Activity Based Funding (MFTP)

Background

Activity-Based Funding (ABF) formerly Money Follows the Patient, represents a major change in the way hospitals are funded.  Since January 2014, it has been rolled out in the 38 largest public hospitals initially for inpatient and day case activity.  It replaces the previous arrangement of block grant allocation.  ABF means that hospitals are paid for the actual quantity and quality of care they deliver to patients, thereby enabling the hospitals to see clearly the link between money and the work they do. Targets for hospital activity are set centrally by the HSE and prices are set by the newly formed Healthcare Pricing Office.  Hospitals are now encouraged, subject to overall budgetary ceilings, to pursue the most cost-effective means of meeting their targets. This will significantly improve levels of efficiency.

The HSE recently published the ABF Implementation Plan 2015-2017 which provides a road map and comprehensive list of thirty four actions to ensure this new method of funding becomes fully embedded in the acute hospital system over the coming years.

What ABF will do

  • ensure a fairer system of resource allocation where hospitals are paid for the quality care they deliver,
  • drive efficiency in the provision of hospital services,
  • increase transparency in the provision of hospital services, and
  • ultimately, support the move to an equitable, single-tier universal health system.

Benefits

The Implementation Plan identifies four principal benefits of the ABF programme.

  • Drive structural and efficiency improvements in the health system;
  • Drive improved quality;
  • Drive greater transparency and efficiency in the allocation of hospital resources based on quality of care;
  • Provide improved national healthcare data.

Implementation

A phased approach to ABF implementation is being taken over the next number of years. This is necessary to ensure that hospital budgets are not de-stabilised.  The primary objective for this is to embed ABF in the acute hospital sector.

The Healthcare Pricing Office (HPO) plays a central role in the implementation of ABF. It was established on an administrative basis within the HSE in 2014 with its key functions being to (i) set the national Diagnostics Related Group (DRG)* prices on which the ABF system is based; and (ii) manage the HIPE** dataset. Oversight of ABF implementation is provided by the Department-led ABF Oversight Group which is comprised of senior officials from the Department of Health and the HSE.

* DRG’s are a classification which groups hospital case types that are clinically similar and are expected to have a similar hospital resource usage.  There are approximately 1,050 DRG’s overall covering inpatient (698) and day case (350) activity.

** Information on hospital activity in relation to the DRG’s is collected on the Hospital Inpatient Enquiry (HIPE) system.  HIPE is the principal source of national data on discharges from acute hospitals in Ireland.

Future development

While ABF has begun with hospital services, this payment system will evolve in the future to other areas like outpatients and care in the community. The work of the National Clinical Programmes Division will be key to this further expansion of ABF, as their work in modernising the way services are delivered ensures that health service provision is integrated and standardised for the individual patient and service user.

Key Documentation