The Hospital Authority will implement a new internal resource allocation system in public hospitals in the next financial year.

Chief Executive Shane Solomon said today the new system, Pay for Performance, will be transparent and allocate resources fairly on the basis of the number and complexity of patients treated. He said a new system is needed to modernise the authority's internal budget allocation system to enhance transparency and ensure fairness.

"At the same time it will provide incentive for efficiency and performance by encouraging shorter length of stay and ambulatory activities which reflect efficiency."

He proposed casemix funding be adopted in 2009-10 but will only apply to acute inpatient services, accounting for about 53% of the authority's total expenditure. Casemix-based funding is the key funding model used in Australian healthcare services for reimbursement of the cost of patient care.

Benchmarking will be built in to allow hospitals and departments to learn from each other, analyse why there are differences in performance and inspire better services.

Public-private partnership

Mr Solomon said the new mechanism will also facilitate the introduction of public-private partnership programmes.

"With a 'price' for each type of inpatient, measured by international Diagnosis Related Groups, we can decide whether it is better to buy some services from the private sector, and what price it should pay to ease our workload or a surge in demand," he said.

Specific funding will be allocated to programmes to improve service quality, such as training more nurses, hospital accreditation, two-dimensional bar-coding and more modern drugs.

The new funding model has three key elements: funding for growth in targeted activities; funding for quality improvement programmes; and funding for technology advancement, service improvement, and workforce supply. The growth in targeted activities will cover acute inpatient, non-acute inpatient as well as ambulatory and community care.

The extra activity will go to high priority areas based on the head office's service planning projections, and on the advice of the Clinical Co-ordinating Committees. Examples include opening new services in areas with undersupply like the New Territories West and Kowloon East, growth in demand from life threatening conditions such as cancer, and areas where there are major service backlogs including Special Outpatient Patient Clinic first attendances and cataract surgery.

To ensure smooth implementation, internal and external communication programmes are being conducted for stakeholders.

Mr Solomon reassured staff the Pay for Performance system will be introduced in phases to avoid major disruptions and allow more study and refinement. He also assured patients the quality of healthcare service will not be sacrificed or compromised to save costs, and hospitals will be awarded for wise use of resources.