Introduction

This information note provides a build-up of HA's budget for 1998-99 and describes HA's budgetary allocation process.

Build-up of the 1998-99 Budget

2. The Government's recurrent subvention to HA takes the form of a one-line-vote. Under the present funding arrangement, HA has flexibility to vire funds within this vote for various purposes. The recurrent grant to HA in 1998-99 is $25,082 million, representing an increase of 5.3% over the revised estimate for 1997-98 at $23,815 million. A breakdown of the 1998-99 subvention by broad expenditure category is at Annex A.

Initiatives for 1998-99

3. In 1998-99, HA will implement the following major new initiatives -

1. open an extra 754 hospital beds (a breakdown is at Annex B);
   
   
2. open 40 geriatric day places;
   
   
3. establish an additional community geriatric assessment team and an additional psychogeriatric team;
   
   
4. commence operation of the Institute of Nephrology and Urology at Princess Margaret Hospital;
   
   
5. carry out an additional 600 cataract surgery operations for elderly patients; and
   
   
6. provide cochlear implants for 30 profoundly deaf patients.
   
   

HA's budgetary allocation process for 1998-99

4. Against a recurrent budget of $25,082 million, HA's allocation of resources to hospitals is inextricably linked to the annual planning process. Resource inputs are determined having regard to service outputs, outcomes, key result areas, targets and quality standards.

5. During the annual planning process, the HA Board and its Committees are involved and their comments are sought at every key stage of the process. For 1998-99, allocation to hospitals is made on the basis of the following considerations -

1. Baseline Allocation
   
   The baseline allocation is derived from the 1997-98 budget, taking into account the full year effect of the new services introduced in 1997-98, changes in service utilization and adjustment for annual pay award and inflation. When baseline allocations are calculated, each hospital agrees with HA Head Office on the hospital's annual plan, covering the level and scope of its services as well as its performance targets.
   
   
2. Productivity Gains Initiatives
   
   HA achieves productivity gains by improving resource management, re-engineering work processes, streamlining procedures and eliminating non-value added work. The savings achieved are then re-allocated to implement new initiatives or service improvements in the context of annual planning. The notional savings are estimated to be about $440 million in 1997 98, representing about 2% of the Authority's budget.
   
   For 1998-99, HA has decided to allow individual medical institutions more flexibility in deciding the approach and percentage of productivity gains. The emphasis is to ensure clinical outcome and service improvement rather than quantification of cost savings. Hospitals will be asked to describe their approach on how to use their productivity gains.
   
   
3. Delinking Specialty Cost and Patient Related Groups (PRGs) from Resource Allocation
   
   HA considers that the information obtained from the unit cost of providing specialist services (specialty/PRGs costing) should be used as a reference rather than a simplistic mathematical formula in resource allocation for the 11 acute hospitals. Such information will also be used as a planning tool for hospital resource management.
   
   
4. Resource Redistribution
   
   Medical institutions other than the 11 acute hospitals may be given additional resources having regard to the merits of programmes as presented in the cluster plans and individual hospital plans.
   
   
5. Allocation to New Hospitals
   
   For newly completed hospitals e.g. Alice Ho Miu Ling Nethersole Hospital, Tai Po Hospital and North District Hospital, consideration is given to their special needs in the development phase apart from benchmark unit costs. These hospitals?budgets are determined on the basis of their service and development needs in the context of the cluster requirements.
   
   

6. A breakdown of HA's allocation to hospitals in 1998/99 is at Annex C.

Summary

7. In summary, the allocation of budgets to hospitals includes the baseline allocation which is based on the previous year's budget, taking into account the full year effect of the services introduced and inflationary adjustments. Further adjustments include those for new initiatives, new beds and projected activities and resource redistribution as described in paragraphs 3 to 5.



Hospital Authority
March 1998