What is resource allocation?
In the context of NHS Scotland, the resources in question are the total monetary budget to be distributed across Scotland's NHS Boards by the Scottish Government. The resource allocation formula is about the allocation of a given amount of money. It is not about the size of that amount, but the share that each health board should get. The size of the total budget is the subject of an earlier decision as part of the Government’s Spending Review process.
In public services, it has long been recognised that an objective and transparent system is needed when limited resources are shared out among service providers. The aim of a good resource allocation system is to ensure equity among those receiving funds and provide a logical framework for decision making.
History of Resource Allocation in Scotland
Before the implementation of the SHARE (Scottish Health Authorities Revenue Equalisation) report, the distribution of available revenue funds for the NHS in Scotland was based on the distribution of NHS facilities (hence, supply based). The SHARE recommendations, which were phased in from 1978/79, proposed a method of allocating resources to Hospital and Community Health Services to reflect the different healthcare needs of each Health Boards population. The SHARE formula was a weighted capitation formula – based on the size of the population in each NHS Board area. SHARE used four broad measures to determine the level of resources that each Board should receive:
- A measure of the population served by each health board
- A measure of the composition of each board's population in terms of age and sex
- A measure of the relative health needs over and above the size, age and sex of the population existing within each Board (mainly due to differences in the morbidity of Board populations)
- A measure of any unavoidable excess costs of delivering healthcare in sparsely populated areas
Following Designed to Care in 1998 (Scottish Office, 1998) a review of the allocation of resources for health was initiated. Sir John Arbuthnott chaired the review which aimed to develop a formula for distributing resources between Boards that reflected the varying levels of need and would therefore promote equitable access to health care.
The review group reported back in July 1999 (Scottish Executive, 1999) and presented a formula that essentially retained the four principles of the SHARE formula but also included the budgets for General Practitioner (GP) prescribing and primary care services (previously excluded from SHARE) and extended the measure of health needs to include over 50 indicators of morbidity and deprivation. The formula, commonly known as the ‘Arbuthnott formula’, was used to calculate target shares for around 70% of the total budget to Health Boards from 2000/01 – 2008/09. The formula covered the costs for Hospital and Community Services (HCHS) and GP prescribing.
As with SHARE, the Arbuthnott determines the share of funding for each NHS Board based on the relative need for healthcare resources across Scotland - it does not determine the overall size of the budget for total healthcare needs.
Fair Shares for All Final Report - 2000
Fair Shares For All A Guide to the Final Report
Fair Shares for All Technical Report, July 1999
In 2005 the NHSScotland Resource Allocation Committee (NRAC) was established with a remit to “improve and refine” the Arbuthnott Formula. The final NRAC report was published in September 2007 and the recommendations in this report were accepted by the Cabinet Secretary for Health & Wellbeing in February 2008 - for implementation in the 2009/10 Resource Allocations. As with the Arbuthnott formula, the NRAC formula covers funding for Hospital & Community health Services and GP prescribing. (The General Medical Services budget is calculated using a different UK based formula). The NRAC formula uses the same weighted capitation approach as the Arbuthnott formula. However, NRAC recommendations led to improvements of the four elements of the formulas. Some key improvements include:
- Formula constructed from smaller, more meaningful geographic units à better precision in predicting needs, more flexible outputs
- Better at keeping pace with changing population
- More accurate account taken of higher relative needs of the very old and very young
- Bring up to date the data sources feeding into the Formula
- More accurately reflect the need for healthcare services due to MLC
- Compensate for unmet need in circulatory services
- More rigorous evidence base for Hospital services cost adjustment
- Seeks to take account of the costs of delivering services on the Islands
- Improve and update Community travel based services adjustment
- Propose formulae for allocating resources for PCS
What does the NRAC Formula cover?
The formula is used for the provision of HCSC and GP prescribing. Revenue resources currently excluded from the NRAC Formula include allocations for general dental, general ophthalmic and community pharmaceutical services (Family Health Services); drugs misuse; and blood borne viruses.
The new NRAC formula was used to inform the 2009/10 funding allocations. The exact amounts received by each health board will depend on the overall funding available and their changing relative position when the formula is calculated. Uplift levels, including parity uplifts, will be considered and announced each financial year in line with the parliamentary process and taking into account funding earmarked for Scottish health priorities within the overall Scottish Government financial settlement. This reflects the practice established under the previous SHARE and Arbuthnott formulae. It means that each health board will receive a standard uplift each year to meet inflationary pressures whilst those boards whose actual funding remains below their target level, as indicated by the NRAC formula, would receive an additional parity uplift from within the remaining resources available.
TAGRAThe Technical Advisory Group on Resource Allocation (TAGRA) was established to carry out the work of overseeing the maintenance and development of the resource allocation formula. The group is chaired by John Matheson, Finance Director in the Scottish Government Health Department (SGHD), and includes members from seven Health Boards plus academics and analytical support from within SGHD and Information Services Division of NHS National Services Scotland. TAGRA is a technical group with members selected according to their expertise in resource allocation and financial matters. An effort has been made to have representatives from a range of Health Boards with different perspectives on the formula