Caoimhghín Ó Caoláin (Cavan-Monaghan, Sinn Fein)
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207. To ask the Minister for Health if he has investigated the introduction of diagnostic related groupings and case-mix based payment in strategic purchasing; if this would give potential savings; and if he will make a statement on the matter. [25663/15]

Leo Varadkar (Dublin West, 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. A DRG system has been operational in Irish hospitals for over 20 years with the AR-DRG grouping system used to group each hospital’s inpatient and daycase workload into approximately 1,050 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 system has been used to facilitate the introduction of a new prospective, case-based funding model for public hospital care called Activity Based Funding (ABF). ABF is also referred to as 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 ABF activity.

As outlined in the recently published “ABF Implementation Plan”, the new model is being rolled-out on a phased basis in public hospitals and full implementation will take a number of years. January 2016 will be an important milestone in the process when block budgets for inpatient and daycase activity will be converted into ABF allocations for the first time. 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 introduction of ABF is an important step towards implementation of a commissioning or strategic purchasing model. My Department has commenced the process of developing policy on a commissioning model in the Irish context that is aimed at improving the way the health system plans and arranges for the delivery of services.

These reforms are designed to introduce a greater level of efficiency to the health service, and create a specific link between spending and activity. They do not seek to reduce overall spending. Instead, the changes provide a more transparent funding mechanism that rewards hospitals more fairly for activity. The experience of other jurisdictions that have implemented ABF suggests that the funding model can deliver improved performance in important measures of system efficiency such as significantly reduced average lengths of stay, increased numbers of day of surgery admissions, and an increase in the number of discharges at the weekend. However, it is important to note that ABF and commissioning will play an important role in driving improvements in quality and patient safety as well as efficiency. The work of the National Clinical Programmes and the National Clinical Effectiveness Committee will be central to the future developments in this regard.