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NRAC Resource Allocation Formula: Purpose and Methods
Acute MLC sub-group: 4th February 2014
Outline:
• Role of the formula• Basic overview of the issues• Structure, data and methods• Formula outputs
Purpose: to inform the distribution of around 70% of the health budget to 14 territorial boards ...
• Through the calculation of target shares• Using estimates of predicted need• On an objective basis• To ensure equitable access to healthcare• Taking account of relative morbidity• And the relative (unit) costs of service
Basic overview: relative need
Health board A
Health board B
Basic overview: relative need
Health board A
Health board B
Basic overview: relative need
• Cost of fracture = £1,000
• Cost of maternity services = £2,000
Basic overview: relative need
Health board A: Cost = £4,000
Health board B: Cost = £5,000
Basic overview: relative need
Health board A: £4,000Health board B: £5,000
Total £9,000
Target share: 44% Target share: 56%
Basic overview: predicted needBudget allocated ex ante
But how many will require health care services …
?? ??
Basic overview: predicted need
• Formula attributes health service use in the recent data to age, sex and socio-economic conditions – national average relationships
• Need predicted by applying these national average relationships to local population characteristics and local socio-economic conditions
Structure:• Uses a weighted capitation approach• Fundamental starting point is (resident) population share• Weighted to reflect need for, and cost of, health services• Relative need: age and sex; Morbidity and Life
Circumstances; • Relative cost: Unavoidable Excess Costs• Product of components generates target shares
PopulationShare
%
ExcessCostIndex
XTarget Share
%=
Age & sex index
XMorbidity & Life Cs
indexX
Need
Data:• Built up using small area information• Basic geographical unit is the data zone (or IG)
Health Boards:
Data:• Resident population characteristics and socio-economic
environment• NRS population projections – rebased• Need is modelled using healthcare utilisation (volume
and cost)• SMR activity and Costs Book costs by speciality
Method:• Costing methodology• Episodes not spells• By care programme and diagnostic group
Method: age and sex effect
• estimated national average cost by age for males and females
Method: Morbidity and Life Circumstances
• Morbidity and Life Circumstances effect captures the variation in utilisation relative to the age and sex effect
• Measured by the cost ratio for the data zone• (Actual cost)/(Expected cost)• Scotland average = 1• Variation above or below Scotland average related to
socio-economic indicators of need; • Analysis undertaken by diagnostic group
x xx x x
x x x x x x x xx x x x
x x x x x
x
Method: estimating the MLC effect
Change in need
Change in utilisation
Age & Sex Adjusted Utilisation
Socio-economic conditions
1
x
x xx x xx
x xxx
x xx
x x x
Method: estimating the MLC effect
Utilisation
Socio-economic conditions
x xx x x
x x x x x x x xx x x x x x x
x x x x xx
Method: estimating the MLC effect
Utilisation
Socio-economic conditions
x xx x x
x x x x x x x xx x x x x x x
x x x x xx
Method: estimating the MLC effect
Utilisation
Socio-economic conditions
Method: variation in (unit) cost …
‘Unavoidable Excess Cost Adjustment’ • Ratio of local unit costs relative to national unit costs• DZ ratio averaged of across urban-rural geographies• Objective geographical classification - control for
variation in efficiency
Outputs: Published Target Shares
Health Board Population
Share1 Age-sex
share Age-sex and MLC share
Overall share
Ayrshire & Arran 6.91% 7.29% 7.36% 7.36%Borders 2.15% 2.32% 2.07% 2.10%Fife 6.99% 7.13% 6.94% 6.90%Greater Glasgow & Clyde 22.91% 22.10% 24.35% 24.01%Highland 5.93% 6.35% 5.94% 6.36%Lanarkshire 10.64% 10.46% 10.98% 10.88%Grampian 10.66% 10.55% 9.67% 9.68%Orkney 0.38% 0.41% 0.37% 0.43%Lothian 16.34% 15.58% 15.03% 14.86%Tayside 7.74% 8.11% 7.86% 7.84%Forth Valley 5.64% 5.59% 5.54% 5.51%Western Isles 0.49% 0.55% 0.53% 0.62%Dumfries & Galloway 2.79% 3.14% 2.95% 3.00%Shetland 0.43% 0.43% 0.39% 0.46%
Outputs: magnitude of variation in weights …
Age & sex index
Morbidity & Life Cs
index
ExcessCostindex
Overallindex
0.52 0.71 0.97 0.412.07 1.85 1.38 2.18Data Zone
Health Board0.96 0.90 0.98 0.911.12 1.10 1.20 1.29
NRAC Resource Allocation Formula: Purpose and Methods
Acute MLC sub-group: 4th February 2014
