Dáil Éireann Debate, Thursday - 2 June 2016
53. Deputy Pearse Doherty asked the Minister for Health in respect of activity-based funding, the transition arrangements that are currently in place in the hospital system to reflect the difference between hospitals' current costs and national average costs; how he will phase out these arrangements; what will happen to hospitals that are unable to address the differences in their costs base; and if he will make a statement on the matter. [13706/16]
Amharc ar fhreagraThe way that public acute hospital services are funded is in the process of being reformed through the implementation of an Activity Based Funding (ABF) system. The purpose of ABF is to change the model of funding from the previously existing block grant budget system to a new approach where hospitals are paid based on the quantity and quality of the services they deliver to patients within a fixed budget system. This model is designed to increase transparency, promote efficiency, and ensure a fairer system of resource allocation. Currently ABF is being applied to Inpatient and Day Case activity in 38 hospitals which account for the majority of hospital expenditure. Given the scale of the change being undertaken the full roll out of ABF will take place over a number of years.
The HSE published the “Activity Based Funding Programme Implementation Plan 2015-2017” in May 2015. In order to ensure financial stability during the process of moving to ABF, this Implementation Plan includes a provision for transition payments to be made. These are adjustments/payments that will be made to hospitals which are currently operating above the national average price for activity. They can occur for many reasons, which fall into two categories - issues within the control of the hospital (e.g. low Day of Surgery Admission rates or higher than average patient Length of Stay), or those that are not (e.g. structural issues such as geographic location).
A major Benchmarking exercise encompassing all ABF hospitals was carried out during 2015, two of the main purposes of which were to calculate the level of transition adjustments to apply in 2016 and to begin the process of identifying the reasons for the price disparities. Hospitals will be required to develop plans to reduce their costs and address the need for transition adjustments related to issues within their control, which will be phased out over a period of time. Other structural type issues will continue to be funded.
As this is the conversion year and therefore the first year that ABF is in operation, the time frame under which transition payments will be eliminated has not yet been determined. However, the transition payments will continue for a number of years to allow hospitals to address any issues with their cost base. Hospitals will be supported to better understand and therefore address such issues through the implementation of new Patient Level Costing and ABF reporting systems.
