An analysis of Population-Based Resource Allocation for health and social care in Ireland

Walsh, Brendan; Hill, Leonie Research Report An analysis of Population-Based Resource Allocation for health and social care in Ireland Research Series, No. 194 Provided in Cooperation with: The Economic and Social Research Institute (ESRI), Dublin Suggested Citation: Walsh, Brendan; Hill, Leonie (2024) : An analysis of Population-Based Resource Allocation for health and social care in Ireland, Research Series, No. 194, The Economic and Social Research Institute (ESRI), Dublin, https://doi.org/10.26504/rs194 This Version is available at: https://hdl.handle.net/10419/306694 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by/4.0/ AN ANALYSIS OF POPULATION-BASED RESOURCE ALLOCATION FOR HEALTH AND SOCIAL CARE IN IRELAND BRENDAN WALSH AND LEONIE HILL RESEARCH SERIES NUMBER 194 OCTOBER 2024 E V I D E N C E F O R P O L I C Y AN ANALYSIS OF POPULATION-BASED RESOURCE ALLOCATION FOR HEALTH AND SOCIAL CARE IN IRELAND Brendan Walsh Leonie Hill October 2024 ESRI RESEARCH SERIES NUMBER 194 Available to download from www.esri.ie © The Economic and Social Research Institute Whitaker Square, Sir John Rogerson’s Quay, Dublin 2 https://doi.org/10.26504/rs194 This Open Access work is licensed under a Creative Commons Attribution 4.0 International License (https://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly credited. ABOUT THE ESRI The Economic and Social Research Institute (ESRI) advances evidence-based policymaking that supports economic sustainability and social progress in Ireland. ESRI researchers apply the highest standards of academic excellence to challenges facing policymakers, focusing on ten areas of critical importance to 21st century Ireland. The Institute was founded in 1960 by a group of senior civil servants led by Dr T.K. Whitaker, who identified the need for independent and in-depth research analysis. Since then, the Institute has remained committed to independent research and its work is free of any expressed ideology or political position. The Institute publishes all research reaching the appropriate academic standard, irrespective of its findings or who funds the research. The ESRI is a company limited by guarantee, answerable to its members and governed by a Council, comprising up to 14 representatives drawn from a crosssection of ESRI members from academia, civil services, state agencies, businesses and civil society. Funding for the ESRI comes from research programmes supported by government departments and agencies, public bodies, competitive research programmes, membership fees and an annual grant-in-aid from the Department of Public Expenditure, NDP Delivery and Reform. Further information is available at www.esri.ie. THE AUTHORS Brendan Walsh is a Senior Research Officer at the Economic and Social Research Institute (ESRI) and an Adjunct Associate Professor at Trinity College Dublin (TCD). Leonie Hill was a Research Assistant at the ESRI. ACKNOWLEDGEMENTS Financial support for this research was provided by the Department of Health. The authors would like to thank the members of the Department of Health/ESRI Research Programme on Healthcare Reform Steering Group for their input in an early version of the report. In particular, the authors would like to thank Conor O’Malley, Christopher Ryan, Tiago McCarthy, Terence Hynes and Michael Courtney from the Department of Health, and Sheelah Connolly and Aoife Brick from the ESRI for their valuable insights. We thank three anonymous reviewers and Anne Nolan from the ESRI for their reviews and suggestions. We thank all those who provided contributions while acknowledging that the authors bear sole responsibility for the analysis and interpretations presented. This report has been accepted for publication by the Institute, which does not itself take institutional policy positions. The report has been peer reviewed prior to publication. The authors are solely responsible for the content and the views expressed. Table of contents | i Table of contents ABBREVIATIONS ..................................................................................................................................... iii EXECUTIVE SUMMARY ............................................................................................................................ v CHAPTER 1 INTRODUCTION .................................................................................................................... 1 1.1 Resource allocation in healthcare ......................................................................................... 1 1.2 Healthcare resource allocation in Ireland ............................................................................. 2 1.3 Resource allocation proposals ............................................................................................... 5 1.4 Objectives of report ............................................................................................................... 7 1.5 Structure of the report .......................................................................................................... 7 CHAPTER 2 POPULATION-BASED RESOURCE ALLOCATION OPTIONS IN IRELAND ................................. 8 2.1 Introduction ........................................................................................................................... 8 2.2 International resource allocation mechanisms ..................................................................... 8 2.3 Population-based resource allocation formula characteristics ........................................... 16 2.4 Conclusion ........................................................................................................................... 20 CHAPTER 3 PROPOSED HSE HEALTH REGIONS AND PBRA FORMULA .................................................. 21 3.1 Introduction ......................................................................................................................... 21 3.2 Resource allocation and funding mechanisms in Ireland .................................................... 21 3.3 HSE Health Regions .............................................................................................................. 32 3.4 Proposed population-based resource allocation formula ................................................... 35 3.5 Other population-based resource allocation formula considerations ................................ 44 CHAPTER 4 CONCLUSIONS .................................................................................................................... 61 4.1 Importance of population-based resource allocation ......................................................... 61 4.2 Considerations for future population-based resource allocation ....................................... 62 4.3 Conclusion ........................................................................................................................... 67 REFERENCES .......................................................................................................................................... 69 APPENDIX A ADDITIONAL TABLES AND FIGURES .................................................................................. 77 ii | Lists of tables and figures LIST OF TABLES Table 3.1 Public healthcare expenditure included and not included in proposed PBRA mechanism ......................................................................................................................................... 54 Table A.1 Local health offices within HSE Health Regions .............................................................. 77 Table A.2 List of health conditions in Healthy Ireland Survey ......................................................... 77 Table A.3 Medical card rates within HSE Health Regions ............................................................... 78 LIST OF FIGURES Figure 2.1 Fundings from resource allocation formula in Scotland .................................................. 13 Figure 3.1 The impact of home support supply on inpatient length of stay ..................................... 27 Figure 3.2 Determinants of mental illness diagnosis among adults in Ireland ................................. 30 Figure 3.3 Determinants of healthcare utilisation among adults in Ireland ..................................... 31 Figure 3.4 HSE Health Regions .......................................................................................................... 33 Figure 3.5 Percentage of population by HSE Health Region ............................................................. 36 Figure 3.6 Acute public hospital funding allocation, population adjusted ....................................... 36 Figure 3.7 Percentage of population in each age group by HSE Health Region ................................ 38 Figure 3.8 Acute public hospital funding allocation, age and sex adjusted ...................................... 38 Figure 3.9 Deprivation by HSE Health Region ................................................................................... 40 Figure 3.10 Acute public hospital funding allocation, deprivation adjusted ...................................... 41 Figure 3.11 Acute public hospital funding allocation, deprivation adjusted using DEIS formula ....... 42 Figure 3.12 Percentage of acute hospital and primary care healthcare expenditure by actual and PBRA scenarios across HSE Health Regions, 2021 ............................................................ 44 Figure 3.13 Self-reported health status, chronic illness and multimorbidity by HSE Health Regions 46 Figure 3.14 Healthcare utilisation per annum by HSE Health Region ................................................. 49 Figure 3.15 Medical card and PHI rates by HSE Health Region ........................................................... 50 Figure 3.16 Medical card coverge, PHI status and GP and inpatient care demand ............................ 51 Figure 3.17 Percentage of hospital discharges from patients outside a HSE Health Region .............. 58 Figure A.1 Supply of primary, community and long-term care services in Ireland, 2014 ................. 78 Figure A.2 The impact of mental illness diagnosis on healthcare utilisation among adults ............. 79 Figure A.3 Mental illness rates by HSE Health Region ....................................................................... 80 Figure A.4 Medical card and PHI rates by local health office and HSE Health Region ...................... 80 Figure A.5 Medical card rates across deprivation quintiles by local health office ............................ 81 Abbreviations | iii ABBREVIATIONS ABF Activity-based funding ACRA Advisory Committee on Resource Allocation CCG Clinical Commissioning Group CHN Community Health Network CHO Community healthcare organisation CIPC Counselling in Primary Care COPD Chronic obstructive pulmonary disease CSO Central Statistics Office DEIS Delivering Equality of Opportunity in Schools DHB District Health Board DRG Diagnosis-related group ESRI Economic and Social Research Institute EU European Union GP General practitioner HIPE Hospital In-Patient Enquiry HIS Healthy Ireland Survey HNI Health Need Index HR Health Region HRB Health Research Board HSE Health Service Executive ICB Integrated care boards IHA Integrated health areas KPI Key performance indicator LHO Local health office LOS Length of stay LTRC Long-term residential care MFF Market forces factor MLC Morbidity and life circumstances NHS National Health Service (UK) NHSS Nursing Home Support Scheme NRAC National Resource Allocation Committee NSW New South Wales NTPF National Treatment Purchase Fund ONS Office for National Statistics iv | Population-based resource allocation in Ireland OOP Out-of-pocket PBR Payment by Results PBRA Population-based resource allocation PCRS Primary Care Reimbursement Scheme PHI Private health insurance PN Practice nurse PPSN Personal Public Service Number RICO Regional Integrated Care Organisation SAPS Small Area Population Statistics SIMD Scottish Index of Multiple Deprivation TILDA The Irish Longitudinal Study on Ageing UK United Kingdom WHO World Health Organization WTE Whole time equivalent Introduction | 3 through which funding for inpatient and day patient care in large acute public hospitals was allocated (Keegan et al., 2020). This shift towards ABF, away from block funding, in Irish acute public hospitals, can be seen as an important shift in how healthcare services are funded in Ireland (HSE, 2015). As we discuss in Chapter 3, the adoption of ABF has represented a substantial change and offers policymakers guidance for future research allocation and funding mechanism options. However, the expansion of similar methods to other sectors, and the integration of funding decisions across sectors, has not yet occurred. A systematic resource allocation system assists local and national healthcare planners in efficiently allocating budgets and services to meet population needs. The lack of a resource allocation system designed to account for the population’s healthcare needs considerably hinders healthcare planners. The absence of a resource allocation system, similar to systems that exist across many contemporaneous countries, also contributes to other constraints that pose substantial challenges and directly affect the quality of healthcare delivery within the Irish healthcare system. Previous research has highlighted that key constraints – such as the lack of healthcare workers (Keegan et al., 2022), physical facilities and infrastructure (Walsh et al., 2023), coordinated care pathways and health information systems (Walsh et al., 2021) – all impede the efficiency of the Irish healthcare system. While several factors underpin these issues, these studies have highlighted that the lack of a resource allocation system designed to account for the population’s healthcare needs is partly to blame. Many issues arise as a result of the current lack of a systematic resource allocation mechanism in Ireland. Notably, as healthcare funding in Ireland is often determined by historical spending, any previous inequitable allocation or unmet need (due to waiting lists, reduced access to care or cost barriers) will be reinforced (Vega et al., 2010). This can result in funding not being directed to meet the health needs of the population, or it not being used to maximise health outcomes given the available resources (Vega et al., 2010). Rather, the current system reinforces and exacerbates any structural inequalities that may exist. Moreover, as illustrated in Section 3.2.2 on urgent and emergency care, the development of different funding structures across regions and by deprivation levels is fragmented and inconsistent, with no identifiable funding allocation method. The lack of a resource allocation system has resulted in inefficient distribution of resources and staffing across regions in Ireland. Previous research by the Economic and Social Research Institute (ESRI) examined the supply of primary, community and long-term healthcare services in Ireland in 2014 (Smith et al., 2019). The key findings, illustrated in Figure A.1 in Appendix A, show notable inequalities in the distribution of health and social care services across counties. A recurrent trend of undersupply in care was seen across numerous counties. The greater Dublin commuter belt (Kildare, Meath, Wicklow) and the southeastern counties 4 | Population-based resource allocation in Ireland consistently exhibited a lower supply of primary and community care services compared to the national average. Kildare and Meath, in particular, showed a significantly lower supply, falling at least 10 per cent below the national average for all non-acute community and primary care services examined. Additionally, Wexford and Wicklow displayed an undersupply that was at least 10 per cent lower than the national average for 7 out of the 8 non-acute community and primary care services evaluated. The authors also adjusted the supply to account for needrelated factors, such as age, mortality rates, rates of disability, medical card usage and chronic illness rates. Even after these adjustments, the findings repeatedly demonstrated that adjusting for needs did not eliminate the observed disparities in supply. In general, apart from some key exceptions (such as ABF in public hospitals), the HSE still allocates health and social care resources based on historic patterns of demand for services (Johnston et al., 2021). This approach raises several issues, as current service use patterns may not accurately reflect either current or future population needs, due to the omission of unmet need, thereby reinforcing structural inequities (Johnston et al., 2021). Additionally, given the rapidly growing and ageing population in Ireland, and the clear importance of demographics on healthcare demand and expenditure requirements (Keegan et al., 2020; Casey et al., 2021; Walsh et al., 2021), relying on historic patterns may embed systematic underestimations of healthcare resource needs when determining the annual HSE budget. To account for this, in the absence of a resource allocation system in the short term, consideration should be given to cost barriers and long waits to access care, as well as changes to the structure of the population when determining the healthcare system’s requirements. The absence of a resource allocation mechanism was also outlined in the Sláintecare report as impeding many of the changes required to expand universal healthcare in Ireland (Houses of the Oireachtas Committee on the Future of Healthcare, 2017; Burke et al., 2018). Since the publication of the Sláintecare report, and subsequent Sláintecare implementation plans, there has been increased preparation for PBRA and regional devolution of health and social care planning and governance. The Department of Health have outlined the appropriateness of a PBRA approach based upon the regionalisation of health and social care (McCarthy et al., 2022; O'Malley et al., 2023). These reports outlined the appropriateness of a PBRA approach based upon the regionalisation of health and social care. The approach follows that taken in Australia, England, the Netherlands, New Zealand and Scotland, all of which have developed PBRA systems to help distribute healthcare resources efficiently to meet the demands of their population. This report, funded through a research programme by the Department of Health, provides an overview of PBRA, detailing important factors included in Introduction | 5 contemporaneous systems within peer countries. Building upon this review, the report offers insights from other healthcare systems about the appropriate evolutions PBRA in Ireland should take in the coming years. Expanding upon the analyses undertaken previously (McCarthy et al., 2022; O’Malley et al., 2023), this report identifies obstacles to the successful integration of PBRA in Ireland and suggests how the system can be improved moving forward, by modifying elements of the current proposed PBRA formula and adopting approaches implemented across international PBRA systems. 1.3 RESOURCE ALLOCATION PROPOSALS 1.3.1 HSE Health Regions In 2020 the Minister for Health outlined plans to develop six HSE Health Regions (HRs – previously referred to as Regional Integrated Care Organisations and Regional Health Areas at various stages of the proposal process). These HRs would incorporate community healthcare organisations (CHOs) and Hospital Group structures in a coterminous geographical structure (i.e., having the same geographic boundaries). However, the emergence of the COVID-19 pandemic stalled the establishment of regional bodies, with much of the response to the pandemic undertaken at a centralised level. The proposed restructuring of the healthcare system is the latest in a long list of transformations in its structural and regional configurations in recent decades (Tussing et al., 2006; Burke et al., 2016; Wren et al., 2017; Braun et al., 2023). Following the Health Act 1970, a system of regional health boards was developed, which provided a more localised governance of healthcare services. In 2003, the report of the Commission on Financial Management and Control Systems in the Health Service (also known as the Brennan report) recommended the ending of the health board structure, and the establishment of a national body responsible for delivering and managing care (Department of Health and Children, 2003). This resulted in the establishment of the HSE in 2005. Since then, a number of organisational changes have been made (and proposed). The short-lived integrated service areas (ISAs) aimed to streamline services and improve patient care continuity. Further reorganisation led to the creation of CHOs, which are responsible for delivering community-based health and social care services. Concurrently, Hospital Groups were formed, clustering hospitals to work together as a single entity to deliver acute care, ensuring higher standards and more efficient use of resources. CHOs and Hospital Groups were both operational by 2015. In 2017, the Sláintecare report proposed major changes to the structure of Ireland’s health and social care services (Houses of the Oireachtas Committee on the Future of Healthcare, 2017). The primary goals of Sláintecare include ensuring affordable universal healthcare for all, transferring more care into primary and 6 | Population-based resource allocation in Ireland community care settings, and developing a mechanism to distribute funding, workforce and capacity to improve overall population health. A key aspect of this approach was the development of regional decision-making bodies that would include governance structures to connect acute hospital, primary and community health and social care services. The report also recommended that staff recruitment (including that of hospital consultants) should be undertaken at the regional level. Subsequent to the report, the development of HRs was central to the first Sláintecare Implementation Strategy (Government of Ireland, 2018). The report outlined: … the value of geographical alignment for population-based resource allocation (PBRA) and governance to enable integrated care. (Houses of the Oireachtas Committee on the Future of Healthcare, 2017, p. 20) In April 2023, it was announced that the implementation of HRs would commence in 2024 (HSE, 2023). 1.3.2 Population-based resource allocation In 2022 and 2023, the Department of Health published two pivotal reports presenting options for a new PBRA mechanism for Ireland (McCarthy et al., 2022; O’Malley et al., 2023). These reports outlined a potential model for allocating HSE resources. The proposed PBRA formula was based on models from other countries, including those discussed in the next chapter. Using evidence from other countries, and analysis within previous reports (Johnston et al., 2021), the Department of Health published a proposed formula for the initial PBRA in Ireland (O’Malley et al., 2023). The proposed PBRA formula is: 𝐴𝑑𝑗𝑃𝑜𝑝𝐻𝑅 = 𝑃𝑟𝑜𝑗𝑃𝑜𝑝𝐻𝑅 𝑥 𝐴𝑔𝑒_𝑆𝑒𝑥𝐼𝑛𝑑𝑒𝑥𝐻𝑅 𝑥 𝐷𝑒𝑝𝐼𝑛𝑑𝑒𝑥𝐻𝑅 𝑥 𝑅𝑢𝑟𝐼𝑛𝑑𝑒𝑥𝐻𝑅 where the adjusted population of each HR (𝐴𝑑𝑗𝑃𝑜𝑝𝐻𝑅) accounts for the (projected) population of each HR (𝑃𝑟𝑜𝑗𝑃𝑜𝑝𝐻𝑅), the age and sex composition of each HR (𝐴𝑔𝑒_𝑆𝑒𝑥𝐼𝑛𝑑𝑒𝑥𝐻𝑅), the level of deprivation in each HR (𝐷𝑒𝑝𝐼𝑛𝑑𝑒𝑥𝐻𝑅), and the rurality or remoteness of each HR (𝑅𝑢𝑟𝐼𝑛𝑑𝑒𝑥𝐻𝑅). The Department of Health reports recommended that only HSE acute and community expenditure, and some services for older people, be subject to the PBRA over the short to medium term. This would exclude over 50 per cent of 2019 HSE operational expenditure, amounting to €8.14bn. It is recommended that the Nursing Home Support Scheme (NHSS or ‘Fair Deal’), the Primary Care Reimbursement Scheme (PCRS – e.g., GP and pharmacy expenditure) and disability Introduction | 7 services not be included in the initial application of the PBRA. It is in the context of the formula above that this report is undertaken. 1.4 OBJECTIVES OF REPORT The main objectives of this report are to provide policymakers with evidence to inform the establishment of PBRA in Ireland and to examine the proposed formula developed by the Department of Health. The research in the report examines the impact of regional, socioeconomic and other pertinent factors on the development of PBRA in Ireland. To do this, the report also provides an overview of PBRA, as well as important factors included in contemporaneous healthcare systems within peer countries. Building upon this review, the report provides insights from Ireland and other healthcare systems about the appropriate evolutions PBRA in Ireland should take in the coming years. It also identifies obstacles to the successful integration of PBRA in Ireland. The report explicitly examines the most recent restructuring and PBRA plans outlined by the Department of Health and the HSE, and provides recommendations on changes and considerations that could occur to improve the proposals, drawing on evidence from other countries, and case studies on previous resource allocation and funding mechanisms from Ireland. 1.5 STRUCTURE OF THE REPORT The report is structured as follows. Chapter 2 details resource allocation systems internationally and the key review studies of PBRA. Chapter 3 first provides case studies from resource allocation and funding mechanisms in Ireland. It then introduces the HSE HR restructuring and proposed PBRA formulae, before providing discussion points and recommendations on how PBRA can be improved, using evidence from international PBRA mechanisms and the Irish case studies. Chapter 4 concludes and outlines barriers to PBRA and improvements to PBRA that may be needed. 8 | PBRA options in Ireland CHAPTER 2 Population-based resource allocation options in Ireland 2.1 INTRODUCTION This chapter discusses the key characteristics of population-based resource allocation (PBRA) mechanisms used within international healthcare systems. The chapter outlines the different PBRA formulae used in peer countries and, using these national level reviews, points to the common characteristics found in PBRA formulae. A number of other considerations for PBRA in Ireland are also identified, and finally we discuss specific resource allocation and payment mechanisms that are used in Ireland. 2.2 INTERNATIONAL RESOURCE ALLOCATION MECHANISMS PBRA frameworks aim to facilitate strategic health and social care service planning. This is achieved by shifting towards models that incorporate a more holistic assessment of needs, rather than focusing solely on specific diseases, settings, or service utilisation patterns (Johnston et al., 2021). The PBRA method allocates funding according to variations in need, as well as the additional costs required to provide services. PBRA mechanisms can also incorporate unmet need and geographical factors such as rurality, and they may apportion a higher level of care to certain demographic groups. Furthermore, PBRA formulae often apply differing weights to certain formula inputs, based on the judgements of decision-makers in determining their importance to their population’s healthcare needs. This section reviews literature on the development and application of PBRA mechanisms. Relevant literature was identified through appropriate databases and reference searching. Our selection criteria included papers published in English and studies from countries with healthcare systems akin to that envisioned for Ireland. The selected countries are Australia (New South Wales), Canada (Alberta, Ontario), New Zealand, Sweden and the United Kingdom (UK – England and Scotland). These countries were included due to the integration of PBRA frameworks within their health systems, the fact that each health system shares some important similarities with the Irish health system, and the identification of literature that details the key components within each PBRA framework. The use of such criteria also means that most of these countries have been included in previous analyses commissioned by the Department of Health (Johnston et al., 2021; O’Malley et al., 2023) to inform the potential future PBRA formula for Ireland. 2.2.1 United Kingdom The National Health Service (NHS) operates across the constituent countries of the UK. While the key pillars of universal healthcare, free at the point of use, are Population-based resource allocation in Ireland | 9 consistent, the functions of the NHS have been devolved to each country. There are also variations between the UK countries regarding the formulae used to distribute resources. In England, NHS England oversees healthcare provision, whereas local authorities are responsible for managing social care. The resource allocation mechanisms in Scotland and Wales allocate funding to health boards for different care programmes, and are formulated in a similar manner. In this study we focus on the Scottish model. In contrast, Northern Ireland, similar to Ireland, adopts a joint approach to health and social care services, with both falling under the jurisdiction of the Department of Health and Health and Social Care in Northern Ireland. However, we do not examine the structures for PBRA used in Northern Ireland as they are much less developed than those used in England and Scotland. England The NHS in England was one of the first healthcare systems to establish strategic resource allocation based on population needs in the 1970s (Buck et al., 2013). Resources were mainly allocated based upon population size, and age and sex differences across regions. A more detailed formula that incorporated other factors such as deprivation was proposed by Carr-Hill et al. (1994). The ‘Carr-Hill formula’ has been in operation since the 1990s and has been adapted for general practitioner (GP) and other care services (Fisher et al., 2022). The formula, which was initially developed for allocating resources to GP services, has since undergone a series of refinements and adaptations, expanding its use to all key healthcare services. In 2023, NHS England underwent a significant organisational change with the transition from clinical commissioning groups (CCGs) to integrated care boards (ICBs). This shift led to the creation of a smaller number of larger regional bodies for decision-making and marked a move towards a more integrated healthcare system, emphasising collaboration and coordination among various healthcare providers. Compared to the CCG structure, the ICB framework envisages greater integration of healthcare providers and local authorities, who provide social care services such as long-term care. As a result of this transition from CCGs to ICBs, the resource allocation formula underwent adaptations to align with the new structure. These changes, outlined in a technical note by NHS England (2023), aimed to ensure that the distribution of resources continued to reflect the varying needs and costs associated with providing healthcare across different regions, maintaining the principle of ‘weighted capitation’ that has existed for decades. The updates took into account demographic, morbidity and economic factors specific to the areas overseen by the new ICBs, ensuring that the allocation of funding remained equitable, efficient and responsive to the unique characteristics and requirements of each area. This supports the overarching goal of the ICBs to deliver more patient-centric and integrated care. 10 | PBRA options in Ireland The NHS England model aims for resource allocation to be based on healthcare needs, operating on the principle of weighted capitation. This method is used to calculate target funding allocations for each ICB for core responsibilities, specialised services and primary medical care. Separate formulae are estimated for different healthcare service models (e.g., acute hospital care, disability care), though the parameters are very similar across the formulae. The formulae are among the broadest and most data-intensive internationally. However, the key parameters are similar to those used in other countries and those proposed by O’Malley et al. (2023). The weighted capitation formula includes: • Population size: Censuses in England occur only every ten years. Due to previous difficulties in population estimates, the size of the population for each ICB is based on the number of registered patients at GP practices located within the ICB’s boundary area. • Age and sex: Adjustments are made for age and sex within each ICB, recognising that healthcare needs vary significantly across different age and sex groups. • Additional healthcare needs: The ICB formula accounts for additional healthcare needs that cannot be explained by age and sex differences alone. These include factors that increase healthcare needs, such as the incidence rates of morbidities in the population. • Unmet need and health inequalities: Adjustments are made to address health inequalities and unmet healthcare needs within populations. This is crucial for ensuring that areas with historically underserved or disadvantaged populations receive adequate funding. These parameters have been key to NHS resource allocation formulae in the past. Previous authorities have rejected new resource allocation formulae that were perceived as failing to reduce health inequalities (Iacobucci, 2012). • Market forces factors (MFF, or ‘cost factors’): The formulae also include adjustments for the higher costs of delivering healthcare in some areas. For example, there are generally higher input costs in cities or densely populated areas, such as London. Additionally, adjustments are made for specific circumstances like the higher costs of running small hospitals in rural areas or emergency ambulance services in remote regions. Combining each of these factors, statistical modelling is used to select the ‘best fit’ drivers of relative costs at the person level and the relative weights for each driver. There are a number of more nuanced aspects of the formula: Weighting: Specific factors are also weighted differently across healthcare models. For example, in the general and acute care formula, to account for the higher hospital needs of the older population, individuals aged 65–69 years are assigned a weight of 4 compared to those aged 20–24 years, while Population-based resource allocation in Ireland | 11 individuals aged 85+ are assigned a weight of 10 (NHS England, 2023). Furthermore, weights are applied to other parameters, such as unmet need. Regions that are historically underserved or disadvantaged are targeted with a higher share of funding, using a fixed percentage to reweight the contribution they receive. Transitions: The formulae account for key transitions, particularly the shift from CCGs to ICBs, by implementing strategies to ensure financial stability and equitable resource distribution during this structural change period. A convergence process is created whereby ICBs are gradually moved from their initial funding levels (based upon the previous CCGs) to target allocations determined by the updated formula. This transition, which is managed to avoid sudden financial impacts, helps to ensure continuity of healthcare services. In a small number of cases, adjustments are also made to reflect new geographic boundaries and population bases of ICBs, as well as more general population updates (NHS England, 2023). Rurality: The new ICB formulae for community care services include a new travel time adjustment. This adjustment recognises that additional travel times are often necessary to deliver community care services (e.g., community nursing visits) to patients living in remote areas. Integrated care: The decision to create ICBs and transition resource allocation to the ICB level was largely motivated by policymakers’ goal of creating better integrated care pathways for population groups. It reflects a strategic shift towards more coordinated and patient-centred healthcare services. First, as with other modern PBRA mechanisms, the NHS England formulae take into account a wide range of factors, like population demographics, healthcare needs and local cost variations, when determining resources. In this sense, the formulae ensure that funding is not only allocated based on the number of individuals in an area but also on their specific health requirements and the complexities of delivering services in diverse settings. This approach is conducive to integrated care as it enables ICBs in this instance to have the resources necessary to address the holistic health needs of their respective populations, considering both primary and specialised care services. Second, ICB structures foster greater coordination between NHS and healthcare providers and the local authorities responsible for commissioning social care (Wenzel et al., 2019). The shift also offers an opportunity for commissioners of health and social care to embed and rationalise the process of integrated care provision (Gongora-Salazar et al., 2022). Transparency and information: An important aspect of the NHS England resource allocation formula is the extensive level of data and information available to inform the decision-making process. Related to this, the Advisory Committee on Resource Allocation (ACRA) was established to provide 12 | PBRA options in Ireland guidance on the formula and to ensure transparency in the process. In this context, all guides and data spreadsheets used to estimate the formulae are available to the public. 1 However, for integrated care especially, some have argued for the further strengthening of broader data collection and the adoption of an evidence-based priority framework (Gongora-Salazar et al., 2022). Scotland The Scottish PBRA formula, known as the Scottish National Resource Allocation Committee (NRAC) formula, allocates funding for 6 care programmes to 14 NHS health boards. To begin, the population is weighted by age and sex profiles (NHS Scotland, 2020). Subsequently, the model is weighted by a morbidity and life circumstances (MLC) index that considers various indicators that affect health, over and beyond what can be explained by age and sex. This index includes deprivation rates from the Scottish Index of Multiple Deprivation (SIMD) and standardised mortality ratio included at the regional level (NHS Scotland, 2020). Finally, the PBRA formula accounts for the additional costs of providing care in rural areas (NHS Scotland, 2020). The NRAC formula is not too dissimilar to the approach adopted in England, and there are many commonalities between the English and Scottish PBRA formulae. However, the NRAC places a heavier emphasis on adjustments for rurality and remoteness, which is likely to be due to the geographic distribution of the population in Scotland compared to that in England. One other distinction between England and Scotland relates to integration of care. In Scotland, Integrated Joint Boards (IJBs) were established to better integrate health and social care services. IJB memberships include members from NHS health boards, local authorities and other stakeholders (e.g., voluntary providers). However, in Scotland, these IJBs function as separate legal entities, with the autonomy to make decisions about the functions and responsibilities of health and social care commissioners (Collins et al., 2023). Therefore, the IJBs are not embedded within the NRAC formula, though they likely do help with the more equitable distribution of resource for integrated care. Figure 2.1 presents the percentage share of the funding provided to the Ayrshire & Arran NHS Health Board in 2020/2021 and 2024/2025. The figure illustrates that while population is the key component of the NRAC formula, the other adjustments (especially the age–sex index) do impact the percentage of funding provided to each NHS board. Furthermore, there is a great deal of consistency in allocation across years. This figure conveys that transparency on how resource 1 A technical guide and all technical annexes and data spreadsheets used to estimate the resource allocations can be found here: https://www.england.nhs.uk/publication/supporting-spreadsheets-for-allocations-2023-24-to-2024-25/. Population-based resource allocation in Ireland | 19 measures by healthcare sector to account for varying impacts of morbidity, health status and utilisation. 2.3.5 Regional factors Regional-level indicators that capture remoteness or rurality account for the unavoidable cost of providing care in rural areas. Such indicators include travel costs and additional costs associated with staff retention (Penno et al., 2013; Johnston et al., 2021), and are included across most PBRA mechanisms examined. England adjusts for costs associated with providing emergency services in sparsely populated areas and diseconomies of scale associated with unavoidably small hospitals (NHS England, 2023). In Northern Ireland, the formula compensates for additional travel carried out by staff to provide selected community services in each area (staff time and the travel cost) and for differential costs faced by areas in meeting a given level of demand (economies of scale) (Department of Health, 2014). Cost adjustments are not solely applied to rural areas but also to high-cost areas. To illustrate, England compensates for unavoidable geographical cost differences through their use of a MFF adjuster. The MFF incorporates data on staff wages, in conjunction with building and land prices, to reflect higher input costs in densely populated areas (London and Southeast England) (Barr et al., 2014; NHS England 2023). The adjuster also accounts for higher costs associated with attracting and retaining workforce supply in rural areas. The MFF focuses on supply-side factors that will influence utilisation and, consequently, need (NHS England, 2023). An emergency service cost adjustment was introduced to reflect the unavoidable cost variations of delivering services in rural areas. 2.3.6 Unmet needs There are two main approaches for measuring unmet need in PBRA mechanisms. The first approach is to use previous evidence on health outcomes for defined population groups. NSW applies additional weightings for Aboriginal and homeless populations to represent greater health disparities faced by these groups (New South Wales Health, 2005). New Zealand distributes a percentage of their budget to health according to the proportion of Māori, Pacific and deprived populations in each DHB (Ministry of Health, 2004). Similarly, Sweden provides an additional weighting for those who fall into the Care Needs Index within their more market orientated allocation formula. The index is inclusive of material deprivation, family structures, social instability and ethnicity (Sundquist et al., 2003). The second approach has been to use epidemiological markers of unmet need. In Scotland, allocations are adjusted for differential rates of circulatory disease (NHS Scotland, 2020). In England, prior to 2014/2015 the PBRA employed ‘disability free life expectancy’ as an indicator for health inequity and unmet healthcare needs 20 | PBRA options in Ireland while distributing resources to primary care trusts. However, more recently the standardised mortality ratio for individuals under 75 years old (SMR<75) was chosen as a more suitable choice to capture unmet need. This was due to its relative stability at the CCG level over consecutive periods and its ease of comprehension. 4 2.4 CONCLUSION The PBRA or weighted capitation mechanisms established in comparator countries analysed in this chapter are often remarkably similar to each other. The basic adjustments are determined according to population size and the age and sex profiles of regional populations. While each country assigns considerable autonomy in decision-making to regional or local health authorities, each country also invariably includes an adjustment for socioeconomic status (most likely deprivation), rurality and other unmet needs. Other countryor system-specific parameters are also included. For example, in New Zealand, the size of the Māori and Pacific peoples’ population within a region is accounted for. The NHS models may incorporate quite granular deprivation information and also account for additional healthcare needs (e.g., morbidity levels) within their formulae. This analysis, alongside similar analyses (Johnston et al., 2021; McCarthy et al., 2022), highlights that Ireland can learn considerably from international PBRA systems. However, the uniqueness of the Irish healthcare system suggests that system-specific parameters may also be appropriate for inclusion within the PBRA mechanism for Ireland. 4 See https://www.england.nhs.uk/wp-content/uploads/2022/04/report-on-acra-review-of-the-health-inequalitiesand-unmet-need-adjustment-22-23.pdf. Proposed HSE Health Regions and PBRA formula | 21 CHAPTER 3 Proposed HSE Health Regions and population-based resource allocation formula 3.1 INTRODUCTION This chapter introduces the most recent proposals for healthcare system structure reorganisation in Ireland; Health Service Executive (HSE) Health Regions (HRs), and the proposed population-based resource allocation (PBRA) formula developed by the Department of Health. As a way of providing context, the chapter first provides information on resource allocation, funding mechanisms and integrated care structures that currently exist in Ireland, as well as lessons that can be garnered from them when informing PBRA. It then introduces the proposed HRs and PBRA formula, highlighting the key components of these proposed changes and recommending some changes to improve the proposals. Discussions of potential changes draws on evidence from other countries, as outlined in Chapter 2, analysis within previous reports (Johnston et al., 2021) and case studies. 3.2 RESOURCE ALLOCATION AND FUNDING MECHANISMS IN IRELAND While Ireland lacks a system-wide resource allocation mechanism, recent years have seen changes in the use of payment and funding mechanisms utilised within various publicly funded health and social care services. Section 3.3 and Section 3.4 outline options for regional level resource allocation, based on systems developed in other countries. First, we outline examples of resource allocation and strategic funding mechanisms that are currently being used in Ireland and may remain within a future, wider healthcare resource allocation mechanism. They also show that funding decisions designed to ensure greater efficiency and equity have already been implemented by healthcare policymakers in Ireland, and a number of barriers to their effective use have been identified. This section identifies four examples, referred to here as case studies, that provide evidence of resource allocation mechanisms being used within the healthcare system. We highlight: • the implementation of activity-based funding (ABF) within acute public hospitals; • resource allocation in urgent and emergency care, as examined by Thomas et al. (2019); • implications of the separate financing of acute hospital care and social care, using evidence from Walsh et al. (2020); and • the potential need for other parameters, in particular mental health and mental illness, to be accounted for within PBRA mechanisms more generally. 22 | Population-based resource allocation in Ireland Key practical lessons from each mechanism have been identified. These lessons can also help to inform the embedding process of the proposed PBRA mechanism. 3.2.1 Case Study 1: Activity-based funding in acute public hospitals ABF is a method of funding healthcare that allocates funds to healthcare providers (e.g., hospitals) based on the actual amount and type of care and services they provide. ABF allows for funding to reflect care delivered, rather than it being based on pre-set budget allocations or historical spending patterns. Since 2016, ABF has been the method through which the HSE has funded inpatient and day patient episodes of care within the main large acute public hospitals (categorised as Model 3 and Model 4 hospitals with 24/7 emergency departments) (Keegan et al., 2020; Valentelyte et al., 2021; Valentelyte et al., 2023). While ABF is not yet used to fund emergency departments and outpatient care in acute public hospitals, this shift towards ABF, and away from block funding in acute public hospitals for inpatient care, represents an important shift in how healthcare services are funded in Ireland. The implementation of ABF has made Ireland comparable in this regard to other countries that employ activity-based or Payment by Results (PBR) models for allocating health budgets. The move towards ABF also showed that the healthcare system in Ireland was capable of implementing largescale strategic resource allocation and funding mechanisms. ABF has been favoured as a mechanism by health economists and planners. The key attributes of ABF are as follows. • ABF puts more responsibility onto the hospitals (and Hospital Groups) to provide accurate information on care provided to patients. • ABF provides a mechanism for more equitable distribution of resources across hospitals based upon the patients who receive the care. In this context, ABF is more patient-centred than block funding. • ABF explicitly includes an efficiency element. Under ABF, hospitals are reimbursed for the type and complexity of care provided to patients. This means that ABF incentivises earlier discharge from hospital, as hospitals will be provided with the same level of funding for patients with the same diagnosis-related group (DRG), regardless of their length of stay (LOS). • The use of DRGs provides hospitals with a simple classification system that allows for funding to be more easily and efficiently allocated. The implementation and evolution of ABF in acute public hospitals offers valuable insights for policymakers, particularly in shaping the PBRA system and the establishment of HSE HRs. We demonstrate below how the implementation of ABF in these hospitals has enabled healthcare providers and planners to address numerous organisational challenges that are also likely to arise with the introduction of PBRA. Proposed HSE Health Regions and PBRA formula | 23 Regional decision-making The policy establishing ABF identified key priorities and levels of decision-making for resource allocation at the Hospital Group level. According to the first ABF implementation plan: ‘Hospital Groups will form the contracting entity for Activity-Based Funding’ and Hospital Groups were to be ‘given the autonomy to harness the benefits of independence and greater control at local level’. (HSE, 2015) These groups were granted autonomy to optimise the benefits of independent decision-making at a local level. This autonomy included adjustments in the cost base and staff deployment to meet local demands. Importantly, this autonomy was also intended to support hospitals facing geographical or structural challenges, which is the approach also taken in England and Sweden. As Rice et al. (2002) discussed, this approach is a critical aspect of budget devolution within a broader ‘strategic resource allocation’ system. These insights are also valuable for the transition towards PBRA and the establishment of HSE HRs. The most recent ABF implementation plan (2021–2023) outlines that Hospital Groups are responsible for the governance and management of hospitals within their groups, and for providing good quality, timely data for national ABF (HSE, 2021). Hospital Groups remain ‘the contracting entities for ABF, with funding flowing from the HSE to the Groups, rather than individual hospitals’; they ‘therefore determine how funding is distributed among hospitals’. It is outlined that responsibilities of Hospital Groups will be subsumed by the newly established regional bodies, e.g., HSE HRs. Currently, it appears that responsibility for ABF will remain predominantly at the hospital and regional level, as Ireland transitions to HSE HRs. Therefore, a review of the role Hospital Groups actually played within ABF and wider resource allocation decision-making as it occurred in reality could be valuable in terms of our understanding of how improvements can be made. Community and long-term care resource allocation As we explore in more detail in subsection 3.2.3, the effectiveness of ABF is somewhat reduced due to the lack of integration between acute and non-acute care. First, the misalignment of regional boundaries between Hospital Groups and community healthcare organisation (CHOs) (and local health offices (LHOs)) likely hinders the integration of these sectors. Second, ABF is also impacted by the poorer level of information on costing and availability of non-acute services. In light of this, the latest ABF Implementation Plan (HSE, 2021) identified several key areas for focus during the 2021–2023 period. One such area is the commencement of the process of cost assessments for community and home support services, with 24 | Population-based resource allocation in Ireland the eventual goal of transferring pricing responsibility for these services to the Healthcare Pricing Office (HPO). This would be another significant change in funding mechanisms for Irish health and social care. Given that integrating acute and non-acute care is a critical aspect of the proposed HR restructuring, future plans for shifting pricing responsibilities for community services to the HPO warrant close examination. Transition adjustments The issue of transitioning or de-coupling from historic budgets was acknowledged by the HSE since the inception of ABF (HSE, 2021). Transition adjustments remain a continuing feature of ABF within acute public hospitals. The shift from fixed block budgets to activity-based budgets necessitated gradual changes, as will PBRA. Governance A key goal of ABF is to encourage the delivery of care in less complex settings and to reduce the LOS in hospitals, as payments are no longer linked to longer hospital stays. ABF, and extensions to ABF, aimed to increase the rates of same-day surgeries for certain procedures. Notably, from 1 January 2018, hospitals were incentivised to perform laparoscopic cholecystectomy (gallbladder removal) as a day case rather than as an inpatient procedure. Essentially, hospitals would receive the same funding for conducting a laparoscopic cholecystectomy as a day case as they would for an inpatient procedure (Valentelyte et al., 2023; Brick et al., 2025). However, a recent analysis of this ABF incentive, using a difference-in-difference statistical approach that compares the use of day case surgery before and after the funding change, revealed no significant effect on the rates of day case procedures (Valentelyte et al., 2023). The study concluded that ‘the implementation of the funding policies did not improve hospital efficiency’ (Valentelyte et al., 2023). The authors discuss that their results conform with international evidence that shows at best modest impacts of ABF-type mechanisms on increasing the use of more efficient hospital care. But they also discuss that Irish hospitals may have a lower capacity to respond to ABF due to underlying capacity constraints, high bed occupancy rates, and long waiting lists for day case and elective inpatient care. It is possible that ABF requires time to become embedded and fully integrated into hospitals, and results will not be evident shortly after its introduction (e.g., for laparoscopic cholecystectomy). International evidence suggests that the benefits of ABF may take several years to materialise (Gaughan et al., 2019). This research also revealed significant variations in how hospitals respond to ABF in their decision-making processes. Such variations were observed with both small and large incentives, and across different clinical settings. These patterns might indicate issues in the governance of ABF, and the capacity of a sophisticated Proposed HSE Health Regions and PBRA formula | 25 funding mechanism to become embedded in practice by clinicians, clinical decisionmakers and hospital management. Furthermore, recent research published by the Department of Health has shown substantial disparities in hospital key performance indicators (KPIs) associated with ABF in acute public hospitals (Clancy et al., 2023). Collectively, these findings underscore the importance of robust governance in resource allocation mechanisms, and within the proposed PBRA. Effective governance ensures not only that the systems function as intended but also that providers failing to meet requirements receive adequate incentives and support structures for compliance. 3.2.2 Case study 2: Variation in resource allocation in urgent and emergency care systems in Ireland This case study highlights that in Ireland, within a relatively small and homogenous sector of the healthcare system – urgent and emergency care – large differences currently exist in how financing and resource allocation decisions are made. Unlike inpatient and day patient care, ABF has not yet been incorporated within emergency department or outpatient care. The objective of a research study undertaken by Thomas et al. (2019) at Trinity College Dublin was to examine the funding mechanisms within the urgent and emergency care sector in Ireland, focusing on the dynamics of healthcare funding used and the regional disparities that exist. As discussed by the authors, international research consistently finds a higher risk of poor health outcomes from emergency conditions in rural areas compared to urban areas. This is due to rural areas consisting of older and more socioeconomically disadvantaged populations, longer travel times to hospitals and care clinics, and lower survival rates (Smith et al., 2008; Alanazy et al., 2019). In their key analyses, Thomas et al. (2019) examined total funding per capita within the three areas of urgent and emergency care (ambulance services, emergency departments and general practitioner (GP) care) across counties in Ireland. They found the lowest funding in Wicklow (€47) and highest in Louth (€208). The analyses also showed that for ambulance services, many rural counties, including Donegal, Clare, Kerry, Roscommon and Leitrim, have well-sourced ambulance services. However, the pattern is inconsistent, with some rural counties like Sligo not being well served (Thomas et al., 2019). This inconsistency is also apparent in GP care, where some rural counties are relatively well-financed (Donegal and Mayo) while others are not (Cavan and Monaghan). Interestingly, in rural counties where public emergency department funding is low, GP funding is relatively high and vice versa. This latter finding may point to differences in how healthcare systems diverge in their operation as well. Thomas et al. (2019) also found that private emergency care services are concentrated in Dublin and the south of the country (namely Cork) while public emergency care services are concentrated in Dublin north-east, the midlands, and the south-east of the country. The authors found no link between pre-hospital (GP, 26 | Population-based resource allocation in Ireland practice nurse and ambulance services) funding and deprivation (Thomas et al., 2019). This is in direct contrast to numerous international studies which found significantly poorer outcomes in more deprived areas (Rigby et al., 2017; McCann et al., 2018), indicating inadequate pre-hospital funding for deprived areas. In conclusion, the authors found that across rurality and deprivation, which are key parameters within the proposed PBRA formula, urgent and emergency healthcare funding is fragmented and inconsistent. This lack of uniformity in the urgent and emergency care system in Ireland may be due to the system currently being based predominantly on historic patterns of expenditure, with limited adjustment for case mix. Little to no acknowledgment of current inefficiencies, in terms of funding across counties and regions, will only serve to advance inequalities, notably in rural areas. The findings from this study also point to the need for PBRA to make systematic decisions of funding based upon population needs. They also suggest that regional inequalities exist, which may take time to dissipate under PBRA. 3.2.3 Case study 3: Social care supply and hospital length of stay An important aspect of the healthcare system changes recommended in Sláintecare is the need to transfer care out of hospital into more appropriate settings. The restructuring envisaged under HRs and PBRA partly aims to help this recommendation be realised. Research from the Economic and Social Research Institute (ESRI) found that improving non-acute care supply can help reduce use of less appropriate hospital care, using the example of the impact of access to public home support on the use of hospital services among older people (65+). This study was one of the first to identify how health and social care services can often act as a substitute for each other in Ireland (Walsh et al., 2020). In the context of Sláintecare, and the goal of placing care in the least complex setting and as close to home as possible, findings from this study highlight that diverting resources from hospitals into other parts of the system has benefits for the efficient and equitable allocation of healthcare resources. This study used information on over 300,000 inpatient hospitalisations between 2012 and 2015 among those aged 65+ from the Hospital In-Patient Enquiry (HIPE) dataset. Using this information on patients’ home address (county and postcode in Dublin), the authors were able to match home support (or home care) supply in patients’ local area, at a point in time, to their hospitalisation data. As highlighted in Section 1.2, there exists large variation in health and social care supply across Ireland, including home support. An updated analysis by Walsh et al. (2020) found similar for home support; they showed that some individuals will have lower access to home support, ceteris paribus, than others, based solely upon their county address. This is in part a result of no mechanism being in place to match home support supply with need. The authors exploited this variation in home support supply across counties, over time, to examine the impact of an Proposed HSE Health Regions and PBRA formula | 27 increase in home support supply on the inpatient LOS of older patients (aged 65+). Furthermore, as the Model 3 and Model 4 hospitals included in the analyses have catchment areas that draw patients from numerous counties, the authors were able to compare patients within the same hospital at the same point in time, who had similar profiles except that they came from different counties, and for that reason had different home support supply available to them. The results show home support supply has little effect on average LOS. However, using a novel unconditional quantile regression technique that subdivides LOS into short and long categories, Figure 3.1 shows that inpatients from areas with a higher per capita availability of home support services tended to have shorter hospital stays on average. Concentrating on longer LOS patients who are likely delayed transfers of care, the paper finds a 10 per cent increase in home support availability correlates with a 1.2 to 2.1 per cent decrease in hospital stay duration. Larger effects were found among stroke and hip fracture patients, who may potentially utilise home support services more than the average patient. Larger effects were also found in one region that invested heavily in home support during the period studied (2012–2015). FIGURE 3.1 THE IMPACT OF HOME SUPPORT SUPPLY ON INPATIENT LENGTH OF STAY Source: Walsh et al. (2020). The results of Walsh et al. (2020) demonstrate the significant impact that nonacute care supply can have on the usage of acute care services. It also highlights how inequalities in access to care can lead individuals to use less appropriate services, such as hospital or long-term residential care (LTRC). The study points out a key inefficiency: hospitals are penalised for longer LOS, despite not being responsible for decisions on home support supply. This disconnection in resource allocation decisions within the healthcare system undermines the potential efficiency gains of measures like ABF within hospitals. A crucial policy takeaway 28 | Population-based resource allocation in Ireland from this research is the potential benefits of joint planning and management of health and social care activities within a region, as proposed by PBRA. Such integration may enable more efficient hospital discharge timing while ensuring patients receive the most appropriate care. Additionally, results may point to the lack of benefits from ABF observed by Valentelyte et al. (2023) being influenced by factors outside a hospital’s control. This study underscores the importance of ensuring that the proposed PBRA mechanism effectively integrates acute and nonacute care. 3.2.4 Case study 4: Mental illness and healthcare utilisation Incidence of mental illness is increasing in Ireland as well as many other countries, leading to an increase in both general healthcare utilisation and use of more specialist mental healthcare services (Figueroa, et al., 2020). Furthermore, while utilisation and expenditure by those with mental illness may be high (Figueroa et al., 2020), access to, and use of, healthcare services can also differ across sociodemographic groups and healthcare coverage (Frank et al., 2014). Health coverage and broader structural barriers often lead to lower uptake of mental healthcare. Barriers such as distance to services and lack of transportation can deter those in rural areas. Moreover, waiting lists and the financial cost of treatment, particularly for those in lower socioeconomic groups, can lead to lower mental healthcare utilisation. While often overlooked in PBRA mechanisms, mental illness and poorer mental health outcomes lead to significant healthcare utilisation (Himelhoch et al., 2004; Saloner et al., 2014; Saloner et al., 2017; González-Suñer et al., 2021). However, no PBRA formula examined in Chapter 2 explicitly includes mental health as a characteristic to help determine resource allocation decisions more generally. Separate mental health budgets, though, are now common in PBRA formulae, including in England (NHS England, 2023). The 2024 HSE budget allocated almost €1.3 billion to mental healthcare services, 5 with the majority of this budget spent on specialised inpatient and communitybased mental healthcare services. O’Malley (2023) outlined that this expenditure on mental healthcare services will be included in the proposed PBRA formula. This is in line with PBRA systems across the National Health Service (NHS) and other comparator countries. However, treatment of mental health issues will invariably include expenditure on general acute public hospital care and primary care. Therefore, as the prevalence of mental ill health continues to increase, future iterations of PBRA formulae may begin examining the appropriateness of including mental health rates explicitly when trying to account for the additional healthcare 5 See https://www.gov.ie/en/press-release/ae213-minister-for-mental-health-and-older-people-launches-hse-digitalmy-mental-health-plan/. Proposed HSE Health Regions and PBRA formula | 35 3.4 PROPOSED POPULATION-BASED RESOURCE ALLOCATION FORMULA The previous section outlined the HR structure through which the PBRA in Ireland will occur. In this section, we outline the key parameters within the proposed formula and offer some discussion and recommendations on how future iterations of the formula could be improved upon. The proposed PBRA formula is: 𝐴𝑑𝑗𝑃𝑜𝑝𝐻𝑅 = 𝑃𝑟𝑜𝑗𝑃𝑜𝑝𝐻𝑅 𝑥 𝐴𝑔𝑒_𝑆𝑒𝑥𝐼𝑛𝑑𝑒𝑥𝐻𝑅 𝑥 𝐷𝑒𝑝𝐼𝑛𝑑𝑒𝑥𝐻𝑅 𝑥 𝑅𝑢𝑟𝐼𝑛𝑑𝑒𝑥𝐻𝑅 where the adjusted population of each HR (𝐴𝑑𝑗𝑃𝑜𝑝𝐻𝑅) accounts for the (projected) population of each HR (𝑃𝑟𝑜𝑗𝑃𝑜𝑝𝐻𝑅), the age and sex composition of each HR (𝐴𝑔𝑒_𝑆𝑒𝑥𝐼𝑛𝑑𝑒𝑥𝐻𝑅), the level of deprivation in each HR (𝐷𝑒𝑝𝐼𝑛𝑑𝑒𝑥𝐻𝑅), and the rurality or remoteness of each HR (𝑅𝑢𝑟𝐼𝑛𝑑𝑒𝑥𝐻𝑅). In the analyses that follows, we list HRs by letter: HR A = Dublin & North East; HR B = Dublin & Midlands; HR C = Dublin and South East; HR D = South West; HR E = Mid West; and HR F = West & North West. The proposed PBRA formula, detailed by the Department of Health in O’Malley et al. (2023), draws on a range of evidence from prior academic studies (Johnston et al., 2021) and a report by the Department of Health (McCarthy et al., 2022). Generally, the parameters incorporated into the PBRA mechanism closely align with parameters included in PBRA formulae in Australia, England, New Zealand and Scotland. We examine these parameters in greater detail below, particularly how they are sequentially integrated into the formula. We also examine the impact of the proposed PBRA formula on HSE budgets, following the methodology of O’Malley et al. (2023). Their approach involves comparing the 2021 budgets allocated across HRs with the hypothetical budgets that would result under the proposed PBRA. In their analyses, O’Malley et al. (2023) examine the impact the PBRA formula would have on acute public hospitals, primary care, social inclusion, palliative care, mental health and older peoples’ services. For the sake of brevity, our examples will primarily focus on acute public hospital care. 3.4.1 Population In line with PBRA formulae used internationally, the population of each HR (𝑃𝑟𝑜𝑗𝑃𝑜𝑝𝐻𝑅) is the starting point in the resource allocation decision within the Irish proposed PBRA formula. Population will have the largest impact on the distribution of resources using this formula, as Figure 3.5 shows large variation in population across each HR. Overall, HR A (Dublin & North East) has the largest population, with HR E (Mid West) having the smallest population. 36 | Population-based resource allocation in Ireland FIGURE 3.5 PERCENTAGE OF POPULATION BY HSE HEALTH REGION Source: O’Malley et al. (2023). Figure 3.6 illustrates the acute public hospital funding allocation once HR population is adjusted for. In general, as would be expected, the inclusion of population does result in changes in funding allocations across HRs. However, the changes seen for acute care are relatively small (two percentage points or less). FIGURE 3.6 ACUTE PUBLIC HOSPITAL FUNDING ALLOCATION, POPULATION ADJUSTED Source: O’Malley et al. (2023) 22.7% 20.8% 18.9% 14.5% 8.2% 14.9% 0% 5% 10% 15% 20% 25% HR A (Dublin & North East) HR B (Dublin & Midlands) HR C (Dublin and South East) HR D (South West) HR E (Mid West) HR F (West & North West) 24% 22% 17% 13% 7% 17% 23.0% 20.9% 18.9% 14.4% 8.0% 14.8% 0% 5% 10% 15% 20% 25% HR A HR B HR C HR D HR E HR F Actual Population Adjusted Proposed HSE Health Regions and PBRA formula | 37 No weighting is used in the adjustment for the population structure of HRs for acute care or other services examined in O’Malley et al. (2023). For older peoples’ services, the population aged 65+ within each HR is used in lieu of the wider population, as these services are targeted to this age group. The adjustment based on HR population size is reliant on readily available data provided by the CSO from the national census. Over a shorter-term horizon (two to five years), it would be expected that the shares of population within each HR would not change to a large extent. However, the size of the Irish population has been increasing in recent years, largely due to increases in net migration among the working age population and improvements in life expectancy at older ages (Walsh et al., 2021). Therefore, relying on population projections provided by the Central Statistics Office (CSO), or using the COSMO model (which models fertility, migration and life expectancy) located at the ESRI (Walsh et al., 2021; Bergin et al., 2024), will provide accurate medium-term population projections. This will allow healthcare policymakers to exploit a key benefit of PBRA mechanisms: multi-year budgets. This would be of considerable importance, and follows calls by the Irish Fiscal Advisory Council (Casey et al., 2021) and others to define shortto mediumterm budgets to remove some of the underbudgeting and overspends that are common within the health budget. 3.4.2 Age and sex index The second parameter, 𝐴𝑔𝑒_𝑆𝑒𝑥𝐼𝑛𝑑𝑒𝑥𝐻𝑅, included in the formula is the age and sex profiles of each HR. This reflects the impact age and sex have on healthcare utilisation and costs. The PBRA formula uses healthcare costs per capita for each age group (five-year age bands) and for both males and females. These age–sex healthcare cost profiles are based in part on previous ESRI research using the Hippocrates model (Keegan et al., 2020; Walsh et al., 2021) and research on palliative care (May et al., 2019). These per capita cost profiles are subsequently compared to the national average per capita cost, to estimate relative age–sex profiles. Figure 3.7, using the age groups examined in O’Malley et al. (2023), shows little variation in the age composition of the six HR populations. HRs A and B have the smallest percentage of people aged 70+, which may reduce the level of resources for care of older people required in these HRs compared to other regions. 38 | Population-based resource allocation in Ireland FIGURE 3.7 PERCENTAGE OF POPULATION IN EACH AGE GROUP BY HSE HEALTH REGION Source: Authors’ calculations. Figure 3.8 illustrates the acute public hospital funding allocation once the age and sex cost profiles of acute public hospital care in Ireland are adjusted for. In the case of acute public hospital funding, these adjustments have a similar effect on funding allocations as the population adjustment. FIGURE 3.8 ACUTE PUBLIC HOSPITAL FUNDING ALLOCATION, AGE AND SEX ADJUSTED Source: Authors’ calculations. No additional weighting is applied to the age–sex profiles within the proposed formula. 28% 28% 27% 27% 28% 28% 64% 65% 63% 63% 63% 62% 8% 7% 10% 10% 10% 10% 0% 20% 40% 60% 80% 100% HR A HR B HR C HR D HR E HR F 0-19 20-69 70+ 24% 22% 17% 13% 7% 17% 22.0% 19.8% 19.6% 14.7% 8.2% 15.6% 0% 5% 10% 15% 20% 25% HR A HR B HR C HR D HR E HR F Actual Population Adjusted Age Sex Adjusted Proposed HSE Health Regions and PBRA formula | 39 Similar to population data, there exists granular information on HR populations by age and sex, and changes to the demographic profile can be modelled within CSO and ESRI population projections. This feature once more points to the ability of healthcare policymakers to formulate multiannual budgets using this PBRA approach. 3.4.3 Deprivation Area-level deprivation is a key factor in the proposed formula, and the third parameter included in the formula. The determination of what deprivation measure to include when calculating the PBRA mechanism for Ireland is, in part, based upon available data. O’Malley et al. (2023) use the Pobal HP (Hasse and Pratschke) Deprivation Index, based upon the Small Area Population Statistics (SAPS) from Census 2016 and 2022. The Pobal HP Deprivation Index uses data from the national censuses to assess various socioeconomic indicators at a regional level, and it one of the most commonly used deprivation indices in public policy research in Ireland (Whelan et al., 2023). The Pobal HP Deprivation Index has three dimensions of advantage: • demographic profile of each small area population (e.g., percentage of households with children aged under 15 years and headed by a single parent); • social class profile (the percentage of the population with a third level education); and • labour market participation (e.g., unemployment rate). Often, the HP Index score is partitioned into decile or quintile variables that apportion SAPS and their populations to specific quintiles (deciles), based upon where they are ranked on the deprivation index. This allows for particular focus on the most deprived populations – those seen as being very or extremely disadvantaged. The HP Deprivation Index is also included in many surveys including the HIS and has been used previously to examine health across groups (Walsh et al., 2020; Walsh et al., 2022). Using Waves 1–5 of the HIS, Figure 3.9 identifies the percentage of adults in each HR living in the most deprived quintile (most deprived 20% of the national population). We find that HRs A and F are the most deprived HRs, with 23.1 per cent and 24.2 per cent respectively living in the most deprived quintile. HR D is the least deprived HR. These differences in deprivation show the importance of accounting for deprivation or socioeconomic inequalities within the PBRA. 40 | Population-based resource allocation in Ireland FIGURE 3.9 DEPRIVATION BY HSE HEALTH REGION Source: Authors’ calculations of Healthy Ireland Survey Waves 1–5. Within the proposed PBRA formula, a deprivation relative score is estimated, in which SAPS is divided into eight categories, from extremely affluent to extremely disadvantaged. This measure is also included in HIS to estimate deprivation of each respondent. The proposed formula used defined deprivation weights. • A weighting of 1 is applied to individuals who are categorised as not being disadvantaged. • A weighting of 2 is applied to individuals who are categorised as disadvantaged. • A weighting of 3 is applied to individuals who are categorised as very disadvantaged. • A weighting factor of 4 is applied to individuals who are categorised as extremely disadvantaged. The deprivation index included is then compared to the national average and normalised as appropriate. Figure 3.10 illustrates the acute public hospital funding allocation once the deprivation weighting outlined above is adjusted for. In the case of acute public hospital funding, these adjustments have a similar effect on funding allocations as the population adjustment. 23.1% 22.1% 22.4% 17.5% 22.4% 24.2% 0% 5% 10% 15% 20% 25% HR A HR B HR C HR D HR E HR F Proposed HSE Health Regions and PBRA formula | 41 FIGURE 3.10 ACUTE PUBLIC HOSPITAL FUNDING ALLOCATION, DEPRIVATION ADJUSTED Source: Authors’ calculations. However, as discussed by Penno et al. (2013), a number of different deprivation and socioeconomic measures, and weightings, are used across PBRA mechanisms internationally. In the past in Ireland, different deprivation indices and weightings were used for resource allocation decisions and recommendations in health. In 2006, the HSE introduced a simple resource allocation formula to try to allocate resources more efficiently and equitably for adult community mental health teams (Vega et al., 2010). This approach estimated deprivation at the local (electoral division level) and used the Small Area Health Research Unit Deprivation Index developed by Dr Alan Kelly at Trinity College Dublin in the 1990s. 8 It applied higher weights to the most deprived areas. Similarly, deprivation was used by the HSE in their formula to determine the location of new Primary Care Centres, which also placed importance on the deprivation of local areas. 9 Outside of healthcare, one of the most important uses of deprivation relates to education and the DEIS (Delivering Equality of Opportunity in Schools) scheme (Department of Education, 2022). The Department of Education specifically targets resources to DEIS schools, which cater to students in areas of high deprivation, aiming to mitigate the educational challenges and disadvantages associated with 8 See https://www.tcd.ie/media/tcd/medicine/public-health-primary-care/pdfs/sahru-report-1997.pdf. 9 The HSE stated that where locations had equal scores, their rankings were then based on the deprivation index score. See https://www.audit.gov.ie/en/find-report/publications/2019/2018-annual-report-chapter-15-development-ofprimary-care-centres.pdf. 24% 22% 17% 13% 7% 17% 21.7% 20.2% 19.3% 14.1% 8.4% 16.3% 0% 5% 10% 15% 20% 25% HR A HR B HR C HR D HR E HR F Actual Population Adjusted Age Sex Adjusted Deprivation Adjusted 42 | Population-based resource allocation in Ireland socioeconomic background. The DEIS formula also uses the HP Deprivation Index but applies different weights to those chosen in O’Malley et al. (2023). The DEIS formula uses defined deprivation weights applied to individuals based upon their location of residence. • A weighting of 0 is applied to individuals living in locations that are categorised as not being disadvantaged (extremely affluent, very affluent, affluent and marginally above average). • A weighting of 0.5 is applied to individuals living in locations that are categorised as being marginally below average. • A weighting of 1 is applied to individuals living in locations that are categorised as disadvantaged. • A weighting of 2 is applied to individuals living in locations that are categorised as very disadvantaged and extremely disadvantaged. Figure 3.11 illustrates the acute public hospital funding allocation using the weighting applied in O’Malley et al. (2023), and applying the DEIS weighting to the acute public hospital funding across HRs. FIGURE 3.11 ACUTE PUBLIC HOSPITAL FUNDING ALLOCATION, DEPRIVATION ADJUSTED USING DEIS FORMULA Source: Authors’ calculations. In presenting this exercise in Figure 3.11, the intention is not to put forward the DEIS weighting as more appropriate than others. But it does show that further examination of appropriate weighting is required as the changes in funding differ across weightings. The DEIS approach to inclusion of deprivation has been used now for a number of years, and one of the important elements of the DEIS 21.7% 20.2% 19.3% 14.1% 8.4% 16.3% 20.8% 20.5% 18.5% 12.9% 9.0% 18.2% 0% 5% 10% 15% 20% 25% HR A HR B HR C HR D HR E HR F Deprivation Adjusted (O'Malley et al., 2023) Deprivation Adjusted (DEIS) Proposed HSE Health Regions and PBRA formula | 43 programme is that evaluation was built into the programme from its inception (Smyth et al., 2015). There is relative stability in deprivation within an area over time. All CSO censuses now capture deprivation at regular (five-year) intervals. Once more, the data on deprivations point to the ability of healthcare policymakers to formulate multiannual budgets using this PBRA approach. 3.4.4 Rurality index Finally, a rurality index is applied to the formula. The model includes variables based upon the percentage of the population within each HR that lives in a highly rural/remote area, using information from Census 2016. This measure is given a weighting of two. 10 Once more, the rurality index is compared to the national average and normalised as appropriate. The degree of rurality of an area will remain relatively constant over time, therefore not impeding medium-term budgeting; however rurality definitions may change over the longer term. 3.4.5 Impact of population-based resource allocation formula on acute and primary care budgets Combining all of the parameters above, O’Malley et al. (2023) compare 2021 budgets allocated across HRs to the counterfactual budget that would occur under the proposed PBRA. The authors compare budget allocations for a number of different sectors, including acute hospitals and primary care. We show the impact the adjustments have on both the acute and primary funding allocations in Figure 3.12. Overall, for both acute hospitals and primary care, the actual budgets provided in 2021 differ little from the counterfactual budget that would occur under the proposed PBRA. Some notable exceptions to this are seen. In HR A, the budget for acute hospitals would be six percentage points lower under the proposed PBRA scenario, while a reduction of three percentage points would occur in HR B. In contrast, a three percentage points increase would occur in HRs E and F. Interestingly, in those HRs where PBRA would reduce (increase) acute healthcare budgets, the proposed formula would also increase (reduce) the HR’s primary care budget. Therefore, it is possible that some of the differences between the actual and PBRA budgets for acute care reflect the relative importance of acute hospitals in some HRs. This may be further underpinned by the fact that the relative 10 As also shown in O’Malley et al. (2023), applying a rurality index has only a small effect on resource allocation for acute public hospital and primary care. Therefore, we do not provide graphical representation of its redistributive effect in this section. However, based upon evidence from other countries, accounting for remoteness is important when allocating resources for community-based care and long-term care, where healthcare workers such as home carers and community nurses may be required to spend significant time travelling to patients. 44 | Population-based resource allocation in Ireland importance of the acute budgets is largest in HRs A and B, which are located in part in Dublin and the Dublin commuter belt. FIGURE 3.12 PERCENTAGE OF ACUTE HOSPITAL AND PRIMARY CARE HEALTHCARE EXPENDITURE BY ACTUAL AND PBRA SCENARIOS ACROSS HSE HEALTH REGIONS, 2021 Source: O’Malley et al. (2023). 3.5 OTHER POPULATION-BASED RESOURCE ALLOCATION FORMULA CONSIDERATIONS It is clear that the PBRA formula outlined in the previous section represents a significant step forward for Irish healthcare and will have a considerable impact on healthcare funding, and health and social care provision in Ireland. Furthermore, the PBRA formula template is well considered and many of the parameters adopted within the formula match those in countries with more sophisticated and embedded PBRA. However, some changes may be required prior to the introduction of PBRA or, more realistically, in future iterations of the formula, to improve its effectiveness. Below we identify other formula parameters or features that policymakers in Ireland may need to consider. Where appropriate, we provide options and lessons from other countries, as examined in Chapter 2. 3.5.1 Health The health and well-being of a population, and the demand for health and social care, are closely related to demographic factors such as age, sex and deprivation, already accounted for within the PBRA formula. For example, the age and sex cost -6% 3% -3% 1% 1% 0% 1% 0% 3% -3% 3% -1% -10% -5% 0% 5% 10% 15% 20% 25% Acute Hospital Primary Care Acute Hospital Primary Care Acute Hospital Primary Care Acute Hospital Primary Care Acute Hospital Primary Care Acute Hospital Primary Care HR A HR B HR C HR D HR E HR F 2021 Actual PBRA Diff Proposed HSE Health Regions and PBRA formula | 51 FIGURE 3.16 MEDICAL CARD COVERGE, PHI STATUS AND GP AND INPATIENT CARE DEMAND Source: Healthy Ireland Survey, Waves 1–5. Notes: N: GP visits=25,669; inpatient days=22,055. Results presented as additional demand (average marginal effects) from a linear regression. Regressions control for age, age squared, sex and deprivation quintile. Parameters such as the medical card are not features of the PBRA formula found in other countries, which may be a reason why they have not been included within the proposed PBRA formula. However, the uniqueness of the Irish healthcare system, and the clear evidence that medical cards are associated with higher demand for healthcare, suggests that policymakers should examine the inclusion of medical card coverage when determining resource allocations. As discussed in subsection 3.5.4, in order for some expenditure to be included within the PBRA, accounting for medical cards within HRs may also be required. It is recommended that, as part of evaluations of PBRA, further evaluations of the potential of accounting for medical card holders within future iterations of the PBRA formula are made. 3.5.3 Weighting factors Weighting factors are commonly used in PBRA formulae to account for additional funds required to meet healthcare objectives. They are often country-specific and selected based on empirical evidence (Diderichsen 2004). The most common weighting factor is cost, which can be incorporated as a rurality, socioeconomic status/deprivation, unmet need, or demographic weighting. The most common cost weights are weights based upon age and sex indices, which take account of the differing healthcare needs across different age groups, and between males and females, often varying by sector and informed by empirical evidence. Generally, as older age groups have a greater need for healthcare, models give greater weight to areas with older populations (NHS Scotland, 2020; Sundquist et al., 2003). 52 | Population-based resource allocation models for Ireland Similarly, rurality cost weighting is included across all countries studied (with the exception of Sweden) to account for additional costs associated with providing care in rural areas. In Scotland, a rurality cost weight accounts for unavoidable costs associated with delivering care in rural areas. It is based on separate remoteness adjustments for community and hospital services, and determined by a simulation model of additional travel requirements (NHS Scotland, 2020). In New Zealand, the rurality cost weighting is determined by: the rurality premium and diseconomies of scale payments for small hospitals in remote or rural locations; payments made to practices in rural areas to assist in GP recruitment and retention; and price premia paid to rural maternity providers where the volume of births is below the threshold level (Ministry of Health, 2004). In England, the model accounts for higher costs in urban and densely populated areas through their market forces factor (MFF). The MFF costs in England are based on staff, building and land costs, and higher London pay costs. The staff MFF is calculated by an analysis of the actual costs borne by NHS organisations and examination of regional variations in pay rates in the private sector. All models include a weighting to recognise the different challenges in reducing disparities between population groups through unmet need and/or socioeconomic status/deprivation. In New Zealand, the model includes additional cost weighting for ethnicity. These cost weightings are calculated by assessing expected against actual expenditure, and an adjustment factor is applied based on the difference (Penno et al., 2013). In Australia, the models incorporate additional weighting for the Aboriginal and Torres Strait Islander populations, with a weight of 2.5 applied per indigenous person to reflect poorer health outcomes within this group (New South Wales Health 2005). In Sweden, unmet need is weighted using their Care Needs Index (CNI), with CNI weights calculated for each decile of the population (Sundquist et al., 2003). The CNI uses a range of indicators (discussed in subsection 3.6.5), which are subsequently weighted by a survey of Swedish GPs’ workload associated with each factor (Malmström et al., 1998). Similarly, in Scotland, the morbidity and life circumstances (MLC) index gives more weight to areas with higher premature death rates and greater socioeconomic deprivation, to account for the additional healthcare resources required to combat such inequalities (NHS Scotland, 2020). It is recommended that, when evaluating the proposed PBRA formula for Ireland, further evaluations of weights applied to age and sex remain based upon health and social care cost profiles. Furthermore, as discussed in subsection 3.4.3, a reexamination of weights applied to deprivation is recommended, with a specific examination of weights used to inform the DEIS programme for education. Proposed HSE Health Regions and PBRA formula | 53 3.5.4 Top slicing – Services excluded It will not be possible, or appropriate, to include all health and social care services within PBRA formulae. Commonly used in resource allocation models (McCarthy et al., 2022), top slicing refers to the practice of setting aside a proportion of the overall budget for specific purposes before allocating the rest according to the standard allocation formula. In general, top slicing occurs in programmes that may require specialised concentrated responses, often at a national level. In Scotland, the government sets aside, or ‘top slices’, revenue funding for specified national service such as the Scottish ambulance service before distributing the remaining allocations to NHS boards. 15 In addition, capital expenditure does not tend to be included within PBRA formulae across those countries examined in Chapter 2. However, excessive top slicing can cause substantial issues of concern. In the case of HRs and PBRA in Ireland, a key factor underpinning these changes relates to integrating services and pathways of care. But exclusion of key health and social care services can impede the ability of these structures to create integrated care pathways. Case study 3 (subsection 3.2.3) for example highlighted the impact the lack of integration between social care and acute care can have on the use of acute public hospital care, and how this can reduce the effectiveness of funding mechanisms such as ABF. Were excessive top slicing to occur, this may indirectly result in inequitable allocations for included services. In their report, O’Malley et al. (2023) recommended that over the short to medium term, only acute public hospital and community expenditure should be subject to the proposed PBRA formula. A key issue with this recommendation is that a substantial percentage of public health and social care expenditure lies outside of the proposed PBRA mechanism. Table 3.1 outlines the key areas, as detailed in O’Malley et al. (2023), that are initially proposed to be included in PBRA. Overall, under the proposed formula, almost half of all public health and social care expenditure will remain outside the PBRA. Large sectors such as the acute public hospital sector (€5.11bn), mental health (€0.97bn) and older peoples’ services (€0.90bn) will be included in the formula. Most notably, the Nursing Home Support Scheme (NHSS, €0.99bn), disability services (€1.99bn) and PCRS (€2.80bn) expenditure are also not be included in the proposed PBRA mechanism. 15 See https://www.nss.nhs.scot/media/1063/nsd602-00101.pdf. 54 | Population-based resource allocation models for Ireland TABLE 3.1 PUBLIC HEALTHCARE EXPENDITURE INCLUDED AND NOT INCLUDED IN PROPOSED PBRA MECHANISM Included in PBRA (€000s) Not Included in PBRA (€000s) Hospital Group expenditure 5,110,908 Children’s Health Ireland 347,771 Primary care 886,051 Acute regional and national services 8,136 Social inclusion 161,149 National Ambulance Service 171,204 Palliative care 87,577 Nursing Home Support Scheme 986,202 Mental health division 986,833 Disability services 1,992,614 Older peoples’ services 889,246 Primary Care Reimbursement Scheme 2,798,048 Other community services 20,621 Other 1,802,082 Total 8,142,385 Total 8,106,057 Source: O’Malley et al. (2023). The top slicing of services such as Children’s Health Ireland (CHI) and the National Ambulance Service is based upon the specialisation of these services, and the fact that they often cover national populations. Similar top slicing of these services also occurs in other countries. However, as PBRA mechanisms mature within countries, many such services often get absorbed into PBRA. Ambulance services for instance have been included in the NHS England PBRA formulae in more recent years (NHS England, 2023). Earlier, we discussed how the restructuring of the HSE will revolve around the establishment of HSE HRs, with a centralised HSE body remaining. The most recent HSE HR implementation plan provides details on the responsibilities of this central HSE body in the context of PBRA, proposing that the HSE Centre: … will plan, resource, and deliver a small cross-section of services, namely, national services (e.g. National Ambulance Service, National Screening Services, National Environmental Health Service, and the National Office for Suicide Prevention) and national shared services (e.g. PCRS, Statutory Home Support Scheme), which would not be efficient for a single Health Region to deliver. (Government of Ireland et al., 2023) Therefore, the services top sliced from the PBRA will effectively be commissioned and delivered by the HSE Centre. More detail is needed on how the HSE Centre and the HRs will coordinate to allow for devolved decision-making for integrated care to occur in practice. Two of the key sectors not included in the proposed formula are the PCRS and the NHSS: Proposed HSE Health Regions and PBRA formula | 55 It is recommended that the Nursing Home Support Scheme (NHSS or ‘Fair Deal’), the Primary Care Reimbursement Scheme (PCRS), and Disability Services not be included in the initial application of the PBRA. (O’Malley et al., 2023) It appears that a key reason why the NHSS and PCRS have been excluded from the first PBRA formula relates to data issues. The report is explicit that: With regard to CHO expenditure, NHSS is excluded from the PBRA model in this proposal as expenditure data does not appear to be available at the regional level and the majority of nursing homes in the scheme are private, with prices negotiated with the National Treatment Purchase Fund (NTPF). PCRS is excluded for similar reasons. (O’Malley et al., 2023) The PCRS and NHSS together account for over 23 per cent of total HSE expenditure (Table 3.1). Exclusion of these services results in an incomplete funding picture for resource allocation in Ireland. PBRA aims to allocate resources based on population needs, including socioeconomic factors. Without these sectors, any PBRA mechanism will be less informed by the actual resource needs of HRs, which may exacerbate health inequalities. The lack of inclusion of these services may reduce the ability of PBRA and HRs more generally to implement key integrated care pathways for important population groups. Primary Care Reimbursement Scheme The PCRS expenditure covers payments made to GPs under the General Medical Services (GMS) Scheme to provide care for medical card and GP visit card holders. In addition, the PCRS includes expenditure to pharmacists under the Drugs Payment Scheme (DPS), the Long-Term Illness (LTI) Scheme, the High Tech Drug Scheme, for medical cardholders, and some publicly funded dental and aural care. Pharmaceuticals: The largest percentage of PCRS expenditure is spent on pharmaceutical medications. There is a clear centralised component to this expenditure. In particular, many of the decisions on negotiations for drug prices are made centrally. It may be appropriate for pharmaceutical expenditure to remain outside the PBRA initially. General practice: The exclusion of the PCRS from PBRA would effectively result in GP care remaining outside of the resource allocation mechanism in Ireland. This would be unique in an international context. For example, within the NHS England PBRA formulae, GPs are central actors and the population and age and sex profiles of ICBs is based upon GP lists within an ICB, and GPs are treated as key providers of care within the system. 56 | Population-based resource allocation models for Ireland There are a number of limitations to excluding GP care from the PBRA. GPs often act as a principal agent in a patient’s care pathway, and as gatekeepers to other forms of care; exclusion of GPs would therefore greatly reduce the PBRA’s effectiveness in terms of improving the efficient and equitable allocation of healthcare resources in Ireland. In addition, new programmes such as the Chronic Disease Management Programme and the Asthma Cycle of Care for under 8s were designed in part to reduce demand for acute public hospital care and improve the care pathways of chronic disease patients. Including GP expenditure within the PBRA mechanism is important in order for the benefits of these programmes to be more effectively incorporated within PBRA. It is recommended that efforts to include PCRS expenditure on GP care and public dental care within the PBRA formula are made from the outset of the restructuring process, using the information that is available. In order to include PCRS within the PBRA, we first acknowledge that there are data limitations on expenditures at the regional level. Poor data and health information systems have consistently impeded efficient allocation of healthcare in Ireland (Walsh et al., 2021). However, it is the authors’ understanding that sufficient information is currently collected or collated by the PCRS, which can be used to develop expenditure data at the HR level. Currently, the PCRS captures quite comprehensive data on payments to GPs. It should be possible to use these data to group activity and expenditure to the HR using information on the address of GPs, as well as information on GMS patients’ addresses. As highlighted in their online system, 16 the PCRS collects and provides high-level data on the number of contracts with GPs, and the number of medical card and GP visit card holders by age and sex within each LHO (which are nested within HRs). While not as detailed as the ABF information available in hospitals, these data are significantly more detailed than information available on most community care and mental health services (Brick et al., 2020; Walsh et al., 2021). As acknowledged by the Department of Health (O’Malley et al., 2023) and the HSE (HSE, 2021), financing for GPs already incorporates weighted capitation when determining fees and allowances for GPs (age and sex are accounted for); this should reduce some frictions when incorporating the PCRS GP expenditure at the HR level. While including more detailed information (especially on non-capitation payments) may be a large undertaking, coordination with the PCRS, the CSO and other stakeholders should be undertaken to evaluate how much information can be garnered from the PCRS. Dental care: The case made for including GP care can also be applied to dental care. While not as integral to integrated care pathways as GP care, dental care is an important healthcare service. Examination of the information available on dental 16 See https://www.sspcrs.ie/portal/annual-reporting/. Proposed HSE Health Regions and PBRA formula | 57 practice and GMS patients should be undertaken to assess the viability of using this information. Nursing Home Support Scheme Including services for older people (e.g., home support, day centres, etc.) within the proposed PBRA, while excluding the NHSS, is likely to impact the effectiveness of integrating these services, particularly in the context of any new Statutory Home Support Scheme. We acknowledge once more that data limitations may exist, which could inhibit the inclusion of NHSS expenditure in the PBRA formula. However, we recommend a thorough examination of the data available on the NHSS to estimate HR-level expenditure on the NHSS. The data are collected by the HSE, and particularly by the National Treatment Purchase Fund (NTPF), which plays a central role in the NHSS. Identification of such data may help with the potential inclusion of the NHSS into the PBRA mechanism. The NTPF plays a key role in determining expenditure on the NHSS. While they do not negotiate NHSS bed payments for public long-term residential care (LTRC) homes, as these are determined by the HSE, they do negotiate NHSS bed payments for private (voluntary and for-profit) LTRC homes. In their 2021 review of the NHSS pricing system, the NTPF outlined that they negotiate payments made to private LTRC homes based on four criteria: • costs incurred by the LTRC home and evidence of value for money; • prices previously charged by the LTRC home; • the local market price of NHSS payments; and • ‘[b]udgetary constraints and the obligation on the State to use available resources in the most beneficial, effective and efficient manner to improve, promote and protect the health and welfare of the public’ (NTPF, 2021). Within the NHSS pricing mechanism, the NTPF uses a county-specific benchmark, known as the ‘local market price’, as one of its four primary criteria for setting payments to LTRC homes. This method typically leads to minimal variation in payments within a county for private LTRC homes. However, there is noticeable variation across different counties. This benchmarking approach is also employed in determining payment rates for new LTRC homes entering into NHSS agreements (NTPF 2021). The authors believe that there are sufficient data currently available – collected by the NTPF (and the HSE for public LTRC homes) – to enable the inclusion of the NHSS within the PBRA. Data are currently available on the age and sex breakdown of NHSS residents across LHOs, as is the NHSS price paid for care delivered within LTRC homes. Inevitable, there will be data limitations, such as those arising from some LTRC homes having resident catchment areas outside of their HR, and the fact that negotiations between the NTPF and LTRC home providers may lead to 58 | Population-based resource allocation models for Ireland fluctuations in the amount paid to private LTRC homes over time. However, a thorough examination of these data should provide a reliable foundation for integrating NHSS expenditure into the PBRA mechanism. 3.5.5 Cross-boundary flows The HRs are defined geographic regions; nonetheless, it is possible that some patients (or LTRC residents) living within one HR may use services provided within another HR, especially acute public hospitals. This affects the accuracy of population, age, and sex adjustments used in the PBRA formula. These ‘crossboundary flows’ of patients, however, are common in all countries examined in Chapter 2. Some PBRA formulae explicitly address cross-boundary flows in their PBRA formulae. For example, NHS England accounts for individuals registered with a GP practice in one ICB area but residing in another (NHS England, 2023). This method acknowledges patient movement across ICB boundaries, thus ensuring that resource allocation reflects actual healthcare service use, not just the registered location of patients. This approach is crucial for accurately distributing resources and planning healthcare services, as it accounts for the dynamic nature of patient flows across regions. Figure 3.17, based on O’Malley et al. (2023), shows that a significant percentage of acute public hospitalisations occur for patients with home addresses outside of their HR, a factor that may affect the PBRA. Notably, the highest percentage of cross-border flows is seen in HRs that include parts of Dublin. FIGURE 3.17 PERCENTAGE OF HOSPITAL DISCHARGES FROM PATIENTS OUTSIDE A HSE HEALTH REGION Source: O’Malley et al., (2023). The issue of cross-boundary flows is likely to impact the PBRA until sufficient health information systems are incorporated into the healthcare system. Developing 12.9% 14.9% 43.9% 6.4% 4.9% 5.6% 0% 10% 20% 30% 40% 50% HR A HR B HR C HR D HR E HR F Proposed HSE Health Regions and PBRA formula | 59 integrated health information systems that facilitate data sharing between HRs, and with specialised service providers (e.g., Children’s Health Ireland), would enable more accurate tracking of patient flows and resource utilisation. However, over the longer term, better data and health information systems will be required to reduce the impact of cross-boundary flows, and similar approaches have been taken by NHS England. 3.5.6 Transitions As highlighted in Figure 3.12, implementing PBRA would result in some HRs receiving more or less funding, for different services, than is currently the case. Implementing PBRA quickly would lead to sharp shocks for HRs and services that would thereby receive funding cuts. For this reason, transitioning from the current funding structures to PBRA needs to take time. There are international examples on how best to incorporate transitions. In moving from CCG to ICB structures in NHS England, for example, a convergence process was created whereby ICBs are to be gradually moved from their initial funding levels to target allocations determined by the updated formula. This ensures that sudden financial impacts can be avoided and continuity of healthcare services for patients and populations is achieved (NHS England, 2023). It is clear from the above that a transition period, and appropriate transition adjustments, would be needed to allow for PBRA to become accepted. Transition adjustments remain a part of ABF within acute public hospitals. Reviewing how these transition adjustments work in practice would be valuable. 3.5.7 Governance and oversight Governance and oversight – of the PBRA and the transition to HRs – will be vital to the success of each. This is especially so considering it is likely that a number of iterations of the PBRA formulae will be required prior to it being embedded within the healthcare system, and for the true benefits to accrue. The Department of Health recommends a permanent advisory group be established (O’Malley et al., 2023). This follows standard practice in other countries. An important element of the NHS England formulae is the level of oversight involved. In general, the resource allocation process is overseen by the Advisory Committee on Resource Allocation (ACRA). A similar structure in used in Scotland. The ACRA reviews the formula and decisions, using evidence from academic literature and information on the latest data and healthcare trends. ACRA comprises independent experts, including from academia, and advises the secretary of state for health and social care and the chief executive of NHS England. Many of the discussions and recommendations in this report also point to the importance of transparency in relation to how decisions are made. Input from a broad advisory group would be beneficial. The PBRA could also learn from other allocation mechanisms in Ireland. For instance, within education, the DEIS programme has programme evaluation built 60 | Population-based resource allocation models for Ireland into it from its inception (Smyth et al., 2015). A number of evaluation studies of DEIS have been conducted by the Educational Research Centre, the Inspectorate of the Department of Education and Skills and the ESRI (Smyth et al., 2015). These evaluations have highlighted changes in both the structure and procedures of schools involved in the DEIS programme, as well as in student outcomes (Smyth et al., 2015; Kavanagh et al., 2017). Specifically, in terms of school processes, DEIS schools have improved their planning for teaching and learning and have set clearer academic achievement objectives. Conclusions | 67 The development of a unique patient identifier, based upon personal public service numbers and the Health Information Bill, will comprise key developments for determining accurate population and age information for the PBRA. These type of data are used to good effect in other countries. In Scotland, for example, population shares across NHS boards are based on the Community Health Index (CHI) registered populations, which are incorporated into population projections. 19 4.3 CONCLUSION The introduction of a PBRA model in Ireland has the ability to greatly improve the efficient and equitable allocation of health and social care resources. PBRA and devolved decision-making are also key aspects of Sláintecare. In combination with the establishment of HSE HRs, PBRA can become a fulcrum towards the further development of a universal healthcare system and new models of innovative and integrative care. The first PBRA formula proposed is to be welcomed and follows closely formulae implemented by international peers. However, improvements to PBRA will be required and PBRA itself will be an iterative process that may require time to become embedded within decisionmaking (McCarthy et al., 2022; O’Malley et al., 2023). This is in recognition of the rudimentary allocation system that currently exists, and the health information systems and data challenges faced. However, investment to improve data systems is being undertaken, and as Ireland moves towards the inclusion of unique patient identifiers and care summary records as proposed in the Health Information Bill, PBRA will in time have the capabilities to integrate more granular information in the allocation process. In this report, in addition to the information challenges highlighted, we identify that the level of top slicing proposed in O’Malley et al. (2023) may hinder the PBRA effectiveness, especially in terms of integration of care. Exclusion of expenditure on the NHSS and publicly funded GPs care in particular will reduce the ability of PBRA to perform to the level of systems in other countries. The integration of key programmes including the PCRS, disability services and the NHSS should be prioritised by policymakers. Without broadening programme inclusion, local decision-makers will struggle to implement integrated care approaches and implement the goals of Sláintecare of providing care in the least complex setting, as close to home as possible. In countries with longer established resource allocation mechanisms, the approach has moved from equality of resource allocation to outcome-based focus and accountability (Buck et al., 2013). Future iterations of PBRA may also incorporate different approaches as the focus of commissioning and resource allocation shifts 19 See https://publichealthscotland.scot/publications/resource-allocation-formula-nrac/resource-allocation-formulanrac-for-nhsscotland-results-for-financial-year-2024-to-2025/. 68 | Population-based resource allocation models for Ireland to outcomes, while decision-making and accountability are increasingly devolved to local areas. This process again will be heavily dependent upon more sophisticated health information systems. This report, alongside previous research (Johnston et al., 2021; McCarthy et al., 2022), has identified important PBRA approaches in other countries, which can be used as guides to the future improvement of PBRA in Ireland. In conclusion, over recent decades the healthcare system in Ireland can be characterised by the constant changes to organisational structures made or proposed. 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