Article Abstract

Article Abstract

Online ISSN: 1099-176X Print ISSN: 1091-4358
The Journal of Mental Health Policy and Economics
Volume 14, Issue 1, 2011. Pages: 25-38
Published Online: 30 March 2011

Using Referrals and Priority-Setting Rules to Risk Adjust Budgets: The Case of Regional Psychiatric Centers

Per Arne Holman,¹ Sverre Grepperud*² and Lars Tanum³

¹Lovisenberg Diakonale Hospital, Oslo, Norway.
²Institute of Health Management and Health Economics, University of Oslo, Norway and University of Nordland, Bodø Graduate School of Business, Bodø, Norway.
³Department of Psychiatric Research, Diakonhjemmet Hospital, Oslo, Norway.

* Correspondence to: Sverre Grepperud, Professor of Economics, Institute of Health Management and Health Economics, University of Oslo, PO 1089, N-0317 Oslo, Norway.
Tel.: +47-2-284 5033
Fax: +47-2-284 5301
E-mail: sverre.grepperud@medisin.uio.no

Source of Funding: None declared

Abstract

A precondition for equal access in systems where health care providers have catchment area responsibility and are reimbursed by global budgets is that they have similar capacities – meaning that budgets must be perfectly adjusted for variations in treatment costs. This study presents a method that can be applied to risk-adjust global budgets by using information being available from referrals. First, referrals are ranked according to need defined according to priority-setting criteria for health care services. Second, adequate treatment profiles (treatment category and treatment intensity) for each referral are suggested. By coupling the treatment profiles with cost information, risk-adjusted budgets are derived. The method is applied to four Regional Psychiatric Centers (RPC) supplying (i) outpatient services, (ii) day-patient care, and (iii) inpatient treatment for adults. The budget reallocations needed (positive and negative) to achieve an equal capacity across providers range between 10% and 42% of the current budgets.

Background: An important objective of many health care systems is to ensure equal access to health care services. One way of achieving this is by having universal coverage (low or absent out-of-pockets payments) combined with tax-financed transfers (block grants) to providers with a catchment area responsibility. However, a precondition for equal access in such systems is that providers have similar capacities -- meaning that budgets must be perfectly adjusted for variations in treatment costs not being under the control of providers (risk adjustment).

Aim: This study presents a method that can be applied to adjust global budgets for variation in health risks. The method is flexible in the sense that it takes into account the possibility that variation in needs may depend on the degree of rationing in supplying health care services.

Methods: The information being available from referrals is used to risk-adjust budgets. An expert panel ranks each individual on the basis of need. The ranking is performed according to priority-setting criteria for health care services. In addition, the panel suggests an adequate treatment profile (treatment category and treatment intensity) for each referral reviewed. By coupling the treatment profiles with cost information, risk-adjusted budgets are derived. Only individuals found to have a sufficiently high ranking (degree of need) will impact the derived risk-adjusted formula.

Results: The method is applied to four Regional Psychiatric Centers (RPC) supplying (i) outpatient services, (ii) day-patient care, and (iii) inpatient treatment for adults. The budget reallocations needed (positive and negative) to achieve an equal capacity across providers range between 10% and 42% of the current budgets.

Policy Implications: Our method can identify variations across providers when it comes to actual capacity and suggests budget reallocations that make the capacities to be equal across providers. In the case of the Regional Psychiatric Centers (RPCs) considered in this analysis, significant deviations in capacities are identified across providers and catchment areas. Thus, significant social gains can be gained, in terms of improved equal access, if our methodology is applied to risk adjust global budgets.

Received 15 April 2009; accepted 15 February 2011