Design of price incentives for adjunct policy goals in formula funding for hospitals and health services

Stephen J Duckett

Reform and Development Division, Queensland Health and Australian Centre for Economic Research on Health, University of Queensland, Australia

author email corresponding author email

BMC Health Services Research 2008, 8:72doi:10.1186/1472-6963-8-72


Published:	3 April 2008

Abstract

Background

Hospital policy involves multiple objectives: efficiency of service delivery, pursuit of high quality care, promoting access. Funding policy based on hospital casemix has traditionally been considered to be only about promoting efficiency.

Discussion

Formula-based funding policy can be (and has been) used to pursue a range of policy objectives, not only efficiency. These are termed 'adjunct' goals. Strategies to incorporate adjunct goals into funding design must, implicitly or explicitly, address key decision choices outlined in this paper.

Summary

Policy must be clear and explicit about the behaviour to be rewarded; incentives must be designed so that all facilities with an opportunity to improve have an opportunity to benefit; the reward structure is stable and meaningful; and the funder monitors performance and gaming.