The Resource Allocation Formula Calculation

1. The Resource Allocation Formula Calculation June 2011

7. Formula Structure Population Age/Sex Cost Weights Additional Needs Unavoidable Excess Costs Health Board Population % Relative need due to age/sex profile Relative need due to MLC and other factors Relative cost of providing services to different geographical areas X X X Weighted Share % =

8. CareProgrammes The Resource Allocation formula covers six care programmes: • Acute • Care of the Elderly • Mental Health & Learning Difficulties • Maternity • Community • GP Prescribing Hospital and Community Health Services (HCHS) Prescribing

9. Weighting of Expenditure across Care Programmes Data Source: Costs Book, year ending 31st March 2008

10. GP Prescribing • No adjustment is made for unavoidable excess costs • Funds are allocated to Boards based on the location of GP practices within their area • Prescribing formula only applies to the cost of prescriptions that are dispensed in the community (i.e. through a community pharmacist or GP) • Hospital prescribing costs, although not separately identified within the formula, are included within the HCHS allocations

11. Formula Structure Population Age/Sex Cost Weights Additional Needs Unavoidable Excess Costs Health Board Population % Relative need due to age/sex profile Relative need due to MLC and other factors Relative cost of providing services to different geographical areas X X X Weighted Share % =

12. Populations – HCHS (1) • General Register Office for Scotland (GROS) mid year estimates & population projections • Health Board and datazone populations (rebased) • Used for the HCHS part of the calculation

13. Populations – HCHS (2) • For example, to re-base the 2006 based projection of 2010 populations using 2008 Mid Year Estimate (MYE) for the 2010/11 allocation year the calculation is: • (2008 MYE) • – (2006 based projection of 2008) • + (2006 based projection of 2010) • the re-base calculations are produced at health board level then compared to health board MYEs to create an adjustment factor • This adjustment factor is used to calculate population projections by datazone as GRO do not publish projections at this level

14. Populations – HCHS (3)

15. Populations – GP Prescribing (1) Community Health Index (CHI) Data • Provides information on all patients registered with a GP in Scotland • Practice population adjusted for list size inflation • Rescaled to HCHS rebased population projections • Used for the GP Prescribing part of the formula

16. Source: GROS June 2010 MYE compared to CHI July 2010 list sizes Total populations: GROS 5.1m, CHI, 5.5m

17. Populations – GP Prescribing (2) • The re-base calculations are produced by local council area then compared to local council area mid-year estimates (GROS) to create adjustment factor • Adjustment factors produced for all combinations of local council area of residence, age and sex • This adjustment factor is applied to the GP practice population

18. Population - Questions?

19. Resource Allocation FormulaAge/Sex Cost Weights Population Age/Sex Cost Weights Age/Sex Cost Weights Additional Needs Unavoidable Excess Costs Health Board Population % Relative need due to age/sex profile Relative need due to age/sex profile Relative need due to MLC and other factors Relative cost of providing services to different geographical areas Weighted Share % X X X =

20. Age/Sex Analysis • The formula accounts for the effect of age differences on the cost of delivering different NHS services for each sex • Older and very young people tend to consume greater resources so the costs rise steeply with age • Calculations are carried out for each care programme

21. Combining Costs & Activity Data Example for the Acute care programme - Age/sex costs per head: • Twenty age bands are used giving a total of 40 age/sex cost weights • All are costs per head except maternity which is cost per birth • Weights are multiplied through the NHS Board populations at datazone level (or births) to give an expected cost that takes into account different demographics • The age-sex index for each datazone is the ratio of the datazone cost per head to the Scottish cost per head

22. Average costs by age & gender

23. Age/Sex Analysis - example

24. Age group (years) 0-4 5-14 15-24 24-34 35-44 45-54 55-64 65-74 75+ Males 31 29 52 69 120 184 280 465 570 Females 37 48 53 81 129 209 300 438 540 GP Prescribing – Age/Sex Analysis (1) • Sample of 1,000 prescriptions per month over a year. • Pooling samples over the most recent 3 years are used to produce cost per head by gender and age (9 age bands) • The age-sex index for each practice is the ratio of the practice cost per head to the Scottish cost per head

25. GP Prescribing - Age Sex Analysis (2) Average costs by age & gender (GP prescribing)

28. Age Sex Adjustment - Questions?

29. Resource Allocation Formula Additional Needs Population Age/Sex Cost Weights Additional Needs Unavoidable Excess Costs Health Board Population % Relative need due to age/sex profile Relative need due to MLC and other factors Relative cost of providing services to different geographical areas Weighted Share % X X X =

30. The Additional Needs - Morbidity and Life Circumstances (MLC) • This adjustment takes into account factors that predict the need for healthcare in addition to the needs due to age and sex • This index directs relatively greater resources towards Boards with higher additional needs • The factors that best explain the variation in need for each care programme were identified using statistical linear and log linear regression analysis

31. The Additional Needs – small area indices • The index is constructed at the intermediate data zone (IDZ) level (currently there are 1235 IDZs and 6505 data zones) • Each data zone within an IDZ shares the same index value • It is updated every three years

32. The Additional Needs Regression Indices SNS – Scottish Neighbourhood Statistics

33. The Additional Needs – Regression Analysis Coefficients needs indices by diagnostic group using the acute regression index Coefficients needs indices by diagnostic group using the mental health regression index Maternity coefficients of needs index using the maternity regression index and supplementaryvariable for Maternity

34. The Additional Needs (1) Utilisation National average 1 Needs

35. The Additional Needs (2) Utilisation 1 Needs *Repeat for each diagnostic group

36. The Additional Needs (3) Diagnostic Group Utilisation A B 1 Needs

37. IDZ 1 The Additional Needs (4) Diagnostic Group Utilisation A MLC = constant + Coefficient*need B 1 0.85 Needs

38. IDZ 1 The Additional Needs (5) Diagnostic Group Utilisation A MLC = constant + Coefficient*need B 1 MLC = 0.95 Needs

39. other respiratory heart cancer ……. 0.95 0.85 1.1 1.0 0.90 Average across acute diagnostic groups (weighted by costs) IDZ Acute MLC index =

40. The Additional Needs Indices • Acute, Care of the Elderly & GP Prescribing: using Acute Regression Index MLC Index = constant + Coefficient*Index • Mental Health & Learning Difficulties:using Mental Health Regression Index MLC Index = Exp (constant + Coefficient*Index) • Maternity: using Maternity Regression Index MLC Index = constant + Coefficient*Index + Maternity supplementary variable coefficients

41. Community Additional Needs Index The additional needs index for community is calculated by combining MLC indices from the four groups ‘acute outpatients’, ‘care of the elderly’, ‘mental health & learning difficulties’ and ‘maternity’ by using community weightings as shown below:

44. Additional Needs - Questions?

45. Resource Allocation FormulaUnavoidable excess costs adjustments Population Age/Sex Cost Weights Additional Needs Unavoidable Excess Costs Health Board Population % Relative need due to age/sex profile Relative need due to MLC and other factors Relative cost of providing services to different geographical areas Weighted Share % X X X =

46. Unavoidable Excess Cost Adjustments • Indices are calculated annually to adjust for the unavoidable excess costs of delivering services in to different geographical areas • Separate indices are calculated for hospital and community activity • For hospital activity, indices are calculated for each of the four care programmes (acute, mental health & learning disabilities, care of the elderly and maternity) • For community services, indices are calculated for clinic based and travel based services

47. Hospital Unavoidable Excess Cost (1) • Cost ratioto analyse the variation in local costs relative to the costs for the same service at national average unit costs • Produced by urban - rural category in which the data zone lies • The index provides a better reflection of all unavoidable excess costs of supplying health services rather just remoteness

48. Hospital Unavoidable Excess Cost (2) Scottish Executive Urban Rural Categories (SEURC): Primary Cities Urban Settlements Small towns – accessible Small towns – remote Small towns – very remote – mainland Small towns – very remote – island Rural areas – accessible Rural areas – remote Rural areas – very remote – mainland Rural areas – very remote – island

49. Hospital Unavoidable Excess Cost (3) Percentages Health Board’s resident in each urban-rural category

50. Hospital Unavoidable Excess Cost (4) – Example: Acute care programme Excess Costs index = 0.98