Annex 2
FREQUENTLY ASKED
QUESTIONS
This document provides background information
on the basic principles applied to resource allocation in Scotland
plus additional detail on the methodology adopted for the new
NRAC formula due to be implemented in the calculation of the 2009-10 allocations.
1. Q: How does the new NRAC Formula work?
A: The Formula assesses each Health Board's
relative need for funding, using information about its population
size and characteristics that influence the need for healthcare
in terms of hospital services, community services and GP prescribing.
The main drivers of the Formula are:
(i) the share of the Scottish population living
in the Health Board area;
(ii) the age structure of the population and
relative number of males and females;
(iii) the additional needs due to morbidity and
life circumstances (eg deprivation); and
(iv) the unavoidable excess costs of delivering
healthcare in remote and rural areas.
2. Q: What is the underlying principle
of the new NRAC Formula?
A: The main objective of the NRAC Formula
is to ensure equity among those receiving funds and provide a
logical framework for decision making. Target shares are calculated
for Health Boards on the basis of relative need for health care
services within that population group, where use of services has
been used as a proxy for need. Scotland uses an indirect approach
to measure healthcare needs. The indirect approach relies on health
service utilisation data to measure those needs based on (i) the
demographic profile of the populations, taking into account the
national average costs of providing services based on age and
sex, and (ii) relative levels of deprivation, and its' estimated
relationship on the greater use of services within each care programme.
In addition to these two factors, the relative need for resources
in each Health Boards is also influenced by the unavoidable additional
costs of providing services in remote and rural areas. Also refer
to Question 14.
3. Q: What are the care programmes and
diagnostic groups used in the new Formula?
A: The table below sets out the care programmes
and diagnostic groups that are utilised in the new NRAC formula
being implemented from 2009-10.
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| Care Programme | Diagnostic Group(s)
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| Acute Services | Circulatory
Cancer
Respiratory
Digestive system
Injuries and poisoning
Other
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| Care of the Elderly | None
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| Mental Health and Learning Disabilities |
None |
| Maternity | None
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| Community1 | None
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| GP Prescribing2 | Circulatory
Gastro-intestinal
Infections
Mental illness
Musculoskeletal
Other
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| 1 Practice Team Information data (PTI) and data from other sources are used as a proxy for all community services.
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| 2 Prescribing programme was disaggregated into the top five British National Formulary chapters
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4. Q: My Health Board provides healthcare services
for 10 per cent of the Scottish population, yet may only
have a target share of 9 per cent—why is this?
A: Each Health Board's share of the population forms
the basis of its allocation. However, this is then adjusted for
factors that affect relative need for healthcare resources (age/sex,
additional needs and unavoidable excess costs of delivering healthcare
in different geographical areas). For example, elderly people
tend to make more use of health care services and are more costly
to treat. Therefore, a Board with a greater elderly population
will require more health care resources than one with a relatively
younger population base. Similarly, deprived people are recognised
to have a greater need for healthcare than relatively affluent
people and it is recognised that there are additional costs in
providing services in remote and rural areas and so Boards with
a larger deprived or rural population will require more healthcare
resources than an affluent urban Board. The impact of these factors
is combined to create an overall index of need for each Health
Board, and this will determine the level of funding that a Board
receives.
5. Q: How do you estimate the population?
A: For hospital and community health services (HCHS),
the Formula uses re-based population projections. These are simple
adjustments made to the GROS Health Board level population projections
by updating them using population mid-year estimates (MYEs) that
have been published since the Health Board level projections were
published. It is a development of the method used in the formulae
for allocating Local Authority Grant Aided Expenditure
(GAE) in Scotland.
For GP prescribing the population source is the Community
Health Index (CHI) which contains every person registered with
a GP in Scotland (deflated to the same total population as the
HCHS re-based projections).
6. Q: Why is population calculated differently for
hospital services and GP prescribing?
A: For hospital services the population is based on the
Health Board of Residence, however, for GP prescribing the population
base is Health Board of Management. So for GP prescribing the
relevant population is the number of patients on the lists of
GP practices managed by each Health Board.
7. Q: Why is it important to take into account the
age/sex profile of the population?
A: The Resource Allocation Formula uses this information
to take account of the use of different specialities by each age/sex
group (eg for maternity services), and also in calculating the
costs of treating patients of different ages. It makes the Formula
more "sensitive" to the healthcare requirements of the
different population groups.
8. Q: Why doesn't GP prescribing have an adjustment
for remoteness?
A: The GP prescribing element of the Formula covers the
cost of prescribed drugs which are reimbursed at nationally fixed
prices. Therefore, there is no need to build in a remoteness adjustment.
9. Q: Does the Formula give enough emphasis to deprivation
or remoteness?
A: The weights attached to different elements in the
Formula are based on the best available evidence at the time,
depending on how each factor influences the need for healthcare.
The weights were not chosen, but based on empirical analysis.
The adjustment for morbidity and life circumstances therefore
takes account of the need for services within diagnostic groups
over and above the affect of the age and sex profile of the population.
The adjustment for the unavoidable excess costs of supply then
takes account of the additional costs of delivering services to
meet the needs that are predicted by the age and sex and morbidity
and life circumstances adjustments.
It should be remembered that the target shares for each Board
are influenced not only by the different adjustments within the
Formula but also by the profile of Boards. Most Boards are very
variable, containing a mix of remote/urban areas and affluent/deprived
areas, and this is taken account of when the results are presented
at Board level.
10. Q: How do you weight the different components of
the Formula?
A: The Formula has the following basic structure:
Population x age/sex x additional needs (MLC) x unavoidable
excess costs
The aim of the modelling is to explain the current overall
need for resources of each Health Board in terms of a percentage
share.
An index is calculated for each element of the Formula and
for each care programme in such a way that it compares each Board's
position with the national average. For example, if the levels
of additional needs (MLC) in a Board are higher than the national
average its index will be more than one to reflect that its population
will need more healthcare resources. By calculating each index
in this way, the values can then be multiplied by the population
share to determine how much more (or less) resource each Board
requires compared with its basic population share due to age/sex,
additional needs and unavoidable excess costs.
In order to determine the overall adjustment for each Board,
each of the care programme formulae are weighted together by the
national average expenditure on those care programmes.
11. Q: How does the NRAC Formula take account of cross-boundary
flows?
A: The Formula allocates resources on the basis of Health
Board of Residence and not by Health Board of Treatment. It is
up to individual Boards to recover costs for patients treated
from other Health Boards, and this has traditionally been done
through Service Level Agreements (SLAs).
12. Q: Are community hospitals covered in the hospitals
section or the community services section?
A: The costs of community hospitals are included under
the appropriate care programme of the Formula eg acute, care of
elderly, maternity etc depending on the activities that are carried
out, rather than the location. They will not be included in the
community section of the Formula as this only covers activity
outside of hospital eg in the patients home.
13. Q: How are temporary residents dealt with in the
Formula?
A: There are two aspects to healthcare provision for
temporary residents—hospital admissions, and prescribing.
(i) Hospital Admissions—Health Boards are able to claim
back the costs of treating non-resident populations through the
finance mechanisms that are in place. This applies to either residents
in other Scottish Health Boards, or visitors from other countries—the
latter is achieved through UNPAC (unplanned activity) provisions.
(ii) Prescribing—there is no capacity in the financial
system to claim back the time spent with, or prescription costs
of, visitors. Inter-board costs (or "cross-border flows"
as they are known in Prescribing) are dealt with as part of the
conversion of a Gross Ingredient Cost based formula modelled on
Health Board of Management to a Net Ingredient Cost based allocation
on Health Board of Residence in the finance system. For visitors,
we therefore need to make an adjustment to the Formula—starting
with the population base.
14. Q: Why do the relative ("target") shares
as calculated by the Formula differ from the actual shares that
Health Boards receive in the final allocations?
A: This issue relates to the movement towards parity.
The policy of the Scottish Government Health Directorate is to
phase in the target shares calculated by the NRAC Formula by way
of "differential growth". Under this methodology, all
Boards continue to enjoy real-terms growth in their allocations
year-on-year, with those above parity (ie above their target share)
receiving less growth than those below parity until the new distribution
is achieved over time. In this way no Board receives a reduction
in funding. This process is still ongoing.
15. Q: The NRAC Formula does not provide us with sufficient
resources to cover the healthcare needs of our population, yet
it is supposed to be needs-based. Why is this?
A: The Resource Allocation Formula does not determine
the total amount of resources required to meet all the needs of
a Health Board. The funds available to Scotland's 14 territorial
Health Boards are determined by Ministers during the Spending
Review process. The Formula suggests how to allocate this amount
on a basis that is fair and equitable, and reflects the relative
need of each Health Board. Health Boards to decide how to spend
their allocation in a way that best meets the needs of its resident
population.
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