New hospital funding system next year

A new system of health funding to be introduced in 2014 will reward hospitals for being efficient and will ultimately improve patient care, according to Health Minister James Reilly.

The 'money follows the patient' system (MFP) will change the current process whereby hospitals get block grants at the beginning of each year to one where hospitals will be paid for the actual level of activity they undertake. It is regarded as a key 'building block' on the road to the planned universal health insurance (UHI) system.

Launching policy papers today on MFP and UHI , Dr Reilly said 'money follows the patient' would result in a fairer and transparent basis for the provision of hospital services.

He said it should result in hospitals no longer having to cancel operations or close wards due to when they run out of funding during the year.

However, the MPF system is not expected to bring immediate benefits to patients - the advantages of the system will probably not will not become fully apparent until UHI is introduced.

The MFP system is also part of the process whereby the HSE will be phased out and eventually replaced by the various components of the UHI system by around 2016.

MFP will not involve any change in how patients obtain hospital services and interact with doctors and other healthcare workers, according to the Department of Health.

By boosting productivity in hospitals, MFP should, however, help improve access to public patients to the care they need, when they need it, and  in the appropriate hospital setting, according to the Department.

The new funding system is regarded as a key building block on the road to UHI, which is due to be introduced around 2016. New hospital groups and eventually, hospital trusts will also feed into the UHI system.

Details of the new hospital groups and of the type of services that will be provided in future by smaller and larger hospitals are expected to be announced in the next week or so.

Under UHI, the entire population will be insured under a State-regulated scheme where insurance companies will purchase hospital care. Everyone would have equal access to care under this system and there will be no distinction made between public and private hospitals for most types of care when it comes to purchasing services.

Under the UHI plan, people will pay insurance contributions to the scheme according to their means, but the policy paper published today does not provide details of the operation of the payments system. Further details of UHI will be revealed in a forthcoming Government White Paper.

Part of the universal healthcare plan involves the provision of free GP care, the first phase of which has been delayed but is expected to be introduced this year.

Under MFP, hospitals will be funded based on the quality and quality of services they deliver to patients. The system is designed to promote greater incentives to hospitals to deliver higher quality care, greater efficiency and greater productivity.

Asked if such a system could be abused by hospitals attempting to 'profiteer' by performing unnecessary treatments and tests, Department officials at a briefing today said there would be safeguards built into the system to prevent this happening.

According to the Department, there will be fixed budgets and capped cost and volume contracts with hospitals under the new system to prevent potential abuses, and the system would be robustly audited.

MFP will also be used to fund services in primary care, according to the Department.

Under the MFP system, a National Information and Pricing Office will be set up to set national prices for services for ratification by the Minister.

As the HSE's acute care function is phased out, a new Healthcare Commissioning Agency (HCA) will be set up to purchase services from hospital groups/trusts. It will agree capped cost, volume and quality contracts with each hospital group/trust based on set prices and activity targets.

The HCA will then pay hospitals quarterly for the activity they carry out based on submitted claims. Prices agreed will be based on the type of care provided and not the type of hospital it is provided in.

Some hospital services, such as emergency department car, and hospital teaching and research functions will not be included in the MFP system.

There will also be an 'outlier payment mechanism' to take account of exceptionally high cost hospital cases that could potentially exceed agreed budgets.

This 'outlier' payment system however, would be linked to 'medical necessity', eg once a patient is deemed medicallly fit for discharge, no payment will apply to the hospital for any further time spent in a bed.

Under the new system, additional funding for specific activity could in some cases be agreed outside agreed budgets, provided the hospitals concerned have met their agreed activity levels in the previous quarter.

MFP will initially apply to public patients in public hospitals but eventually it will be extended to private patient treatment in these hospitals.

Department officials said as UHI is introduced, the HCA have many of its core functions as the purchaser of hospital services replaced by insurance companies, who will purchase services from public and private hospitals.

However, there will continue to be a role for a central funding authority. Under UHI, the Department says the role of health insurers will be 'complemented and constrained' by a statutory insurance fund.

The HSE, which is currently changing its structure to a directorate model, is expected to be phased out by around the end of 2014, following which its acute hospital function will be taken over by the HCA and the MFP process and eventually, the UHI system.

Other HSE functions in areas such as social and child care wil be taken over by other agencies.

 

 

[Posted: Fri 15/02/2013]

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