Improving the allocation of health resources in England How to decide who gets what

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While the principles behind resource allocation in the English NHS have changed little since the mid-1970s, the NHS has changed considerably. This paper argues that the resource allocation system needs to change accordingly.

The paper explores how the health resource allocation process and the formula on which it is based have changed over time, and how it will work from April 2013. It suggests some improvements that can be made to support a more coherent health and care system.

Key findings

  • The government’s health and social care reforms risk creating a more complex and fragmented resource allocation process.
  • The current system lacks transparency and the formula is so complex that most local citizens, politicians and clinicians find it difficult to interpret. Moreover, the research that informs decisions is only made available to the public long after those decisions have been made.
  • Concerns remain that the health allocation formula does not distinguish sufficiently between need and demand for care.
  • The politics of the pace of change policy have undermined much-needed decisions on reconfiguration and other service improvements. 
  • Some very different approaches to resource allocation may be needed as the focus of commissioning shifts to outcomes, as decision-making and accountability are increasingly devolved to local areas, as more integrated delivery systems develop, and as relationships between commissioners and providers undergo considerable change.

Policy implications

The Department of Health needs to address the risks posed by changes to the resource allocation process. The fundamental review of resource allocation announced by the NHS Commissioning Board (now NHS England) must be given sufficient scope and resources to be just that. It must address some critical questions: is a formula-based approach to health resource allocation in England still appropriate? And should resource allocation be a neutral way of allocating funds ‘fairly’ to the NHS and local government, or a policy tool to deliver better patient outcomes and system-wide change? The review must grasp this opportunity for more radical, longer-term thinking about how to make the resource allocation process clearer, more transparent, and fit for purpose.



Comment date
20 April 2013
A very wonderful article. Your post affects a lot of urgent issues in our society. We can not be indifferent to these challenges. Your post gives a lot of great information and inspiration. Keep it up.

mervyn stone

Retired thinker,
Comment date
14 April 2013
I welcome this ‘winds of change’ review. I am one of four academics who have argued for years against the AREA and CARAN funding formulas―the others are Sheena Asthana, Alex Gibson and my UCL colleague Jane Galbraith. For us, formulae are not a ‘forgotten element of health policy’ but―in their present form―monsters created by statistical incompetence and
econometric hubris. The new monster on the block, from the Nuffield Trust, has some redeeming features. It has recently been rejected for the wrong reasons by Sir David Nicholson―so can we be as hopeful as the two King’s Fund authors that the NHS chief executive is the herald of the new future?
Some nerdish but necessary details!
i) It is misleading, even untrue, to say that the ‘technical development’ of the formulas has engaged ‘the most capable statisticians’. In the past, DH and ACRA have colluded to make sure of that!
ii) I am flattered that Figure 2 updates the graphical technique that the Health Select Committee found helpful in 2006, but puzzled that the updater (whoever it was) did not break the big ‘acute need’ jump into two―into steps for ‘age profile’ and ‘deprivation’.
iii) An analysis of the breakdown for all PCTs would have informed the rather opaque sentence on page 10 that compares these two factors of the formula―about which a lot of hot air has been expended.
iv) Figure 8 is a sceptical eye-opener, but the risk is that some will claim it as evidence that the formula must be right―rather than that the same subjective judgements have been used in both HCHS and its complement.


Comment date
12 April 2013
"The government’s health and social care reforms risk creating a more complex and fragmented resource allocation process."

This was not a "risk", it was a certainty.

Michael Crawford

Comment date
11 April 2013
“A formula-based approach has great advantages. As long as it is set independently, it is objective and fair. The technical development of the formulas over time has also been a major intellectual achievement, engaging some of the most capable statisticians, econometricians and health service practitioners in ACRA and its predecessors, back to RAWP.”
This is only true if the use of resources follows that which the formula intended. Essentially this means that access to services must be similar throughout the country and not affected by social or geographical considerations.

“…the previous Labour government should have taken a far more radical approach to shifting resources between parts of England that were over- or under-funded…” Where are the over-funded areas? I strongly suggest that the correct interpretation of figure 6 is that the London SHA economy, containing as it does a high proportion of well-educated and articulate people who live reasonably close to NHS facilities and in which demand for services is only attenuated by the less-favoured patients who are less able to compete for resources at the pinch-points of demand management and perhaps by the relatively high use of privately-financed services represents most closely the level of service that should be funded.

If inequalities of access are addressed, the people of the cities of Derby Leicester and Nottingham and their environs will appropriately consume something just over 10% more healthcare funding than they currently do. That point emphasises the fact that correction i=of inequalities will only, in the worst case scenario which is East Midlands, involve a modest increase in funding.

Dr MAtthew Shaw

Brookside Group Practice
Comment date
11 April 2013
Funding formluae for the NHS and social care are a national scandal bordering on a conspiracy. The silence by the media reflects their laziness [difficult subject to grasp] and by the intellectual elite betrays their left leaning bias. Those who pay for the health service are denied access to it whilst health funding is diverted as a form of redistribution. The whole thing stinks. Well done for flagging it.

David Hill

GP commissioner,
East Surrey CCG
Comment date
11 April 2013
We have certainly found that weighting on the basis of historical spend has severely limited our ability to introduce new pathways of care. Our GPs have historically done much secondary care work in primary care eg diabetic care. We have a low referral rate and good quality of care but are penalised for our historically low spend.

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