Funding formula that may calculate CCG budgets effective, says study

A new formula that could be used to determine clinical commissioning group (CCG) budgets has shown to be more effective at predicting future health costs than the formula used for PCT allocations.

The Nuffield Trust developed a person based resource allocation (PBRA) formula that uses data on individual patients’ health needs, such as their hospital attendance, to predict the cost of their hospital care in the next financial year.

The model used this data from 2005/6 and 2006/7 to predict costs in 2007/8. The predicted costs were then compared with each practices actual costs for 2007/8 to assess how well the model performed.

The study found the model could predict upwards of 77% of next year’s hospital costs per practice, which it said is ‘in line with best international standards in predicting future health costs’.

But it also found that 32% of practices are likely to exceed or undershoot their predicted costs by more than 10%.

It said this shows that the PBRA model should therefore be combined with effective arrangements for sharing financial risk across the NHS.

It said: ‘We have shown that using the PBRA formula to set target allocations for practices is challenging but feasible.

‘Compared with previous methods, the PBRA formula makes far greater use of information from individuals, relies less on area level information attributed to individuals and is more predictive of future costs.’

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