1. IMPROVING THE ARBUTHNOTT FORMULA: REFINING THE RESOURCE ALLOCATION FORMULA FOR NHSSCOTLAND Prepared for The Scottish Executive Prepared by George Street Research Limited November 2006

2. Background to provide NRAC with feedback on the recommendations for change to the current formula for resource allocation in NHSScotland Work undertaken: Visits to Health Boards: Summer 2005 Consultation: July – September 2006 Regional workshops: August/September 2006

3. Background  Consultation ran from 3 rd July 2006 to 29 th September 2006: 30 completed responses  Workshops took place in Edinburgh, Clydebank, Aberdeen: 133 delegates GSR commissioned to produce a report of responses to the consultation paper along with results from 3 regional workshops

4. The Workshops The purpose of the workshops was to:  Provide an update on what NRAC has been doing since Board visits  Explain the consultation document  Provide a chance for Boards to discuss and question the recommendations  Receive early feedback on the options to help plan the next stage

5. The Consultation Consultation sought the views of a wide range of organisations and individuals:  within Scotland  in wider health resource allocation community Due to the technical nature of much of the work, the focus of the consultation was on staff in NHS Scotland and experts on health resource allocation issues  but the consultation was open to any organisation or individual who wished to comment

6. Consultation Publicity 3 rd July: e-mail alert issued those likely to have an interest in the consultation:  The 14 NHS Boards  Wide range of professional bodies  Local and central Government  Independent public bodies  Academics In addition the consultation was advertised via a number of fora:  NRAC website  Scottish Executive website - publications section  SHOW publications website and front page feature  Scottish Executive economists monthly e-mail alert  E-mail to worldwide health economics mailbase  Health Department Weekly Bulletin  NHS Confederation newsletter

7. Approach to Analysis Combination of quantitative and qualitative analysis techniques  Provides depth and breadth of views Responses categorised as:  NHS Board  Other Health  Local Government  Individuals

8. Responses  31 responses to consultation received  30 completed: reporting based on 30  13 (43%) from NHS Boards (all bar Western Isles)  6 (20%) from Other Health organisations  3 (10%) from Local Government  8 (27%) from Individuals  1 nil response from a Ministerial Action Group

9. The Questions  5 main sections – 21 questions  Population  Age-sex cost weights  Healthcare needs due to morbidity and life circumstances  Excess cost of providing healthcare services  General questions  Quantitative data from consultation responses: other comments from workshops included

10. Key Findings Population

11.  Three questions: 1.Is there a better alternative to continuing to use the General Register Office for Scotland as the source of data on Boards’ resident populations for hospital and community services within the Formula? 2.Should the formula move to using re-based population projections rather than mid-year estimates as at present, to better reflect the populations using services in the allocation year? 3.Do you have any other comments on the recommendations for changes to the population basis of the Formula?

12. Population Whether there is a better alternative to using GROS

13. Key Themes Use CHI data instead – more up to date (n=3) GROS data most widely used – especially in public sector (n=5) GROS data seen as most accurate (n=2) + - Whether there is a better alternative to using GROS Use CHI data instead – GROS undercounts (workshops)

14. Population Whether the formula should move to using re-based population projections

15. Key Themes Mid Year Estimates more transparent (n=1) “the most accurate reflection of current population profiles” local government(n=9) Sensitive to population trends (n=2) + - Whether the formula should move to using re-based population projections Need for data to reflect new populations (n=2) Broad support from workshops

16. Key Themes Need up to date statistics on providing care for older people in rural areas (n=2) Need to consider migrant workers (n=2) Need to consider tourists and recreational visitors (n=3) Other comments on the recommendations for changes to the population basis of the Formula (n=14) Data sources and Community Data highlighted as key themes at workshops

17. Key Findings Age-Sex Cost Weights

18.  Three questions: 4.Are there more appropriate sources of data for the age-sex profile of patients accessing community services than those proposed in Table 4? 5.Is there a better alternative to the recommendation that prescribing cost weights should continue to be based on the national random sample of prescriptions, pooled across several years data to improve stability and precision? 6.Do you have any other comments on the recommendations for changes to the age-sex cost weights within the Formula?

19. Key Themes Proposed sources do not accurately reflect levels of need – impacts on providing care locally (n=2) There are not – but this is a cause for concern (n=6) Full implementation of Quality and Outcomes Framework may lead to better data (n=2) Whether there are more appropriate data sources (n=17) Use of Practice Team Information data questioned – patterns of service delivery may differ (n=2) Questioned data population for home dialysis (n=2)

20. Key Themes Whether there are more appropriate data sources (n=17) Quality? Representative? (workshops) Fit for purpose? (workshops)

21. Key Themes Larger sample size needed to narrow confidence intervals (n=6) Not at present – need to link with CHI numbers as soon as possible (n=7) No (n=4) Whether there is a better alternative for prescribing cost weights (n=17) Inflation, local policy, the General Medical Services (GMS) contract or changes in the drugs available to GPs for prescribing can contribute to variations in costs (n=4)

22. Key Themes Stability may be reduced if changes result in small population sizes (n=2) Support changes to age bands (n=8) Caution against over reliance on ISD cost book (n=3) Other comments on the recommendations for changes to the age-sex cost weights within the Formula (n=15) Need to allow for proximity to death (n=2) - Although -

23. Key Findings Healthcare Needs due to Morbidity and Life Circumstances

24. Morbidity and Life Circumstances  Five questions: 7.What are your views on the first two options proposed by the researchers recommending separate needs indices and supplementary variables? 8.What are your views on their additional option that no MLC adjustment is required for certain care programmes and diagnostic groups for which the needs indices explain very little of the variation in cost? 9.Can you help us explain why, for maternity and outpatients in particular, variation in costs across the country are largely explained by differences in levels of activity among Boards, rather than indicators of need, and how should this be taken account of in a resource allocation formula? 10.What are your views on the recommendation that data on ethnic minorities and asylum seekers should not be included in the need indices within the Formula but allocation should be addressed via separate mechanisms? 11.Do you have any other comments on the recommendations for changes to the adjustment for healthcare needs due to MLC within the formula?

25. Key Themes Need for further research, information or explanation (n=7) Hard to comment without knowing potential impact (n=5) Recommendations on separate needs indices and supplementary variables (n=21) Comments on the complexity of the formula (n=6) Broad welcome for proposals but some uncertainty Concern over representation of rural areas (n=2) May favour urban areas (n=2)

26. Key Themes Disagree – especially for cancer and non-psychotic mental illness (n=8) Agree (n=4) Will depend on the selection of the correct model (n=2) Recommendations on no MLC adjustment for certain care programmes (n=19) Disagree – results differ from expectations or experience (n=5) and workshops + -

27. Key Themes Differences in clinical practices (n=6) Rurality (n=7) Problems with the model specification (n=3) Explanation of Maternity and Outpatient variations (n=16)

28. Key Themes Mention of the cost of translation and other services (n=2) Agree (n=17) Ensure other sources of funding are taken into account (n=2) Recommendation not to include data on ethnic minorities and asylum seekers (n=19) Include the needs of migrant workers (n=5)

29. Key Themes Concern over reflection if levels of deprivation in rural areas (n=4) Indicators and datazones do not accurately capture levels of deprivation (n=7) Comments on the complexity of the formula (n=4) Other comments on changes to adjustments due to MCL (n=19) Datazones welcome (n=2) More work needed on unmet need (n=6) Adjustments should take account of actual need (n=2) More research needed (n=3) Lack of transparency in options 1 & 2 (n=3)

30. Key Findings Excess Cost of Supplying Healthcare Services

31. Excess Cost of Providing Healthcare  Five questions: 12.What are your views on the recommendation to replace the current hospital remoteness adjustment, based on road kilometres per head, with an adjustment based on mapping the actual costs of treating patients living in areas of different levels of remoteness and rurality? 13.Is the recommendation to introduce a market forces factor for non-medical staff costs justified based on the comparison of NHS vacancy and turnover rates with private sector wage variations? 14.Could the introduction of market forces factors for labour, land and buildings, in addition to the recommended remoteness adjustment for hospital services, lead to double-counting of costs within the Formula? 15.Are the assumptions and data sources used in updating the current simulation model for travel-intensive community nursing services appropriate, and are there better alternative sources of data or evidence to support this? 16.Do you have any other comments on the recommendations for changes to the adjustment for the excess costs of supply healthcare services within the Formula?

32. Key Themes Need to consider patient transport as well (n=2) Agree (n=12) Must include travel time along with distance (n=4) Recommendations for hospital remoteness adjustment (n=21) Remoteness highlighted as key theme at workshops

33. Agreement with whether market forces factor for staff costs is justified Excess Cost of Providing Healthcare MFF highlighted as key theme at workshops

34. Key Themes Disagree (n=13) Agree (n=7) May favour urban areas (n=2) Whether market forces factor for staff costs is justified Agenda for Change (n=10) and workshops + -

35. Agreement with whether MFFs and remoteness adjustment could lead to double-counting Excess Cost of Providing Healthcare

36. Key Themes Further investigation is needed in this area (n=2) MFF for land may favour some areas over others (n=2) Whether MFFs and remoteness adjustment could lead to double-counting Double counting WILL occur (n=7) and workshops

37. Key Themes They are not appropriate (n=2) Assumptions and data sources are appropriate (n=5) Consider data on other community health professionals (n=3) Whether assumptions and data sources for travel intensive community nursing are appropriate (n=14) Concern over lack of accuracy of community services data (n=4) Baseline data categories inappropriate (n=3) Need to take travel time into consideration (n=3) Unsure (n=2)

38. Key Themes Ratios of local to national average costs by hospital care programme - results unexpected (n=3) Impact of new consultant contract (n=3) Other comments on changes to adjustments for excess costs (n=19) More work needed on MFFs (n=3)

39. Key Findings General Questions

40.  Five questions: 17.The Formula is designed to allocate funds to Boards to distribute as they see fit. However, how could information be provided to best serve the requirements of Boards in distributing funds within their own areas?” 18.Should the Formula take account of unmet need and if so, how? 19.How can we ensure that the Formula does not create perverse incentives or reward inefficiency? 20.Do you agree with NRAC’s recommendation not to develop distinct formulae for all health improvement funds but to use wherever possible the Arbuthnott Formula to allocate funds to Boards? In addition, do you think the Formula should be extended to allocating any other areas on NHS expenditure not previously considered? 21.Do you have any other comments on the research and recommendations for change to the Arbuthnott Formula?

41. Key Themes Training & Guidance for Boards How could information be provided to Boards? (n=18) Monitoring & Evaluation – ensure consistency across Boards A variety of suggestions Improvements to local data Data for benchmarking Evidence on how efficiently / effectively Boards use allocations

42. Whether the formula should take account of unmet need General Questions

43. Key Themes Take account of work already done in this area (n=3) Need to agree on identification and classification of unmet need (n=2) Resources needed for preventative services in deprived areas (n=2) Whether the formula should take account of unmet need Concern that proxy data shows usage rather than need (n=3)

44. Key Themes Basing formula on usage could lead to stagnation of services (n=2) MFFs could lead to inefficiencies being rewarded (n=2) How to ensure the formula does not create perverse incentives (n=16) Many single comments

45. Whether there should be distinct formulae for health improvement funds General Questions Many single comments

46. Key Themes Other comments on the research and recommendations for changes to the Arbuthnott Formula (n=24) Impact Multiple deprivation Transparency Proxy data Methodology Comments on a variety of issues

47. Key Themes Continued : Other comments on the research and recommendations for changes to the Arbuthnott Formula (n=24) Joint funding Island Boards Population sizes Delivering acute care in remote and rural areas Health services For CYP

48. Core Criteria Some concern over:  transparency - due to the complexity of the formula or parts of the formula;  practicality – concern over the lack of robust data to support some parts of the formula;  responsiveness - especially to changes in legislation and contracts;  evaluability, as the formula is not yet ready to run and so the impact cannot be measured;  face-validity – some of the results were not seen as intuitive.

49. Conclusions Broad welcome for the review of the Arbuthnott Formula SUPPORT A separate allocation mechanism for asylum seekers and ethnic minorities The changes to age-bands The use of needs indices and supplementary variables Rebased population projections The continued use of GROS data The proposed replacement of the hospital remoteness adjustment That the Arbuthnott Formula should be used to allocate health improvement funds wherever possible

50. Conclusions Some concerns the consultation process Robust up-to- date data Face validity Flat funding for some care programmes MFFs for staff MFFs may contribute to inefficiencies of perverse incentives Island Boards face particular challenges Complexity of Formula Difficulty in commenting as impact unknown