There is renewed criticism over hospital funding as once again budget overruns provoke threats of cutbacks, writes Theresa Judge.
Minister for Health Mary Harney's statement last week that she would be discussing as "a matter of urgency" budget overruns with HSE chief executive Brendan Drumm has prompted renewed criticism of the system used for funding our major hospitals and heightened concerns over planned cutbacks.
Senior staff from various Dublin hospitals described the funding system as "antiquated", "haphazard", a "disincentive to treat more patients" and "a form of rationing of services".
From leaked internal HSE documents sent to hospital managers and service providers over the past two months it is clear job cuts, with consequent reductions in services, are being ordered.
It is believed that in the hospital sector alone the budget overruns are in excess of €100 million.
Hospitals argue that the budgets they are given are inadequate and that, as a result, deficits are inevitable. As a result, warnings of budget overruns are an annual event and hospitals become drawn into protracted discussions with the HSE in an attempt to renegotiate finances and obtain more money.
Hospitals generally choose not to comment on this issue publicly.
"Nobody wants to rock the boat when they have to go back to the HSE - they prefer to renegotiate, to go back and back until they get what they want," says one source.
It is argued by many that a lot of time and energy is wasted on these renegotiations and that a better system of financial planning is needed.
Dr Pat Doherty, a member of the board of management of Our Lady's Hospital for Sick Children in Crumlin, says a basic problem is that the budgeting is done on an incremental basis - each year a hospital receives what it got the previous year plus a percentage.
The extra money is meant to account for inflation but, he says, it is never sufficient to cover medical inflation - which is twice as high as general inflation at 8 per cent - and is insufficient to account for rising pay costs as staff members move up salary scales.
He, and many others, believe there is a need for a fundamental review of the way hospitals are funded, a system that would allow money to "follow the patient". Such a system would be activity driven unlike the current one.
Doherty believes the HSE would like to have a more sophisticated system that would have a mechanism to take into account the work being done in a hospital.
Donal Duffy, assistant general secretary of the Irish Hospital Consultants' Association, agrees, saying some effort must be made to predict a hospital's workload, taking into account population increases and changing patient profiles, rather than "giving hospitals a lump of money and saying what can you do with it".
Duffy says his main concern now is that there will be cutbacks in frontline staff given that the HSE has a legal responsibility to balance its books.
Fears of cutbacks are well founded. A letter from the HSE director of human resources, Martin McDonald, sent to hospitals and voluntary organisations in March but only made public in May sought 1,000 job losses and mentioned specific numbers in various hospitals.
Letters between the HSE and Our Lady's Hospital for Sick Children in Crumlin were also made public showing that the hospital was being ordered to cut spending as it was facing a year-end deficit of €16 million. It was told it had more than 100 employees above its limit allowed.
The hospital's chief executive, Michael Lyons, in response pointed out that to live within its budget would mean closing wards, theatres and intensive care unit beds, leading to cancellation of planned surgery and waiting lists for children with cancer. He argued that when new service developments and inflation were taken into account, the allocation for 2007 was an effective decrease in funding.
Pat Doherty says that Crumlin has offered to act as a pilot for a new system of financing hospitals because the "base allocation" is often incorrect.
He points out that because 80 per cent of costs are for staff, half way through the year hospitals have very few ways of cutting costs other than by cutting staff, and this inevitably leads to fewer patients being treated.
In trying to deal with overruns, hospitals are faced with "an ethical and moral dilemma", one source says, a choice between curtailing services and leaving people untreated or going over budget.
A source from one of Dublin's largest teaching hospitals accepts that the budgeting system can act as a disincentive to hospitals to do more work.
Towards the end of the year they will not be rewarded by the HSE for increasing activity but rather curtailing it to keep within budget.
"It's like a type of rationing because you can't treat everybody," he says.
Individual hospitals give many examples of why budgets are inadequate - new drugs come on the market which were not expected when the allocation was being made, the cost of running new services are not allowed for sufficiently and extra pay costs - including the salary increase awarded to nurses after the recent dispute - are not included.
Dave Hughes, deputy general secretary of the Irish Nurses Organisation, stresses that there is no scope for cutbacks.
"Hospitals are running at 100 per cent capacity rather than the 85 per cent recommended by the OECD - where is the sense of punishing hospitals that are running at 100 per cent capacity?" he asks.
"The problem is the budgets are inadequate - there is very little happening in our hospitals that doesn't need to happen," he says.
Hughes says that whatever efficiencies can be made should be implemented but believes that any cutbacks later in the year will inevitably lead to problems in A&E departments.
A HSE spokesman says he cannot give any official figures for projected overruns and accepts that this happens every year.
"The system usually rebalances itself," he says, adding that "the priority for the HSE is to continue to provide frontline services". He says there is also contingency funding in place to allow for overruns. However, a practice which has occurred in the past of taking money from the capital budget to pay for deficits in current spending is also fraught with danger.
UCD economist Prof Ray Kinsella says he has serious concerns that long-term depreciation of our hospitals is not being included in the HSE's accounting system. In the private sector, money is taken from budgets each year to allow for depreciation but this does not happen with the health budget. "This is a serious problem waiting in the long grass," he says.
Mary Harney also acknowledged last week that capital spending this year was behind schedule.
Last year, the HSE underspent its capital budget by almost €98 million and had to return monies to the Exchequer.