The Ministry of Health will be running a stethoscope over the health funding system to see if it needs some treatment, but what will be covered and how long it might take are not yet clear, writes Elspeth McLean.
If the Southern District Health Board is hoping changes to the funding system might help its money woes, it will have to be patient. An early task for new Health Minister Dr Jonathan Coleman may be approving the long-awaited
review of the population-based funding formula (PBFF) used to fund district health boards. But although preliminary work has begun on the review, which is now almost three years overdue, just what will fall within the $500,000 review has still not been spelt out.
Any resulting adjustments to board funding will not be introduced until the 2016-17 financial year at the earliest.
In the next few months the ministry is expected to begin discussions with boards as part of the first stage in the review.
However, those hoping for radical changes to the formula, under which
more than $11.36 billion was allocated this year, may be disappointed.
Although a year ago officials suggested the review could be an opportunity for a wide-ranging look at the way health dollars are allocated, retiring health minister Tony Ryall, who had been briefed on the ''intended scope'' of the review, says he did not see a need for a major change to the funding formula.
''The formula sees all boards funded equally on a population basis, adjusted for age, gender ethnicity, index of deprivation, plus adjustor [sic] for overseas visitors, unmet need, and rural/diseconomies of scale.''
He expected the new minister would ''formalise the scope of the review'', Mr Ryall said.
In a paper considered by top ministry officials a year ago, recently released under the Official Information Act, the formula was described as not well understood by the sector or the public and considered ''complicated, messy and not transparent''.
A review of the formula was a recurring theme in discussions and correspondence with the sector, it said.
Of particular concern were the adjusters, which give extra funding to cater for rural populations and unmet need.
These were based on old service use information and ''may no longer be fit for purpose''.
The rural adjuster - one of the areas where the Southern District Health Board has been concerned it is under-funded - has not been updated since 2004.
The report said the West Coast DHB continued to be funded $17 million over and above PBFF through transitional funding, while it and other small DHBs have been in and out of deficit.
The formula is reviewed five-yearly following each national census, but was delayed due to the later census following the Canterbury earthquakes.
It was expected to begin in the first half of this year, according to information released by the Treasury in July, but is only getting off the ground now.
Comment in ministry papers on the review released under the OIA suggests even if the review was limited to updating census figures, this could still result in large shifts in funding and the impact on DHBs would need to be considered.
A second paper on the scope of the review, by senior policy analyst Steven Youngblood and considered by top ministry officials in May, says reviewers are required to go further than just updating the formula to reflect the new census figures.
''The minimum we must do is review the make-up of the formula to ensure it remains fit for purpose.
''This involves examining the current mechanisms within the formula to see if they continue to be the most appropriate way of assessing the relative health need of a district's population, and therefore determining the amount of funding each DHB should receive.''
No decisions were made on this paper and the ministry says it has undertaken more work on the scope of the review since May.
The complex formula includes calculations based on the previous national use of health services, but the OIA documents say some data
for this is 10 years out of date.
The May paper suggested the funding to cover the extra costs of running the country's most complex (tertiary) hospitals (which would include Dunedin Hospital), should also be included in a review of PBFF.
The review could also ''reveal opportunities'' to make better use of the formula to support ministry and wider health sector goals such as lifting performance and improving sustainability, Mr Youngblood said.
The September 2013 paper said PBFF was ''permissive'' as it did not say how funding should be used.
The review could examine wider implications around funding and how it could be used to drive and support wider system change.
That report also suggested the PBFF review might be a good opportunity to review the capitation formula which allocates funding to PHOs and their GP practices.
However, the ministry has pulled back from this idea.
This, along with funding for disability support and community maternity services, seems set to be included in a bigger
review of health funding to be carried out within the ministry's policy business unit's multi-year work programme.
Acting director of the National Health Board's business unit Michael Hundleby said recently the health system funding review would be part of the multi-year work programme.
''This work has yet to be scoped, and as a result no indicative timeframe is yet available.''
Mr Ryall said he was happy with the decision not to include primary care funding in the PBFF review.
In the 2013 review document Mr Youngblood said the formula used for PHO funding had not been substantively changed since introduced in 2002. which meant the formula was ''now 11 years old and potentially out of date''.
''It could be argued the current funding system lacks sufficient flexibility to best meet the health needs of the populations PHOs are responsible for, and that the current mechanisms limit the effectiveness of taking an alliance approach to planning services.''
He pointed out part of the funding model was based on use data from the early 2000s, which was out of date and also no longer reflected expectations of service design in primary care, particularly around increased use of prevention and community care.
There was a risk that if changing the formula meant PHOs and/or practices received less funding, then patients might have to pay more.
A review of capitation, which bases payment on
the number of patients enrolled rather than the number of times doctors see patients, could look at whether the existing model could be improved or should be replaced.
Options might include increasing payment by results or basing funding on ''episodes of care''.
