Tommy Broughan (Dublin North East, Independent)
Link to this: Individually | In context | Oireachtas source

405. To ask the Minister for Health if he will report to Dáil Éireann on proposed activity-based funding of hospitals in 2016; how he estimates the new system will impact on his overall budget; and if he will make a statement on the matter. [42469/15]

Leo Varadkar (Dublin West, Fine Gael)
Link to this: Individually | In context | Oireachtas source

The way that public hospital services are funded is in the process of being reformed through the implementation of an Activity Based Funding (ABF) system (also referred to as Money Follows The Patient). The purpose of ABF is to change the model of funding from the existing block grant budget system to a new approach where hospitals are paid based on the quantity and quality of the services they deliver to patients. Hospitals will be incentivised to pursue the most cost-effective means of achieving their performance targets and will also be subject to overall budgetary ceilings.

Implementation of ABF is a multi-year project and extensive preparatory work has been undertaken over the last 24 months. This work has allowed 2016 to be identified as the “conversion year” for inpatient and day case activity. This means that hospital budgets will be separated into ABF and non-ABF budgets for the first time. Hospital funding associated with inpatient and day case activity will effectively be withdrawn from hospitals and replaced with funding provided upon the delivery of activity in line with agreed targets. In order to maintain financial stability in the system, where appropriate, hospitals will be given transition adjustment payments to reflect the difference between their current costs and the national average cost. These transition payments will be phased out over time. All non-ABF activity will remain block funded during 2016. The ABF model will continue to evolve in subsequent years to encompass other aspects of hospital services, such as outpatient activity, before extending into community services.

It is important to note that ABF does not seek to reduce budgets. Instead, it will encourage hospitals to use the resources at their disposal more efficiently and will provide a more transparent funding mechanism that more fairly rewards hospitals for the activity they undertake.

The Government published details on this major element of its programme of health service reform in the "Money Follows the Patient Policy Paper on Hospital Financing". In addition, the HSE has in recent months published the “Activity Based Funding Programme Implementation Plan 2015 – 2017” which outlines the timetable for implementation over the next two years. Both documents are available on my Department's website.