Using referrals and priority-setting rules to risk adjust budgets: the case of regional psychiatric centers

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).

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.

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.

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.

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.