The Money Follows the Patient Policy Paper, which I published in February 2013, outlines the Government's plans for the introduction of a prospective case based payment system for hospital services using Diagnosis Related Groups (DRGs). Implementation of this new funding model commenced in January of this year with the approach initially being applied to inpatient and daycase activity in public hospitals. Full implementation will take a number of years and a phased approach to roll-out is being employed. The new model involves moving away from inefficient block grant budgets to a new system where hospitals are paid for the actual level of activity undertaken. As such, hospitals will be funded based on the quantity and quality of the services they deliver to patients. They will be liberated, subject to overall budgetary ceilings, to pursue the most cost-effective means of achieving this standard of performance. Budgetary discipline will be delivered through the use of fixed budgets for Money Follows the Patient (MFTP) activity. It should be noted that, as stated in the MFTP Policy Paper, the new funding mechanism does not aim to reduce budgets but, rather to drive efficiency in the provision of high quality hospital services.
Prior to the commencement of MFTP, the HSE operated a prospective funding pilot programme for Primary Hip and Knee Replacements (four DRGs) between 2011 and 2013. The pilot related to elective work only. Seven hospitals initially participated, with a further five joining from January 2012. The pilot involved the participating hospitals' current budgets being reduced by an amount of money related to the four DRGs. This portion of the budget was then “earned” back, based on the work carried out in the hospital. There was no other change to any other portion of the hospital budget.
No specific savings figures have been calculated for the pilot programme. However, reviews of the pilot highlighted a number of efficiency related benefits including significantly reduced average lengths of stay, increased numbers of day of surgery admissions, and an increase in the number of discharges at the weekend. While the level of improvement varied across the different hospitals and the different DRGs, all showed significant improvements in these key determinants of hospital efficiency and productivity.
This pilot was the first example of Money Follows the Patient in operation in Irish hospitals and was a useful exercise in highlighting the benefits that can accrue as a result of these types of funding arrangements. It also provided useful lessons in terms of systems and process requirements as well as the need for stakeholder buy-in ahead of roll-out to the wider hospital system.
A shadow funding exercise was also carried out in Q4 2013 using eight representative hospitals. This exercise: (i) compared, on a systematic basis, actual hospital activity against baseline activity targets; and (ii) informed hospitals of what the financial implications of any variance from the targets would be in a “live” system without impacting on budgets. Although this was not strictly speaking a "pilot" it did provide key lessons which are being applied in the 2014 MFTP roll-out.
While it is not possible to specify a percentage increase in efficiency that will result when MFTP is rolled out across all public hospitals, I am confident that its introduction will drive efficiencies in similar areas to those evident in the orthopaedic project. This will help to deliver a more efficient and productive hospital system.
