Caoimhghín Ó Caoláin (Cavan-Monaghan, Sinn Fein)
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184. To ask the Minister for Health the extent to which the diagnostic-related groupings system is employed in the health service here; if there is scope to extend this system; the expected efficiencies and savings which could be expected from same; and if he will make a statement on the matter. [30468/14]

James Reilly (Dublin North, Fine Gael)
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Diagnosis Related Group (DRG) systems classify patients into distinct groupings which are clinically similar and consume similar health resources. Irish hospitals use the AR-DRG grouping system which groups each hospital's inpatient and daycase workload into 698 DRGs. Until the end of 2013, the main use of the DRG system was to adjust the budget allocations of acute public hospitals by up to 3% in line with the complexity of their casemix and their relative performance under the Casemix System. DRGs have also been used as a tool to assist with planning as well as monitoring and assessing performance within the acute hospital sector.

Since January, 2014 the DRG grouping system has been used to facilitate the introduction of a new prospective, case-based funding model for public hospital care called Money Follows the Patient. The new model involves moving away from inefficient block grant budgets to a new system where hospitals are paid for the actual level of activity undertaken. As such, hospitals will be funded based on the quantity and quality of the services they deliver to patients. They will be liberated, subject to overall budgetary ceilings, to pursue the most cost-effective means of achieving this standard of performance. Budgetary discipline will be delivered through the use of fixed budgets for MFTP activity.

The new model is being rolled-out on a phased basis and full implementation will take a number of years. The MFTP approach is initially being applied to inpatient and daycase activity in public hospitals. However, it is intended that the payment system will extend over time to cover other hospital activity and eventually evolve so that money can follow the patient out of the hospital setting to primary care. The work of the National Clinical Programmes will be central to the future development of the payment model so that care can be financed as a bundle/package across a variety of settings.

Encouraging hospitals to use the resources at their disposal more efficiently is one of the central objectives of the MFTP system. A recent pilot project, which implemented a MFTP model in the orthopaedic speciality, showed the positive impact that MFTP can have through productivity gains. Introduction of MFTP resulted in significantly reduced average lengths of stay, increased numbers of day of surgery admissions, and an increase in the number of discharges at the weekend. Crucially, these improvements were delivered while not raising any quality concerns.

Caoimhghín Ó Caoláin (Cavan-Monaghan, Sinn Fein)
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185. To ask the Minister for Health his views on whether the introduction of a prospective case-based payment system for hospital services using the existing diagnostic-related grouping system would result in savings arising from increased efficiency and productivity of 5%; if he will provide details of the pilot projects carried out to date; if he will provide detail of efficiencies and savings realised, including the money saved, total value and as a percentage of local budgets; and if he will make a statement on the matter. [30469/14]

James Reilly (Dublin North, Fine Gael)
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The Money Follows the Patient Policy Paper, which I published in February 2013, outlines the Government's plans for the introduction of a prospective case based payment system for hospital services using Diagnosis Related Groups (DRGs). Implementation of this new funding model commenced in January of this year with the approach initially being applied to inpatient and daycase activity in public hospitals. Full implementation will take a number of years and a phased approach to roll-out is being employed. The new model involves moving away from inefficient block grant budgets to a new system where hospitals are paid for the actual level of activity undertaken. As such, hospitals will be funded based on the quantity and quality of the services they deliver to patients. They will be liberated, subject to overall budgetary ceilings, to pursue the most cost-effective means of achieving this standard of performance. Budgetary discipline will be delivered through the use of fixed budgets for Money Follows the Patient (MFTP) activity. It should be noted that, as stated in the MFTP Policy Paper, the new funding mechanism does not aim to reduce budgets but, rather to drive efficiency in the provision of high quality hospital services.

Prior to the commencement of MFTP, the HSE operated a prospective funding pilot programme for Primary Hip and Knee Replacements (four DRGs) between 2011 and 2013. The pilot related to elective work only. Seven hospitals initially participated, with a further five joining from January 2012. The pilot involved the participating hospitals' current budgets being reduced by an amount of money related to the four DRGs. This portion of the budget was then “earned” back, based on the work carried out in the hospital. There was no other change to any other portion of the hospital budget.

No specific savings figures have been calculated for the pilot programme. However, reviews of the pilot highlighted a number of efficiency related benefits including significantly reduced average lengths of stay, increased numbers of day of surgery admissions, and an increase in the number of discharges at the weekend. While the level of improvement varied across the different hospitals and the different DRGs, all showed significant improvements in these key determinants of hospital efficiency and productivity.

This pilot was the first example of Money Follows the Patient in operation in Irish hospitals and was a useful exercise in highlighting the benefits that can accrue as a result of these types of funding arrangements. It also provided useful lessons in terms of systems and process requirements as well as the need for stakeholder buy-in ahead of roll-out to the wider hospital system.

A shadow funding exercise was also carried out in Q4 2013 using eight representative hospitals. This exercise: (i) compared, on a systematic basis, actual hospital activity against baseline activity targets; and (ii) informed hospitals of what the financial implications of any variance from the targets would be in a “live” system without impacting on budgets. Although this was not strictly speaking a "pilot" it did provide key lessons which are being applied in the 2014 MFTP roll-out.

While it is not possible to specify a percentage increase in efficiency that will result when MFTP is rolled out across all public hospitals, I am confident that its introduction will drive efficiencies in similar areas to those evident in the orthopaedic project. This will help to deliver a more efficient and productive hospital system.