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BMJ No 7114 Volume 315 Editorial Saturday 18 October 1997
Formula fever: allocating resources in the NHSSimple formulas weighted for standardised mortality ratios may still work bestSee Paper (abstract only) p 994A new set of weighted capitation formulas are being used for allocating resources to health service "purchasers." Since the 1970s the NHS has used formulas to promote a more equitable allocation of resources for hospital and community care. The Resource Allocation Working Party (RAWP) recommended that cash should be distributed on the basis of the size and age-sex distribution of an area's population, taking into account relative health care needs as indicated by its standardised mortality ratio.(1) This highlighted the fact that the regions in the south of England were receiving more than their fair share of resources and initiated a gradual redistribution to the poorer and sicker north. In the 1980s regression analysis was used to estimate the influence of health and socioeconomic factors on health care use.(2) Recent research at York University used more statistically appropriate techniques which also adjust better for the effect of variations in supply and consider resource use rather than just bed days. The resulting indices of need for acute(3) and psychiatric(4) health services are more sensitive to the influence of socioeconomic factors and, had they been implemented, would have redistributed resources from richer to poorer districts. However, the previous government decided to allocate only around 75% of the funds using these needs weights. Most of the community health services budget was excluded on the pretext that the research was based on hospital episodes: community health service data are not routinely recorded. The decision not to weight the community health services budget according to need contradicted the epidemiological evidence.(5) The effect was to dampen the redistributive effects of the York formulas, resulting in losses for poorer districts.(6) The then Secretary of State was pressured into commissioning research on weighting community health needs. In this issue of the BMJ Buckingham and colleagues report the results of part of this research (p 994).(7) Along with other research on the use of community health services,(8) and a refinement of the market forces factor which takes into account geographical differences in the cost of providing care, this research is now used to allocate resources to health authorities.(9) The methods used are necessarily cruder because of the general lack of good data and the dependence on a few providers for records of community health contacts. The results are particularly important, however, for two reasons. Firstly, they confirm that the government was indeed wrong to exclude community health services from needs weighting for the past two years. For many of the individual programmes and for all the community services aggregated, the correlation between the prediction of the new formulas and the York indices is over 80%.(8) Secondly, the results again show the importance of the standardised mortality ratio. This measure summarises the cumulative social and health experience of people living in an area and is a sensitive indicator of general health care needs(10) and powerful predictor of community health care use. Its advantage over other variables which are derived from the census is that it is available routinely on a regular basis and is not manipulable. The empirical work over the past years seems to have validated the original idea of the Resource Allocation Working Party to use a measure of the death rate as an indicator of relative need.(1) There are no unique and valid indicators of health care need, and, no matter how sophisticated the analysis, research based on the use of services tends to underestimate the effect of poverty because the middle classes are better at accessing health services. Because of this, a similar result could be produced by basing a formula simply on population size and age, weighted by the under 75 year standardised mortality ratio.(11) This would be simpler and more transparent than combining the results of 10 different but highly correlated instruments.(9) We have become besotted with the production of ever more refined empirically based formulas. The marginal increase in NHS equity resulting from these compared with formulas based on standardised mortality ratios is probably very small. Formula fever has distracted attention from the now more important issue of how the allocated resources are spent. Health authorities and general practitioners should focus their attention on whether current spending patterns reinforce socially produced inequalities(12) and, if so, doing something about this at local level.(13) Trevor A Sheldon Professor
NHS Centre for Reviews and Dissemination,
References
1 Department of Health and Social Security. Sharing
resources for health in England: report of the Resource Allocation
Working Party. London: HMSO, 1976.
2 Coopers and Lybrand. Integrated analysis for the review
of RAWP. London: Coopers and Lybrand, 1988.
3 Smith P, Sheldon T A, Carr-Hill R A, Martin S, Peacock S,
Hardman G. Allocating resources to health authorities: results and
policy implications of small area analysis of use of inpatient
services. BMJ 1994;309:1050-4.
4 Smith P, Sheldon T A, Martin S. An index of need for
psychiatric services based on inpatient utilisation. B J
Psychiatry 1996;169:1059-64.
5 Brennan M, Carr-Hill R. No need to weight community
health programmes for resource allocation? York: Centre for
Health Economics, University of York, 1996.
6 Peacock S, Smith P. The resource allocation
consequences of the new NHS needs formula. York: Centre for
Health Economics, University of York, 1995.
7 Buckingham K, Freeman P R. Sociodemographic and morbidity
indicators of need in relation to the use of community health services:
observational study. BMJ 1997;315:994-6.
8 Buckingham K, Bebbington A, Campbell S, Dennis E, Evans
G, Freeman G, et al. Interim needs indicators for community
health services. Canterbury: University of Kent Personal Social
Services Research Unit, 1996.
9 NHS Executive. HCHS revenue resource allocation to
health authorities: weighted capitation formulas. Leeds: NHS
Executive, 1997.
10 Martin S, Sheldon T A, Smith P. Interpreting the new census
illness question for health research on small areas. J Epidemiol
Community Health 1995;49:634-41.
11 Sheldon T A, Davey Smith G, Bevan G. Weighting in the dark:
resource allocation in the new NHS. BMJ 1993;306:835-9.
12 Payne N, Saul C. Variation in the use of cardiology services in
a health authority: comparison of coronary artery revascularisation
rates with prevalence of angina and coronary mortality.
BMJ 1997;314:257-61.
13 Arblaster L, Lambert M, Entwistle V, Forster M, Fullerton D,
Sheldon TA, et al. A systematic review of the effectiveness of health
service interventions aimed at reducing inequalities in health.
J Health Services Research and Policy 1996;1:93-103.
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