Hospital resource allocation in New Zealand

HOSPITAL RESOURCE ALLOCATION NEW ZEALAND

IN

J. Ross BARNETTand DAVID WARD Department

of Geography, Umverslty of Canterbury and MICHAEL TATCHELL

Health Research ProJect Group. Austrahan

Natlonal University

Abstract-It

has long been recognised that inequalitles exist m the availability of primary medical care. Less well known, however, are the distributional inequalities that exist in the secondary sector This paper examines the relationships between hospital resource allocation, the presence of medIca resources and need in New Zealand’s 29 hospital boards m 1976. Although the relationship between resource allocation and need was positive, It was found to be tenuous, with bed numbers, political pressure and the system’s inertia being the more important determinants of allocation levels.

The inequitable distribution of health care resources is a common feature in many of the developed economies of the Western world. In the past most attention has focused on inequalities in the availability of primary care physicians, particularly in the inner city and rural areas of North America [l]. Less well known, however, are the patterns of inequality that exist in the allocation of health resources in the public sector. There is a dearth of academic writing in this field, which is surprising given the major role which governments play in determining the level and quality of community resources. The social and economic environments in which people live are influenced considerably by the spending patterns of the public sector. The theory of public financing indicates that the allocation of public resources should favour those areas that will gain the greatest social benefit from having the resources; in the health care system, those with the greatest need for medical services. The extent to which the New Zealand system demonstrates this is the focus of this study. The New Zealand Government is a major element in the country’s political economy. Government expenditure accounted for nearly one quarter of the total GNP in 1976. In that year public expenditure on health services alone was 6:< of GNP, having risen sharply from 4.7% in 1966 [2]. Nearly two thirds of that expenditure was allocated to the provision and operation of hospital facilities, the latter being made through grants to hospital boards. The size of these grants. combined with the existing distribution of resources. is an important factor in determining the level of access to. and the quality of, hospital care. The crucial question is whether the present hospital allocation system has created a condition where equality of access to hospital services is available to individuals of equal needs. In the light of these comments, this paper seeks to: (1) examine the present hospital resource allocation system in New Zealand; and (2) examine possible influences on the spatial allocation of government money for hospital care. 251

DETERMINANTS

OF RESOURCE

ALLOCATION

To account for disparities in policy goals and implementation, two alternative models have been proposed for evaluating pliblic sector decisions (see Fig. 1). The first, Foltz and Chen 133 have termed the rational decision-making model, where the policymaker accumulates data and then objectively makes decisions about allocations on the basis of needs which have already been assessed. Ideally a rational allocation of health resources occurs where funds, manpower or facilities are directed toward areas of greatest need and there are relatively consistent criteria developed to assess these needs. One definition of territorial equality, which could be advanced as a policy objective, might be: “equal treatment opportunity for patients of similar risk regardless of their places of residence” [4]. However, because decisionmakers rarely have all the necessary data to make objective decisions, they will often act on subjective, or inaccurate or biased, perceptions of need, hence the existence of disparities between objectives and reality. Complete equity on the basis of need will always remain an elusive objective. The inertia associated with the existing physical stock, for example, may produce a pattern of public expenditure that is more a result of political constraints and institutional barriers preventing change than variations in the need for medical care. Unfortunately, therefore, the allocation of public resources is often sensitive to factors other than need, with the result that public expenditure may seldom produce the desired redistributive effects. Allison and Halperin [S] and Lineberry [6], for example, have termed this process the “bureaucratic politics model”. This assumes that any policy decision or action on the part of a public agency results not from an agreed set of goals (such as distributing resources equitably), but from conflicting organisational and political goals [7]. These could include minimising potential political conflict, which could result from an attempted

?i? __-

J. Ross BARNETT. DAVID WARD and MICHAEL ‘TATCHELL

Fig. I. Some determinants of resource allocation. redistribution of resources, or bureaucratic efficiency favouring incremental budgeting or public spending in programmes which have the greatest chance of success. This type of decision-making is often sub-optimal because it may simply reflect the existing distribution of medical resources which, in turn, may be unrelated to need. In the United States, for example, Friedman [S] was able to show that an area was more likely to get a Maternal and Infant Care project funded if it contained a medical school or a high ratio of physicians to population. Project funding bore little or no relationship to need indicators, such as the level of concentration of the poor or the infant mortality rate. Similarly, Rushing [9] also showed that public spending favoured high income areas which were already well provided with medical resources. The resource flow pattern was more strongly correlated with impact, that is, where the doctors were to utilise the resources. than it was to need. Most grant projects for Regional Medical Programme funds, studied by Rushing, were developed and funded in areas with the highest concentration of medical staff since these were the areas in which the programmes were most likely to be successful. Rushing termed such patterns, “cumulative advantage” (or disadvantage); the greater an area’s medical resources, the greater its ability to attract more. The problem is essentially one of perception and political lobbying. Morbidity, on its own, cannot attract resources. The perceived morbidity level, which requires the presence of doctors and medical personnel to real& that a medical problem exists, is the more crucial factor. The greater the number of doctors present, or the existence of a medical school, reduces the need for further resources but drastically enhances the lobbying potential to attract these resources. Similar inequalities in public expenditure also exist in the British National Health Service. Noyce et al. [lo], in a study of community health expenditure (combining executive council and local authortty expenditure which accounted for general practiticner services and public health and infant welfare respectively) in the 14 hospital regions in Britain in 19’11-72, found that per capita expenditure was unrelated to need (indexed by the infant mortality rate and the proportion of the population aged 65 years and over), but was directly a function of socio-eco;lomic status. This was also true of the level of haspita revenue expenditure and to a lesser extent the level of capital * See

also Ohlsen

rr al. p. 267 of this issue.

expenditure. However, these inequalities may only be temporary, for. following the reorganisation of the British National Health Service in 1973. it appears that a more rational basis for the allocation of hospital resources is being developed [l I]. In the Australian context. Mant’s [12] evaluation of the Community Health Programme (CHP) in Sydney:* provides some evidence of a reversal of the traditionai pattern of resource allocation. The aim 01 introduced by the Australian the programme, Government in 1972. was to redistribute health services by funding according to need. Mant found that the allocation of CHP funds only partly achieved this objective. While the level of funding per capita was directly related to measures of crowding, family structure and low socio-economic status, it was positively. but not significantly, related to more direct measures of medical need such as rates of total and infant mortality. The analysis suggested that while the allocation of funds began to reverse some of the major inequities created by the existing distribution of health resources, more clearly stated goals and criteria were obviously needed [ 131. HOSPITAL

RESOURCE NEW

ALLOCATION

IN

ZEALAND

This paper sets out to examine the basis of hospital expenditure in the New Zealand situation. The particular type of expenditure chosen for study is the maintenance allocation grant which the central government makes to hospital boards. Most of the maintenance expenditure is for the salaries and wages of boards’ staff although supplies and services also incur considerable costs. Maintenance allocations exclude finance for major capital expenditure. This is financed from approved loans raied by the hospital boards, with repayment costs being met by central government. Given the fact that the formula which determines the level of a hospital board’s maintenance grant has generally excluded need criteria, such as population size, growth or morbidity rates, it is hypothesized that allocations are likely to be related to the existing distribution of medical resources rather than to need. The following section analyses the distribution of the annual maintenance grant to New Zealand’s 29 hospital boards in 1976 and compares the resulting spatial distribution to one which would be predicted on the basis of need. Before turning to an analysis of the allocation system and the distribution of maintenance expenditure, three aspects must be kept in mind. First, the 29 hospital boards in existence in 1976 are by no means homogeneous; marked variations occur not only in their area1 extent, but also in terms of their population size and composition as well as in the range of facilities operated by the boards. For example, the Auckland Hospital Board, with a population of nearly 800,000 in 1976, was somewhat different from Manitoto, the smallest board, which served a population of only 2547. Similar variations occurred in the number of hospital beds; Auckland had 3099, Manitoto only 33. Secondfy, it would be impractical, as well as financially irresponsible, to provide a wide range of medical services in each board area. Clearly

Hosprtal

resource allocatlon

some hterarchtcal organisation of hospitals IS required, ranging from sophisticated technology. such as open-heart units, being available at only one or two hospitals. through a wide range of speciality facilities being provided at regional centres, to the basic general surgical and medical services at all hospitals. The presence of a hierarchical orgamsation of resources, therefore. requires the transfer of patients both wtthin and between hospital board areas. Financial allocations should not only allow for this increased number of admissrons, but should also make allowance for the fact that specialist services provided for a wider region generally involve highly skilled staff and more expensive treatment. The same argument can also be apphed to the larger boards which also have a teaching and research functton. These boards, because of their specialized equtpment and staff, will normally be costlier to service than non-teaching boards. Finally. the interaction of the public and private sectors must also be considered Private institutions provide approximately one fifth of all the hospital beds m New Zealand. Most of the private hospitals are predominantly urban centred. with the four largest boards all having more than one fifth of their total beds m private institutions [14]. The important pomt IS that the prtvate hospital system partly compensates for disparities in the public system. However, although private hospital operating costs are heavily subsidised by the public sector, access to such facilities IS still restrrcted by personal financial barriers. Due to the above three points, inter-board comparisons in expenditure must be treated with care. The present allocation system

The basic elements of the present system for calculating hospital board maintenance grants were introduced in 1967 when a call for economy from central government led to the mtroduction of fixed maintenance allocations within which the boards were required to operate. Since that year each board has received an amount equtvalent to the previous year’s allocatton plus additions to cover “growth”, “stabilisation” and miscellaneous other factors. More precisely the present allocation “formula” can be stated as follows: A,

=

A,- I

+ G,+G,+S+M \

This year’s allocation

Previous year’s ‘final base’

Various adjustment factors

where A,-this year’s maintenance allocation; ,4,_ t-the previous year’s “final base”. i.e. the total payments made to a board during the year mcluding all supplementary allowances to cover such thmgs as price and wage mcreases ; G,-a “flat” growth allowance payable to all boards calculated as a percentage of A,_1 (after deductton of that year’s new commtsstoning): G,-a “weighted” growth allowance based on the throughput of vartous categories of patient. In 1975-76 the various categorres and their

m New Zealand

253

weightings were: inpatient admtsstons (1.0) outpatient attendances (0.1). new daypattents (1.0). meals on wheels cases (0.05). district nursing attendances (0.05), physiotherapy and occupational therapy home visits (0.05): (The differential weights applied to patient numbers in each category are intended to encourage hospital boards to develop certain services, for example, domiciliary care); S-an amount known as “stabihsation” to compensate for expected increases m salaries and wages. and in the costs of Items such as drugs, dressings, food and power; M-miscellaneous adjustments to account for increases or decreases in expected operating costs due to new commissionings, scheduled drugs, child health clinics or the closure of wards. While this system has its obvious administrative benefits of ease of calculation of the allocations, the end result is a system with a high level of inertia, with one year’s allocation inequalities being compounded by the next. Not surprisingly the pattern of allocation has been remarkably stable over time (the simple correlation between variations in allocations per capita in 1968 and 1976, for example, was 0.844), desptte changes in the size and population composition of the boards. Considerable criticism has been levelled at incremental financial allocation systems of this nature, most recently in the United Kingdom [ 151 and in New South Wales [16]. Both these reports point to the inertia inherent in such systems which, they argue, tend to perpetuate decisions made in relatron to past building programmes thereby funding on the basis of the existing supply of facilities and manpower rather than on any objective measure of relative need. Initial impressions suggest that the influence of need has been negligible and that other factors, particularly the existing supply of beds and other facilities, are more significant in determining the relative magnitude of the allocations. This impression is borne out by the fact that population. the primary determinant of need, was eliminated as a variable in the calculation of the growth factor in 1974 to be replaced a year later by an expanded list of weighted patient throughput measures. Thus in the place of some recognition of relative need (albeit small since the population variable was one of a number used to calculate the growth factor which itself represents a small addition to each boards lump sum allocation), a caseload measure has been introduced which is more a reflection of the relative supply of beds and facilities than of the actual needs of the population being served. Hospital resource allocation: The pattern 1976

The latest allocation to New Zealand’s 29 hospital boards for the financial year ending 31 March 1979. totalled $403 million. of whrch just over half went to the four major teaching boards. Auckland, Welhngton, North Canterbury and Otago. It is evident that considerable variation exists between board areas m terms of their per capita maintenance allocattons:

254

J. Ross

BARNEIT.

DAVID WARD and MICHAEL TATCHELL

Table I. Mamtenance Year endmg 31 March 1968 1975 1976 1977 1978 1979

Grants

grants

GM)

Grants per captta

Range

79 2 223.7 282.1 337.2 401.3 4033

29.9 73.4 90.3 107.5 127.9 128.6

23.9-44.0 58.&l 18.3 71.2-136.3 85.3- 160.4 99.1-187.7 I OO& 189.0

however, there has been a slow movement towards greater per capita equality since 1975 (Table 1). With the exception of the more urbanised Otago Hospital Board. it appears that the smaller boards serving predominantly rural populations (such as Waipawa, Waiapu or Taumaranui) are better off in terms of their per capita allocations than the larger -predominantly urban based boards (such as Auckland, Wellington and North Canterbury). Indeed, the range in grants per capita, in 1976 for example, is quite considerable. Maintenance allocations varied from a low of $71.2 per capita in Vincent to a high of $136.3 in Otago (Fig. 2). With respect to the favourable position of the Otago Hospital Board, the importance of the political system in influencing the allocation mechanism should not be overlooked. Although some allowance has to be made for Otago as a teaching board and for the specialities it provides, in 1976 the Otago Hospital Board had more beds, higher admission rates and a larger maintenance allowance per capita than the other main hospital boards which were also centres of teaching and regional speciality. When the existing

boards

Coefficient variation

of

16.8 ‘0.4 19.3 18.3 17.8 178

allocation system was introduced m 1968 an attempt was made to reduce the maintenance allowance. made to Otago and four other boards, by $1 per capira. In Otago, however. the resultant pressures from local Members of Parliament, Hospital Board Members and other concerned groups gave rise to sufficient political disquiet to cause the decision’s reversal the following year. This type of crisis avoidance decislonmaking has been typical of government policy since World War II and is by no means an optimal resource allocation strategy. EXISTING

RESOURCES

AS A DETERMINANT

OF ALLOCATION

It is c!ear that the level of financial allocations to individual boards is determined largely on the basis of their bed numbers. This is evident in Fig. 3 which relates maintenance allocations and beds per capita in the 29 hospital boards in 1976. There appears to be a reasonably strong positive relationship between the two variables (r = 0.652), the higher the number of beds per capita, the higher a board’s financial alloca-

NELSON

meon=b90

to hospital

72

3

TH

CANTERBURY

ASHaURTON SOUTH

CANTERBURY

PALMERSTON OUTH

NORTH

WELLINGTON

Fig.

DANNEVIRKE

OTAGO

2. Mamtenance allocatlon per capita by hospital board, 1976.

WAI RARAPA

Hospital resource allocation in New Zealand

-

1.55

Donncvwh I = O-652

I 0

I 2

I

I 4

I

I 6 Public

I 8 Beds per 1000

I IQ population

12

14

16

Fig. 3. The relationship between maintenan~ allocations and public beds per capita, 1976. tion (per capita). It also appears from the dispersion of boards that Otago and many of the smaller rural boards are better off in both their bed supplies and allocations than the larger more rapidly growing urban boards. On the grounds of equity alone this distribution would appear to be unjust particularly for the larger urban boards. There are, however, a number of factors that may go some way towards explaining, and possibly justifying. the extent of these inequalities. There are, for example, a considerable number of private hospital beds, particularly in the larger urban boards which compensate somewhat for the relatively low numbers of public beds per capita in those boards. 39ya of the beds in North Canterbury. for example, were in private institutions (mostly in old people’s homes) in 1976. There is also some merit in the view that additional beds are required in the rural hospital boards not only because they are providing a service for a widely scatt:red population facing accessibility problems, but also because they are to some extent acting as a substitute service for the generally scarcer ambulatory medical services (e.g. general practitioners and domiciliary services) in those areas compared with those in the urban boards. A further factor that may be affecting the distribution shown in Fig. 3 is the flow of travellers (that is, persons who are treated in boards other than the one in which they normally live) between hospital boards which. for some. can amount to quite a,sizeable proportion of their total inpatient numbers. The net inflow of traveilers (travellers to less travellers fion~ each board) to the Otago EIospital Board, for sS.!,,I 3,--L

example, represented 16% of the total inpatients being treated there on census day 1976 [17]. Clearly, therefore, the effective catchment population of the Otago Board is considerably larger than that quoted in the official statistics (129,187 in 1976). Conversely the catchment populations of those boards which have a net our~ow of travellers would be overstated in the official statistics. In the following analyses adjustments to the quoted population figures to account for travellers between boards have been made by using the following formula: N,i = N& & Nri where

N “,-Adjusted population of hospital board i N .,-Original base population of hospital board i N r,--Population from (to) which net traveliers drawn (dispersed) for hospital board i S-Net travellers, hospital board i, on census day pi-Inpatient numbers, hospital board i, on census day Pi-Inpatient numbers, hospital board i, for whole year r-Inpatient admission rate for whole of New Zealand. The direction of the sign in the equation is determined by whether there was a net inflow (or outflow)

26

J. Ross

Fig. 4. The relationship

BARXETT.

between

DAVID

maintenance

WARD

and

allocations

travellers,

than

m

665-99.9

m

SIOO-114

and

TAXH~LL

public

beds

prr

capita.

adJusting

for

1976.

NELSON Less

MICHAEL

%

$85

NORTHLAND

s II5

ano

9 over WEST

COAST

BAY

TH

SOUTH

CANTERBURY

CANTERBURY

PALMERSTON SOUTH

NORTH

DANNEVIRKE

OTACO

SOUTHLAND WELLINGTON

Fig. 5. Maintenance

OF PLENTY

allocation

prr cupita

by hospital

board.

adjusting

WAIRARAPA

for travellers.

1976

Hospital

resource

allocation

in New Zealand

251

THE RELATIONSHIP BETWEEN THE HOSPITALISATION RATE AND THE (Populof~on figures hove been odjusled to OCCOU~~ for net trovcllerr)

I

0

I

I

2

4

I

8

IO

Public Beds (Non-Psychioiric)

Fig. 6. The relationship

between

public hospital

admission

travellers.

of travellers to (or from) each hospital board. Examination of the 1976 census figures reveals a net outflow of travellers from twenty of the country’s hospital boards and a net inflow to eight of the remaining boards which are, for the most part. the larger urban boards. Having adjusted the population of each hospital board to account for the net flow of travellers, amended per capita figures for bed numbers and maintenance allocations can be derived--these are depicted in Figs 4 and 5. Two features of Fig. 4 .are immediately apparent when compared with Fig. 3: the relationship is considerably stronger (r = 0.805) and the extent of the scatter is much reduced. Certain boards with relatively high proportionate numbers of travellers (e.g. Otago + 15.8% and Vincent -28.9%) have moved in closer to the trend line from their original quite atypical positions. In Otago’s case adjustment for travellers changes what appears to be a privileged position into one more in line with boards of similar size and nature. In general Fig. 4 illustrates that allowance for travellers reinforces the premise that maintenance allocations appear to be closely related to bed availability in the regions. RESOURCE

ALLOCATION HOSPITAL

AND THE CARE

NEED

FOR

Two concepts can be considered as possible criteria for gauging the efficiency of main:snance grant alloca-

I

I

I

1

6

per 1000

I2

BED RATIO.1976

I4

I6

population

rates and public beds per capita. adjusting

for

1976.

tions; meeting demand and meeting need, for health care. The demand for hospital care is revealed by criteria such as hospital admission rates, waiting lists and, to a lesser extent, the number and use of private hospitals. However, demand for public health care will never be satisfied as there is no given quantum of ill health requiring hospital treatment. As major conditions are treated, potential patients become more aware and seek treatment for less serious ailments. Also, since maintenance allowances are partly determined by the level of services provided, there is a financial incentive for hospitals to treat such patients. The major problem in analysing demand is that it is not independent of supply. This is evident in Fig. 6, which shows that in 1976, for example, the hospitalisation rate was quite highly related to the availability of public beds per capita. This is not surprising since many studies, ranging from surgical rates [IS] to the utilisation of general practitioner services [19] show that rates of utilisation are a direct function of the availability of medical resources. Even in wealthy over-supplied areas there may be a shortage of the supply of medical services and hospital beds with respect to the demand for those services. An example of this is the Otago Hospital Board; despite having considerably more public beds per capita and a higher maintenance allocation per bed and per capita than the other major hospital boards. waiting lists for admission to hospital still exist. Given the above comments, it is evident that hospital-specific data often

J. Ross BARXETT. DAVID WARD

1%

simply indicate the demand for services. which may not equate with actual needs. In contrast to demand. the level of need for hospital care is a more complex concept. While the population of an area is an obvious base for a measure of need. it is by no means the only factor. Health status and demographic components must also be taken into account. In this study two measures are included as proxies for the need for medical services: infant mortality and a measure of demographic need indicating the expected number of hospital discharges per capita, based upon national rates, for each hospital board. Infant mortality was chosen as a proxy for the general “healthiness” of an area, particularly since it is a highly sensitive indicator, even in Western societies, of the general social and environmental conditions which are the major determinants of health status [20]. To overcome problems of low birth rates in the smaller boards, the infant mortality rate was calculated using data covering a three year period (1972-74). Mortality statistics were extracted from the New Zealand Health Statistics Reports, Mortality and Demographic Data for 1972, 1973, 1974 and the Iive birth data from New Zealand Vital Statistics for the same years [21]. The measure of demographic need is an age, sex and race specific population measure based on national discharge statistics [22]. It was developed by combining the demographic structure of each board’s population with the age, race and sex discharge rates mentioned below, in the following manner: NEED,

= f

(n,jDj) + (Ma - v,N,)L),

j=i +

(6%

-

.VSN,PS)INO

NEED,-demographic need for hospital care per cupitn in area n n,,-number of people in age group j in area a D,-the rate of discharge for age group j M,--the number of Maoris in area a Y,-the proportion of Maoris in New Zealand’s total population (0.082) N,---the total population of area a II,---the marginal Maori discharge factor ( + 0.026) &--the number of males in area a Y,---proportion of mates in New Zealand’s total population (0.49) D,---the marginal male discharge factor ( + 0.004). The need variable, therefore, incorporates three components: (1) An aye specific discharge raw. The age structure of a board’s nouulation is multiplied by the age . . specific national discharge rate. In ‘1972-73 the rates for the particular age groups used in this analysis were: o-4 : II5 per 1000 : 53 per loo0 5-14 : 74 per lOGO t5-I9 2&29 : 77 per 1000 : 67 per 1000 30-39 : 87 per 1000 40-59 60+ : 154 per loo0 (2) A race specific rut(v. Maoris in 1972 were discharged at a rate of 116 per 1000, the Non Maori rate

and

MICHAEL TATCHELL

being 90 per 1000. Any area that has more than the average number of Maoris (8.2”,, of the total population) would therefore have greater need for hospital care. The age specific need factor was therefore increased (decreased) by 26 for ever? 1000 Maoris over (under) the expected X2”,, of the population. (3) .-t ses specijc rc~tr. Males have higher admission rates than females. by 1 per 1000. Correspondingly the difference between the actual number of males present in an area and the expected number (0.49 of the total population) was multiplied by 0.004 and added (if actual is greater than expected) to the need variable. This measure of need, in terms of expected discharge levels. is not however. intended to be an indication of the required or even desired level of discharges for each board. It is merely a demographic standard based on national rates. rather than the highly supply dependent statistics for individual boards which do not present an acceptable indication of variation in area1 need. Age specific information on admissions on a national scale would ideally have been used so a comparison between the need for medical services, defined in terms of an area’s demographic characteristics, could be directly compared with actual admission rates. However, due to the incompatibility of the age breakdown of hospital admissions and the 1976 Population Census. the discharge data had to be used. This was not thought to be a serious problem since the rates for admissions and discharges were virtually identical, given that only 4.3”,, of the latter were due to mortality in 1974. Inter-board variations in demographic need are illustrated in Fig. 7. Immediately apparent is that expected discharge rates are highest in Northland and parts of the East Coast and central North Island. often economically depressed areas with high concentrations of Maoris. high levels of outmigration and, in some cases, high rates of infant mortality [23]. In the South Island. the index is highest in the Waitaki and West Coast Boards, reflecting the higher proportion of elderly in these parts of the country. Need, in terms of the standardised need ratio and infant mortality rates. plays httle role in hospital financial allocations. Both need measures are only slightly correlated with both maintenance grants (0.173 and 0.245 respectively) and beds per capita (0.046 and 0.2201, and there are also small, but not significant. positive correlations between both need variables and admissions per rupira. These findings imply that access to hospital care is largely determined by variables other than need when defined on the basis of demographic criteria. It is, however. gratifying to find that the relationships are at least not negative. A comparison of the distribution of maintenance grants per capitu (adjusted for travellers) and the level of need in each hospital board (Figs 5 and 7) gives some indication of the relative equity of the allocation system. Ignoring, for the moment. the special position of the four teaching boards, it is evident that some areas are overcompensated while others are undercompensated in terms of their grant allocations. Some boards. such as the Bay of Plenty, Waiapu and Cook. have high levels of need which pardy justifies their large allocatrons. Others, however. such as Wanganui

Hospital resource allocation in New Zealand

Fig. 7. Demographic need for hospitafcare.

and Thames. have low allocations which contrast with their high levels of need. In some boards (including South Otago. Ashburton and Waipawa) favoured allocations occur beside low levels of need. These trends are likely to continue in the future as population growth in the larger boards is likely to lead to a further decline in their position in comparison to the smaller rural boards with more favourable ratios of beds per capita (see Fig. 8). The implications of this trend in the public sector will mean that access to hospital care is likely to diminish particularly in Auckland, North Canterbury and Wellington, the areas with the least hospital resources per capita and the greatest expectation of further deprivation. In resource-poor areas the pressing need for facilities may cause a higher throughput (and perhaps premature discharge) of patients. a trend which was already in evidence in 1976 (Fig. 9). These were also the boards which had the longest waiting lists per capita. On the other hand. in areas well endowed with beds

1976

per capita, lower occupancy rates are likely to occur, especially m areas of declining population (in 1976 the ten boards with the lowest levels of occupancy were all rural boards) together with increasing lengths of hospitalisation since an empty bed may cause a reduction in the maintenance allocation the following year (see Fig. 9). Special reference must also be made to the four main boards (Auckland, Wellington, North Canterbury and Otago) since they account for over half the total maintenance grant to all hospitals. All four boards provide regional specialities and serve a teaching function, although only Auckland and Otago have pre-clinical medical schools. Although inter-board comparisons must be made with caution, some indication of the maldistribution problem is evident in Table 2. The pattern is fairly clear. Despite the marginally greater need per capita, the Otago Board still clearly receives more resources, in terms of its allocation of beds and maintenance allowances, than Auckland and the other boards. This is rather critical, par-

238

Fig. 8. Relationships

between public

beds

259

per capita and input and output variables (simple correlation coefficients).

J. Ross BARNETT.DAVID WARD and MICHAEL TATCHELL

260

.Taumarunui

E 00 E 2 :: =

16-

14-

I2 -.

IO-

. Dannevlrke Waqawa . I

0

I 2

I

I

I

I

4 Public

I

I

6

I

IO

8

beds per 1000

Board Auckland Wellington North Canterbury Otago

boards’

Beds 3.9’ 5. I 4.4 7.2

3.w 4.9 4.2 6.0

I

I

I

I4

12

I

I

I6

beds prr capita, adjusting

for travellers.

1976.

the explanation likely to lie in the costs of clinical teaching since this function is handled by all four boards (with similar numbers of students), with the universities and hospital boards sharing the costs. Rather the inequalities appear to be the result of past political decisions maintaining the high concentration of beds and other resources in the Otago Board. This is evident in the fact that any reduction of financial grants causing redundancies and closures, even in an over-supplied area, causes more political turmoil than the support created from an equivalent increase in

titularly in the case of Auckland, where the number of pre-clinical students has rapidly increased. Furthermore, the population served by the Auckland Board (including the population from which travellers were derived) also increased rapidly between 1971-76, while that served by the Otago Hospital Board actually declined. These inequalities cannot be explained on the basis of the extra costs associated with teaching pre-clinical students in the medical schools since these are met by the universities and not by the hospital boards. Nor is

2. Main

I

population

Fig. 9. The relationship between throughput per bed and

Table

I

data (per capifa) 1976

Maintenance grants

Admissions

82.5 87.6 71.2 136.3

90.9 118.0 102.6 159.5

* Unadjustea for travellers. t Adjusted for travellers. $ Expected discharge rates per 1000 population.

80.7 84.5 73.8 112.5

88.8 111.4 98.1 131.7

Demographic need$ 86. I 84.9 85.7 86.9

Hospital

resource

allocation

allocation in a deprived area. This helps to add inertia to the system, which when operating under a resource constraint, ensures the continuation of allocation inequalities. CONCLUSION The crux of the findings produced by this research paper is that the present hospital resource allocation system in New Zealand has not created the condition where equity of access to hospital services is available to individuals of equal need. It is, however, reassuring to find that need for health care. and hospital resource allocations are not negatively related. Considerable conceptual. methodological and data associated problems exist within the research framework. The two requiring most urgent attention are the divergence between need and demand for hospital services, and the effect of different sized hospitals providing different treatment services at varying costs per patient. All allocation problems have two basic components; the objective function and the quantity of available resources. Some kind of medical social welfare function must be formulated to establish priorities to determine what type of health facilities should be provided and for whom. Does an open-heart unit increase aggregate health status more than a financially equivalent community care programme? These are the types of questions that must be asked .before objectives are finalized. The resources available are not infinte; public health expenditure already accounts for 6:< of GNP. Current trends, exemplified in the Jarvis Amendment in California, for example, suggest that greater public involvement may be resisted politically. as financing by taxation becomes overburdensome. The entire problem must always be considered within its overall political framework and the New Zealand experience to date has been one where the political pressures reinforce the inertia created by an incrementalist allocation system. Before any significant policy advances can be made in this area, considerably more research is required, perhaps along the lines of that currently taking place in Britain with respect to the problems of defining and implementing equity-based allocations [24]. In New Zealand, ad hoc decision-making appears to have created problems of access to hospital resources and there can be no guarantee that without an improved data base. decisions will be any better in the future. The inequalities that have arisen and been perpetuated by this system are unlikely to be removed easily. due to the permanence of hospitals and the

nature

of the system

itself.

REFERENCES See

for example. Shannon G. and Dever G. E. A. HeaIm Care De/it-erJ.: Spark/ Perspecrices. McGrawHill. New York. 1974. New Zealand Department of Health. Health Espeadirure iv !L’e\
in New Zealand

Xl

4. Rickard J. H. Tlrc Allacuriov a/’ Revenue Expenditure Betweet Areas in the Reorgarlised Healrh Service. Health Services Evaluation Group, Oxford. 1974. 5 Allison G. and Halnerin M. H. Bureaucruric Poliricx A Paradigm und Some Policy Iuylicuriom. Brookings Institution, Washington. DC, 1972. 6. Lineberry R. L. Equalit, und Urhm Policy Sage. Beverly Hills. 1977. 7. Johnston R. J. Environment, elections and expenditure: Analyses of where governments spend. Reg. Srud. II, 3X3. 1977; and Political spending in the United States: Analyses of political influences on the allocation of Federal money to local governments. Enuir. Plum IO. 691, 1978. J. J. Structural constraints on community 8. Friedman action: the case of infant mortality rates. Sot. Prohl. 21. 230. 1973. constraints 9. Rushing W. A. Public policy, community and the distribution of medical resources. Sot. Prohl. 19. 21. 1971. IO. Noyce J., Snaith A. H. and Trickey A. J. Regional variations in the allocation of financial resources to the community health services. Lnncer I, 554. 1974. 1 I. Department of Health and Social Security. Sharing Resources far Health irk England. Report of the Resource Allocation Working Party, HMSO, London, 1976. of 12. Mant A. Where does the money go? An evaluation the Australian community health program. Comm. Hlrh Stud. I, 57, 1978. a comment. 13. Barnett J. R. Health resource allocation: Cotntn. Hlrh Stud. 2, 32, 1978. 14. New Zealand Department of Health. Hospital Sratisrics and Hospital Managentenr Data 1967-1975. Wellineton. 1976. Br. Med. J. 15. Kikin R. The politics of redistribution. 893. 1976: Bennett A. E. and Holland W. W. Rational planning or muddling through? Resource allocation in the National Health Service. Lafmr I, 464. 1977: and Knox E. G. Principles of allocation of health care resources. J. Epidem. Conuuun. H/r/t 32, 3, 1978. of New South Wales. Formula for I 6. Health Commission Regional Allocation af Maintenance Funds. Discussion Paper, 1977. 17. National figures for travellers are only collected every five years on census day and may not, therefore, be an accurate reflection of the pattern in a full year. Data on travellers is contained in: New Zealand Department of Health. Census of Public. Private and Marerniry Hqspital Patienrs 1971. National Health Statistics Centre, Wellington, 1973 (and 1978). in the incidence of surgery. N. 18. Lewis C. F. Variations Engl. J. Med. 281, 880. 1969; and Roemer M. Bed supply and hospital utilisation. Hospirals 35, 36, 1961. 19. Malcolm L. A., Higgins C. S. and Barnett J. R. The availability. distribution and utilisation of general practitioners in New Zealand. N. Z. Med. J. (forthcoming). 20. For example. see: Pyle G. F. and Rees P. H. Modelling patterns of death and disease in Chicago. Econ. Geog. 47, 475. 1971. of Statistics. New Zealand Viral Starisrics. 21. Department Wellington. 1972, 1973. 1974. 22. The data on admission and discharge rates were obtained from: New Zealand Department of Health. New Zealand Healrh Srarisrics Reporr: Morraliry and Demographic Dam. 1974. National Health Statistics Centre. Wellington. 1974. 23. Aitken G. V. and Neville W. Spatial variations in New Zealand’s infant mortality rate 197Gl972. N. Z. Geog. 34. 41. 1978. 24. Knox E. G. op. cir.