The NHS in England has introduced a system of budgets for general practices covering hospital expenditure for the patients on their lists.
Calculating a needs-based target allocation
This report from the Centre for Health Economics describes a procedure for calculating a needs-based target allocation for general practices. The approach differs from previous utilisation based modelling approaches in that it:
1) models the expenditure of individuals, not the mean expenditure of individuals in small areas as in previous modelling for NHS resource allocation
2) links individuals to practices
3) uses diagnostic information from previous hospital utilisation to construct individual level morbidity measures.
The authors model individual expenditure using diagnostic information from previous hospital spells, plus a large set of attributed variables measuring population, general practice, and local hospital characteristics.
Results suggest that the one stage OLS (ordinary least squares) model is a robust estimator of hospital expenditure at the level of the general practice. Where the aim is to predict health care expenditures in order to set practice budgets this model out-performs alternative estimators:
OLS is the simplest to implement, is widely used and understood
Nevertheless, it is clear, that irrespective of the preferred procedure, that actual allocations differ considerably from those based on measures of need derived from the expenditure models.
Gravelle, H. Et al. Modelling Individual Patient Hospital Expenditure for General Practice Budgets. [pdf, 360KB] York, Centre for Health Economics, CHE Research Paper 73, Dec 2011.