Otago researchers clarify DHB funding formula

A report representing the first-ever attempt to comprehensively detail how the population-based funding formula (PBFF) for District Health Boards (DHBs) operates has just been released by University of Otago researchers.

The PBFF is used to distribute around $9 billion annually among the 20 DHBs and represents two thirds of the entire public health spend.

Co-author Professor Robin Gauld of the University’s Centre for Health Systems says the report was produced because there is no up-to-date manual for how the formula’s various cost weights and adjusters are calculated.

“We hope this report will provide important information to DHB CEOs and others in the DHB sector relying almost entirely on government funding and who receive different funding levels per capita based on PBFF calculations. The report will provide them with more detail than previously available on the subject and provide a greater level of transparency.”

The authors, who also include Centre for Health Systems Assistant Research Fellow Erin Penno and Associate Professor Rick Audas of Memorial University in Canada, noted that despite the best efforts of the research team over 18 months, concerns remain around availability of information on how components of the PBFF are calculated.

“In particular, there is a need for greater transparency in terms of making data used to construct the PBFF available for public scrutiny. A striking point of contrast between New Zealand and the other jurisdictions we looked at is the greater accessibility of detailed data on the development and construction of their funding formulae.”

Preparing the report required the researchers to obtain information from the Ministry of Health under the Official Information Act, but in England reports and recommendations surrounding similar processes are systematically published online along with final health provider allocations.

Professor Gauld says one of the aims of producing the report is to promote wider understanding of the PBFF, stimulate discussion on it, the principles underpinning it and methods used.

“The report notes that it is difficult to determine whether the PBFF, as currently designed, is as robust as it could be or whether it is reflective of actual health needs. In particular, there is a need for greater transparency in terms of making data used to construct the PBFF available for public scrutiny. This is in keeping with the spirit of open government.”

The report is titled: “The State of the Art? An analysis of New Zealand's Population-Based Funding Formula for Health Services” and can be downloaded as a PDF.