The draft Money Follows the Patient Policy Paper, which I published for consultation on 15 February last, proposes the introduction of a new model of funding for public hospital care. This involves changing from the current inefficient system of block grant budgets to a new approach where hospitals are paid for the actual level of activity they undertake. The new approach will be facilitated through the introduction of a prospective case-based payment system using Diagnosis Related Groups (DRG) and effectively means that hospitals will be funded on the basis of the quantity and quality of the services they deliver to patients and not the size of last year’s budget.
It is proposed that ‘Money Follows the Patient’ will begin in shadow form in 2013. Under shadow funding, hospitals will continue to receive their existing base budget under a vote cashing system. However, a process will be put in place to compare on a systematic basis, (i) actual hospital activity against pre-agreed baseline activity targets and (ii) hospital expenditure against pre-agreed DRG prices. In this way funding variances and potential impacts will be highlighted although no changes would be made to a hospital’s budget on foot of the exercise. It is my intention to announce the composition of the Hospital Groups shortly, subject to Government approval, and it is proposed that shadow funding will be rolled out to the Hub hospital of each Group. This approach allows Hospital Groups time to develop while still facilitating shared learning across the entire Group. It also enables the health system to leverage maximum efficiencies and economies of scale when investing in necessary resources, thereby reinforcing the optimally efficient service delivery model envisaged in the creation of Hospital Groups.
It is proposed that the system will then move from shadow funding to full phased implementation of ‘Money Follows the Patient’ from 1 January 2014, subject to fully developed hospital groups and central financial management systems being in place.