What is resource allocation?
In the language of economics, resources are anything which have an alternative use. Thus economics is often characterised as the study of the allocation of scarce resources among a variety of possible uses. If resources were not scarce, ie if there were no budget constraint, there would be no need to consider how to allocate them. And if there were no alternative uses, again there would be no need to consider allocation. It is the interaction of scarcity and alternative uses which makes for the interesting, and difficult, decisions.
In the context of the review, the resources in question are the total monetary budget to be distributed across Scotland's NHS Boards by the Scottish Executive. It is worth noting that this is about the allocation of a given amount of money. It is not about the size of that amount, but the share that each health board should get. The size of the total budget is the subject of an earlier decision as part of the Executive's Spending Review process.
How does resource allocation happen in NHSScotland?
Since devolution the Scottish Executive has been striving to make Scotland healthier for all of us. By creating 14 NHS Boards across the country the management of our healthcare is more efficient, more accountable and more effective. These Boards bring together key partners, who deliver our healthcare. One of the main functions of these different bodies is to put government policies into practice in the best way possible. To do this, NHS boards are being funded in 2006-07 with revenue resources of over £6,436 million.
Revenue resources are, in the main, allocated on the basis of a formula introduced in September 2000 - the Arbuthnott Formula. The Formula is named after Professor Sir John Arbuthnott who, whilst Principal and Vice-Chancellor of Strathclyde University, chaired the National Review of Resource Allocation which was set up in December 1997. The principal task of that Group was to conduct an independent review of the way in which NHS money ( revenue ) is allocated annually to the NHS Boards. This was the first such major Review since 1977 when the SHARE formula was introduced.
Fair Shares for All Final Report - 2000
http://www.scotland.gov.uk/fairshares/docs/fsfa-00.asp
Fair Shares For All A Guide to the Final Report
http://www.scotland.gov.uk/fairshares/docs/fsfg-00.asp
Sir John subsequently chaired the Standing Committee on Resource Allocation (SCRA) from 2001 to 2003 which looked at unmet need for healthcare & cost issues.
What is the Arbuthnott Formula?
The Arbuthnott Formula is a so-called 'weighted capitation' formula - based on the size of population in each NHS Board area (capitation), with factors that seek to adjust for the relative need for healthcare funding. So the four main elements of the allocation formula are:
- share of the Scottish population living in the NHS Board area (updated annually from mid-year population estimates);
- relative number of males and females within different age groupings (age/gender mix);
- level of deprivation (morbidity and life circumstances) assessed by the Arbuthnott Index based on 4 components of:
- mortality rate among people under 65;
- unemployment rate;
- percentage of elderly people living on income support; and
- multiple deprived households (i.e. households with two or more measures of deprivation from the 1991 census); and
- an adjustment to take account of costs of delivering services in remote and rural areas.
On this basis, the allocation formula determines the share of funding for each NHS Board based on the relative need for healthcare resources across Scotland - it does not determine the overall size of the budget for total healthcare needs.
A utilisation-based method is adopted to estimate relative need on the assumption that the 'use of services' is a good indicator of need. The formula picks up the use of services across seven main programmes of care: acute hospital services, maternity, mental illness, care of the elderly, learning disability, community services and GP prescribing, taking into account the impact of the four outcomes described above. For example, deprivation is likely to have a greater impact on the need for hospital acute services than the use of maternity services. This method ensures that the formula is more sensitive to reflecting need than if all services were considered together.
Fair Shares for All Technical Report, July 1999
http://www.scotland.gov.uk/library2/doc02/fsat-00.htm
SCRA evaluated the impact of additional costs associated with undergraduate medical teaching and considered a further adjustment to take account of the unmet needs of those in the most deprived areas. Money has been allocated to the Boards that support the people in the lowest decile (10%) of deprivation (Tayside, Argyll and Clyde and Greater Glasgow) for specific projects that seek to address unmet health needs. These will be reviewed by the new Committee. The work of the SCRA can be found in a Newsletter at http://www.show.scot.nhs.uk/sehd/publications/DC20040326SCRAnews2.pdf
What does the Arbuthnott Formula cover?
The Arbuthnott Formula covers funding for Hospital & Community health Services and GP prescribing. (The General Medical Services budget is calculated using a different UK based formula).
Revenue resources currently excluded from the Arbuthnott Formula include allocations for general dental, general ophthalmic and community pharmaceutical services (Family Health Services); drugs misuse; and blood borne viruses, but work is underway to see if formulae can be constucted for Family Health Services.
Capital resources are allocated on the basis of a formula which is a variant of the Arbuthnott Formula.
Parity
Boards positions in relation to parity - achieving the fair share
When accepting the recommendations of the Arbuthnott Group, the then Minister for Health and Community Care indicated that the impact of the formula would be implemented in five years. However, this has not proved possible. Moving from a distribution of funds based on the SHARE formula to one based on the Arbuthnott formula has taken longer. The main reason for this is the need to avoid financial turbulence in NHS Boards. All NHS Boards are given the standard increase in funds each year. The size of the annual standard increase is sufficient to meet the main pressures, including pay and price inflation and the cost of the drugs bill, together with funds for developments. Those Boards which are below their parity target (ie the level of funds required to meet the Arbuthnott share) are given extra funds to move those Boards towards their parity targets. The following table shows NHS Boards position with regard to parity targets.
The Scottish Executive Health Department estimates that on current trends the mainland NHS boards should all (except one) be within at least 1% of their parity targets by 2007-08.
CHANGE IN ALLOCATION REQUIRED TO REACH ARBUTHNOTT TARGET
Change in |
Change in |
||
Allocation |
Allocation |
||
Required to Reach |
Required to Reach |
||
Target Following |
Target Following |
||
2006-07 |
2006-07 |
||
Allocation |
Allocation |
||
£000 |
% |
||
| Ayrshire and Arran | 4,613 |
0.92 |
|
| Borders | 1,998 |
1.37 |
|
| Dumfries and Galloway | 2,555 |
1.22 |
|
| Fife | 5,498 |
1.26 |
|
| Forth Valley | 3,476 |
1.02 |
|
| Grampian | 1,201 |
0.21 |
|
| Greater Glasgow & Clyde | -32,156 |
-2.01 |
|
| Highland | 3,898 |
0.92 |
|
| Lanarkshire | 8,070 |
1.16 |
|
| Lothian | 6,395 |
0.73 |
|
| Orkney | 193 |
0.72 |
|
| Shetland | -3,402 |
-11.97 |
|
| Tayside | -612 |
-0.12 |
|
| Western Isles | -1,721 |
-3.54 |