =IF(ExcessOverThreshold>0,1,0)
Assumptions
Annual figures are net NHS costs in the first three financial years of use
Each BI_t is the net annual cost to the NHS that NICE estimates for the test (PMG36 section 5.10.7), for financial year t counted from the first financial year of the technology's use in the NHS. Each figure is net, so the cost of the technology is reduced by the treatment it displaces and by the change in other NHS costs. Gross acquisition spend, or a figure for another payer, is a different quantity and gives a different result (HE-ER-BUDI-002). NICE's assessing resource impact process manual describes the same period as the first 3 years of use, that is the first 36 months from funding, and for a multiple technology appraisal it reads the joint budget impact of the appraised technologies (HE-ER-BUDI-006).
Realisable share of savings stated for the budget impact test inputs
PMG36 section 4.11.6 asks for estimates of net NHS costs and, if savings are anticipated, asks that the extent to which these finances can be realised is specified. NICE's assessing resource impact process manual models capacity impacts and notes that they may not be cash releasing. The inputs therefore state which offsets release cash and which only free capacity, because a cash forecast that drops an unrealised saving can fall on the other side of L from a figure that counts it, as the second worked example shows (derived). Prices are those paid in the NHS, including confidential or known price reductions when appropriate (section 4.11.6).
Threshold taken from the manual in force
L is the figure stated in the current manual, GBP 40 million a year since the June 2025 update recorded in the Update information of PMG36; analyses dated before that update used GBP 20 million. Section 5.10 was revised again in October 2026, and the GBP 40 million figure is in the current sections 5.10.4 to 5.10.6 and 5.10.21.
Worked examples
Article's illustrative medicine with every saving realised, just below the line
The article's illustrative medicine, with 2,000, 4,000 and 6,000 patients treated in years 1 to 3, has net budget impacts of GBP 14 million, GBP 26 million and GBP 39 million, each from HE-FM-BIA-001 in the article's per-patient form. The peak is GBP 39 million in year 3, GBP 1 million below the GBP 40 million line, so the test is not met, although the cumulative total of HE-FM-BIA-002 is GBP 79 million. The figures are illustrative and describe no real medicine.
BI_1 = 14000000; BI_2 = 26000000; BI_3 = 39000000; L = 40000000; M = 39000000; X = -1000000; met = 0
Article's illustrative medicine as a cash forecast with the hospital saving not realised
If the GBP 1,500 of hospital care avoided per treated patient frees beds that other patients fill, no cash is released and the article sets that saving to zero. The annual figures rise to GBP 17 million, GBP 32 million and GBP 48 million, and the rule applied to this cash forecast gives a peak GBP 8 million above the line in year 3 and met equal to 1, with the same clinical evidence and price. NICE's own estimate for the test may still count the avoided care as a capacity impact, so the figure it reads can differ from this cash forecast, as the article notes. The figures are illustrative.
BI_1 = 17000000; BI_2 = 32000000; BI_3 = 48000000; L = 40000000; M = 48000000; X = 8000000; met = 1
Illustrative peak year exactly at the budget impact test threshold
An illustrative technology with net budget impacts of GBP 25 million, GBP 40 million and GBP 32 million peaks at exactly GBP 40 million in year 2. That figure does not exceed GBP 40 million, so X is zero and the test is not met. The case checks that an implementation uses a strict comparison.
BI_1 = 25000000; BI_2 = 40000000; BI_3 = 32000000; L = 40000000; M = 40000000; X = 0; met = 0
Common errors
Cumulative budget impact read against the annual test threshold
The test compares each year of net budget impact with GBP 40 million a year, so the cumulative total of HE-FM-BIA-002 is the wrong input. In the first worked example the three-year total of GBP 79 million is almost twice the line while no single year exceeds it, and reading the total would report the test as met when it is not (derived).
Gross spend on the new technology read as the net budget impact
The test reads the net annual cost to the NHS (PMG36 section 5.10.7). In the article's example gross spend on the medicine is GBP 20 million, GBP 40 million and GBP 60 million in years 1 to 3, a peak GBP 20 million above the line, while the net figures peak at GBP 39 million and the test is not met.
Every avoided resource counted as a cash saving in a budget impact forecast
Subtracting avoided bed days or clinic visits at full unit cost when the capacity is refilled lowers the forecast below the cash the budget holder must find. In the article's example the hospital saving of GBP 1,500 per treated patient separates a peak of GBP 39 million, below the line, and a cash forecast peaking at GBP 48 million, GBP 8 million above it. Section 4.11.6 of PMG36 asks submissions to specify the extent to which anticipated savings can be realised, and NICE's assessing resource impact process manual notes that capacity impacts may not be cash releasing.
Earlier GBP 20 million budget impact test threshold applied
Analyses and teaching material from before June 2025 give the threshold as GBP 20 million. Applied to the first worked example it reports the test as met, with years 2 and 3 above the line and a margin of GBP 19 million, when under the current GBP 40 million threshold the test is not met.
Peak taken over the whole forecast instead of the first three financial years
The condition in PMG36 sections 5.10.4, 5.10.5 and 5.10.21 refers to the first 3 financial years of use. If an illustrative forecast had net budget impacts of GBP 14 million, GBP 26 million and GBP 39 million followed by GBP 55 million in year 4, the test on the first three years is not met, and a maximum taken over all four years would report it as met. A later peak still matters for the budget holder, and the annual series of HE-FM-BIA-001 shows it.
Budget impact test applied to each technology of a multiple technology appraisal separately
For a multiple technology appraisal NICE's assessing resource impact process manual regards the threshold as exceeded when the joint budget impact of the appraised technologies exceeds it, even if none of them does so on its own. With illustrative peak net budget impacts of GBP 25 million and GBP 22 million in year 3 for two technologies appraised together, and a joint year 3 figure of GBP 47 million from HE-FM-BIA-001 with both in the adoption scenario, separate tests report the threshold as not exceeded while the joint test gives a margin of GBP 7 million and met equal to 1. PMG36 section 5.10.30 likewise takes into account the combined budget impact when NICE considers a funding variation for a second technology in an indication that already has one.
Sources
NICE manual on the budget impact test and varying the funding requirement
National Institute for Health and Care Excellence. NICE technology appraisal and highly specialised technologies guidance: the manual (PMG36). Published 31 January 2022, last updated 13 October 2026. Chapter 5 Developing the guidance, section 5.10 Varying the funding requirement to take account of net budget impact, as revised in October 2026. Sections 5.10.4 and 5.10.5 state the condition, a potential net budget impact expected to exceed GBP 40 million a year in any of the first 3 financial years of a technology's use in the NHS, under which NHS England may request a longer time to implement the funding requirement and offers commercial discussions with the company before requesting a variation. Section 5.10.6 notes that a commercial discussion may not bring the figure below GBP 40 million a year in each of those years, section 5.10.7 says NICE assesses the potential budget impact by estimating the net annual cost to the NHS, and section 5.10.21 repeats the condition for a pause before final guidance is published. Section 5.10.28 lists whether the budget impact test has been met among the matters guidance executive takes into account in deciding whether to vary the timescale for the funding requirement.
NICE manual update raising the budget impact test threshold to GBP 40 million
National Institute for Health and Care Excellence. NICE technology appraisal and highly specialised technologies guidance: the manual (PMG36). Published 31 January 2022, last updated 13 October 2026. Update information. The list of minor changes records for June 2025 that sections 5.10.4, 5.10.5, 5.10.6 and 5.10.22 were updated to note that the threshold for the budget impact test increased from GBP 20 million to GBP 40 million, and the October 2026 entry records an update of the section on varying the funding requirement to take account of net budget impact. In the current text the GBP 40 million sentence on a pause before publication is section 5.10.21.
NICE manual on net NHS costs and the extent savings can be realised
National Institute for Health and Care Excellence. NICE technology appraisal and highly specialised technologies guidance: the manual (PMG36). Published 31 January 2022, last updated 13 October 2026. Chapter 4 Economic evaluation, section 4.11.6, which asks for estimates of net NHS (and PSS, when appropriate) costs of the expected resource impact for national and local financial planning, asks that if savings are anticipated the extent to which these finances can be realised is specified, and asks for cost information that reflects as closely as possible the prices paid in the NHS, including confidential or known price reductions when appropriate.
NICE resource impact process manual on the budget impact test threshold and joint appraisals
National Institute for Health and Care Excellence. Assessing resource impact process manual. Updated January 2026, Word document linked from the NICE page Assessing the resource impact of NICE guidance. Section The budget impact test says NICE assesses the potential budget impact by estimating the net annual cost to the NHS, that the test threshold is regarded as exceeded if the budget impact shows potential to be greater than GBP 40 million in any of the first 3 years of a technology's use in the NHS, that is the first 36 months from funding, and that for multiple technology appraisals the threshold is regarded as exceeded if the appraised technologies' joint budget impact exceeds it, even if none individually does. Section Only including what is in scope says capacity impacts are modelled and evaluated in the resource impact assessments but may not be cash releasing, and the introduction gives bed day savings and outpatient appointments as capacity impacts that may not result in cash impacts.
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