IMPROVING THE ARBUTHNOTT FORMULA: REFINING THE

RESOURCE ALLOCATION FORMULA FOR NHSSCOTLAND

Prepared for The Scottish Executive

Prepared byGeorge Street Research Limited

November 2006

Background

to provide NRAC with feedback on the recommendations for

change to the current formula for resource allocation in

NHSScotland

Work undertaken:Visits to Health Boards: Summer 2005Consultation: July – September 2006

Regional workshops: August/September 2006

Background

Consultation ran from 3rd July 2006 to 29th

September 2006: 30 completed responses

Workshops took place in Edinburgh,

Clydebank, Aberdeen: 133 delegates

GSR commissioned to produce a report of responses to the

consultation paper along with results from 3 regional

workshops

The Workshops

The purpose of the workshops was to:

Provide an update on what NRAC has been doing since Board visits

Explain the consultation document

Provide a chance for Boards to discuss and question the recommendations

Receive early feedback on the options to help plan the next stage

The Consultation

Consultation sought the views of a wide range of organisations and individuals:

within Scotlandin wider health resource allocation community

Due to the technical nature of much of the work, the focus of the consultation was on staff in NHS Scotland and experts on health resource allocation issues

but the consultation was open to any organisation or individual who wished to comment

Consultation Publicity

3rd July: e-mail alert issued those likely to have an interest in the consultation:

The 14 NHS BoardsWide range of professional bodiesLocal and central GovernmentIndependent public bodiesAcademics

In addition the consultation was advertised via a number of fora:

NRAC websiteScottish Executive website - publications sectionSHOW publications website and front page featureScottish Executive economists monthly e-mail alertE-mail to worldwide health economics mailbaseHealth Department Weekly BulletinNHS Confederation newsletter

Approach to Analysis

• Combination of quantitative and qualitative analysis techniquesProvides depth and breadth of views

• Responses categorised as:NHS BoardOther HealthLocal GovernmentIndividuals

Responses

31 responses to consultation received30 completed: reporting based on 30

13 (43%) from NHS Boards (all bar Western

Isles)

6 (20%) from Other Health organisations

3 (10%) from Local Government

8 (27%) from Individuals1 nil response from a Ministerial Action

Group

The Questions

5 main sections – 21 questions

Population

Age-sex cost weights

Healthcare needs due to morbidity and life circumstances

Excess cost of providing healthcare services

General questions

Quantitative data from consultation responses: other comments from workshops included

Key FindingsPopulation

Population

Three questions:

1. Is there a better alternative to continuing to use the General Register Office for Scotland as the source of data on Boards’ resident populations for hospital and community services within the Formula?

2. Should the formula move to using re-based population projections rather than mid-year estimates as at present, to better reflect the populations using services in the allocation year?

3. Do you have any other comments on the recommendations for changes to the population basis of the Formula?

Population

3

0

1

0

2

16

10

1

2

3

0 5 10 15 20

Total

NHS Board

Other Health

Local Government

IndividualNoYes

Base = 30

Total reply = 21

Other Comments = 2

Whether there is a better alternative to using GROS

Key Themes

Use CHI data instead – more up to date (n=3)

GROS data most widely used –

especially in public sector (n=5)

GROS data seen as most accurate

(n=2)

+ -

Whether there is a better alternative to using GROS

Use CHI data instead – GROS undercounts

(workshops)

Population

17

11

2

1

3

1

0

0

1

0

0 5 10 15 20

Total

NHS Board

Other Health

Local Government

Individual NoYes

Base = 30

Total reply = 18

Whether the formula should move to using re-based population projections

Key Themes

Mid Year Estimates more

transparent (n=1)

“the most accurate reflection of current population profiles”

local government(n=9)

Sensitive to population trends

(n=2)

+ -

Whether the formula should move to using re-based population projections

Need for data to reflect new

populations (n=2)

Broad support from workshops

Key Themes

Need up to date statistics on providing care for older people in rural areas (n=2)

Need to consider migrant workers (n=2)

Need to consider tourists and

recreational visitors (n=3)

Other comments on the recommendations for changes to the population basis of the Formula (n=14)

Data sources and Community Data highlighted as key themes at

workshops

Key FindingsAge-Sex Cost

Weights

Age-Sex Cost Weights

Three questions:

4. Are there more appropriate sources of data for the age-sex profile of patients accessing community services than those proposed in Table 4?

5. Is there a better alternative to the recommendation that prescribing cost weights should continue to be based on the national random sample of prescriptions, pooled across several years data to improve stability and precision?

6. Do you have any other comments on the recommendations for changes to the age-sex cost weights within the Formula?

Key Themes

Proposed sources do not accurately reflect

levels of need – impacts on providing

care locally (n=2)

There are not – but this is a cause for

concern (n=6)

Full implementation of Quality and

Outcomes Framework may

lead to better data (n=2)

Whether there are more appropriate data sources (n=17)

Use of Practice Team Information data

questioned – patterns of service delivery may

differ (n=2)Questioned data

population for home dialysis (n=2)

Key Themes

Whether there are more appropriate data sources (n=17)

Quality?Representativ

e? (workshops)

Fit for purpose? (workshops)

Key Themes

Larger sample size needed to narrow

confidence intervals (n=6)

Not at present – need to link with CHI

numbers as soon as possible (n=7)

No (n=4)

Whether there is a better alternative for prescribing cost weights (n=17)

Inflation, local policy, the General Medical

Services (GMS) contract or changes in the drugs

available to GPs for prescribing can

contribute to variations in costs (n=4)

Key Themes

Stability may be reduced if changes

result in small population sizes (n=2)

Support changes to age bands (n=8)

Caution against over reliance on ISD

cost book (n=3)

Other comments on the recommendations for changes to the age-sex cost weights within the Formula (n=15)

Need to allow for proximity to death

(n=2)

- Although -

Key FindingsHealthcare Needs

due to Morbidity and Life Circumstances

Morbidity and Life Circumstances

Five questions:

7. What are your views on the first two options proposed by the researchers recommending separate needs indices and supplementary variables?

8. What are your views on their additional option that no MLC adjustment is required for certain care programmes and diagnostic groups for which the needs indices explain very little of the variation in cost?

9. Can you help us explain why, for maternity and outpatients in particular, variation in costs across the country are largely explained by differences in levels of activity among Boards, rather than indicators of need, and how should this be taken account of in a resource allocation formula?

10. What are your views on the recommendation that data on ethnic minorities and asylum seekers should not be included in the need indices within the Formula but allocation should be addressed via separate mechanisms?

11. Do you have any other comments on the recommendations for changes to the adjustment for healthcare needs due to MLC within the formula?

Key Themes

Need for further research,

information or explanation (n=7)

Hard to comment without knowing potential

impact (n=5)

Recommendations on separate needs indices andsupplementary variables (n=21)

Comments on the complexity of the

formula (n=6)

Broad welcome for proposals but some

uncertainty

Concern over representation of rural areas

(n=2)

May favour urban areas (n=2)

Key Themes

Disagree – especially for cancer and non-psychotic mental

illness (n=8)

Agree (n=4)

Will depend on the selection of the

correct model (n=2)

Recommendations on no MLC adjustment for certain care programmes (n=19)

Disagree – results differ from

expectations or experience (n=5) and

workshops

+ -

Key Themes

Differences in clinical practices (n=6)

Rurality (n=7)

Problems with the model specification

(n=3)

Explanation of Maternity and Outpatient variations (n=16)

Key Themes

Mention of the cost of translation and other

services (n=2)Agree (n=17)

Ensure other sources of funding

are taken into account (n=2)

Recommendation not to include data on ethnic minorities and asylum seekers (n=19)

Include the needs of migrant workers (n=5)

Key Themes

Concern over reflection if levels of deprivation in rural

areas (n=4)

Indicators and datazones do not

accurately capture levels of deprivation

(n=7)Comments on the complexity of the

formula (n=4)

Other comments on changes to adjustments due to MCL (n=19)

Datazones welcome (n=2)

More work needed on unmet need (n=6)

Adjustments should take account of

actual need (n=2)

More research needed (n=3)

Lack of transparency in options 1 & 2 (n=3)

Key FindingsExcess Cost of

Supplying Healthcare Services

Excess Cost of Providing Healthcare

Five questions:

12. What are your views on the recommendation to replace the current hospital remoteness adjustment, based on road kilometres per head, with an adjustment based on mapping the actual costs of treating patients living in areas of different levels of remoteness and rurality?

13. Is the recommendation to introduce a market forces factor for non-medical staff costs justified based on the comparison of NHS vacancy and turnover rates with private sector wage variations?

14. Could the introduction of market forces factors for labour, land and buildings, in addition to the recommended remoteness adjustment for hospital services, lead to double-counting of costs within the Formula?

15. Are the assumptions and data sources used in updating the current simulation model for travel-intensive community nursing services appropriate, and are there better alternative sources of data or evidence to support this?

16. Do you have any other comments on the recommendations for changes to the adjustment for the excess costs of supply healthcare services within the Formula?

Key Themes

Need to consider patient transport as

well (n=2)Agree (n=12)

Must include travel time along with distance (n=4)

Recommendations for hospital remoteness adjustment (n=21)

Remoteness highlighted as key theme at

workshops

7

4

2

0

1

13

8

0

3

2

0 2 4 6 8 10 12 14

Total

NHS Board

Other Health

Local Government

Individual

Disagree / hasconcernsAgree

Base = 30

Total reply =23

Other Comments = 3

Agreement with whether market forces factor for staff costs is justified

Excess Cost of Providing Healthcare

MFF highlighted as key theme at

workshops

Key Themes

Disagree (n=13)

Agree (n=7)

May favour urban areas (n=2)

Whether market forces factor for staff costs is justified

Agenda for Change (n=10) and workshops

+ -

7

5

0

0

2

4

1

0

2

1

0

1

0

3

4

0 1 2 3 4 5 6 7 8

Total

NHS Board

Other Health

Local Government

Individual Do not support MFF

No

Yes

Base = 30

Total reply =18

Other Comments = 3

Agreement with whether MFFs and remoteness adjustment could lead to double-counting

Excess Cost of Providing Healthcare

Key Themes

Further investigation is needed in this area

(n=2)

MFF for land may favour some areas over others (n=2)

Whether MFFs and remoteness adjustment could lead to double-counting

Double counting WILL occur (n=7) and

workshops

Key Themes

They are not appropriate (n=2)

Assumptions and data sources are

appropriate (n=5)

Consider data on other community

health professionals (n=3)

Whether assumptions and data sources for travel intensive community nursing are appropriate (n=14)

Concern over lack of accuracy of

community services data (n=4)

Baseline data categories

inappropriate (n=3)

Need to take travel time into

consideration (n=3)

Unsure (n=2)

Key Themes

Ratios of local to national average costs by hospital care programme -

results unexpected (n=3)

Impact of new consultant contract

(n=3)

Other comments on changes to adjustments for excess costs (n=19)

More work needed on MFFs (n=3)

Key FindingsGeneral Questions

General Questions Five questions:

17. The Formula is designed to allocate funds to Boards to distribute as they see fit. However, how could information be provided to best serve the requirements of Boards in distributing funds within their own areas?”

18. Should the Formula take account of unmet need and if so, how?

19. How can we ensure that the Formula does not create perverse incentives or reward inefficiency?

20. Do you agree with NRAC’s recommendation not to develop distinct formulae for all health improvement funds but to use wherever possible the Arbuthnott Formula to allocate funds to Boards? In addition, do you think the Formula should be extended to allocating any other areas on NHS expenditure not previously considered?

21. Do you have any other comments on the research and recommendations for change to the Arbuthnott Formula?

Key Themes

Training & Guidance for Boards

How could information be provided to Boards? (n=18)

Monitoring & Evaluation –

ensure consistency

across Boards

A variety of suggestions

Improvements to local data

Data for benchmarki

ng

Evidence on how efficiently /

effectively Boards use allocations

8

5

2

0

1

10

6

1

0

3

0 2 4 6 8 10 12

Total

NHS Board

Other Health

Local Government

IndividualNo / Allocate outwithFormula

Yes

Base = 30

Total reply =21

Other Comments = 3

Whether the formula should take account of unmet need

General Questions

Key Themes

Take account of work already done in this

area (n=3)

Need to agree on identification and classification of

unmet need (n=2)

Resources needed for preventative

services in deprived areas (n=2)

Whether the formula should take account of unmet need

Concern that proxy data shows usage rather than need

(n=3)

Key Themes

Basing formula on usage could lead to

stagnation of services (n=2)

MFFs could lead to inefficiencies being

rewarded (n=2)

How to ensure the formula does not create perverse incentives (n=16)

Many single comments

13

9

2

0

2

3

1

0

1

1

0 2 4 6 8 10 12 14

Total

NHS Board

Other Health

Local Government

Individual

No

Yes

Base = 30

Total reply =18

Other Comments = 2

Whether there should be distinct formulae for health improvement funds

General Questions

Many single comments

Key Themes

Other comments on the research and recommendations for changes to the Arbuthnott Formula (n=24)

Impact

Multiple deprivation

Transparency

Proxy data

Methodology

Comments on a variety of issues

Key Themes

Continued : Other comments on the research and recommendations for changes to the Arbuthnott Formula (n=24)

Joint funding

Island Boards

Population sizes

Delivering acute care in

remote and rural areas

Health services For CYP

Core Criteria

Some concern over:

transparency - due to the complexity of the formula or parts of the formula;

practicality – concern over the lack of robust data to support some parts of the formula;

responsiveness - especially to changes in legislation and contracts;

evaluability, as the formula is not yet ready to run and so the impact cannot be measured;

face-validity – some of the results were not seen as intuitive.

Conclusions

Broad welcome for the review of the Arbuthnott Formula

SUPPORTA separate allocation

mechanism for asylum

seekers and ethnic

minorities

The changes to age-bands

The use of needs indices and

supplementary variables

Rebased population projections

The continued use of GROS

data

The proposed replacement of the

hospital remoteness adjustment

That the Arbuthnott

Formula should be used to

allocate health improvement

funds wherever possible

Conclusions

Some concernsthe

consultation process

Robust up-to-date data

Face validity

Flat funding for some care programmes

MFFs for staff MFFs may contribute to

inefficiencies of perverse

incentives

Island Boards face particular

challengesComplexity of

Formula

Difficulty in commenting as

impact unknown