Priority Setting within Regional Funding Envelopes: The Use of Program Budgeting and Marginal Analysis

by Cam Donaldson | Nov 01, 2001

Key Implications for Decision Makers

  • Because of limited resources, decision makers must examine how best to allocate health system resources.
  • Health region personnel do not necessarily have the skills to set priorities and make choices about how best to allocate resources. Managers and clinicians want an evidence-based process that is explicit, formal, and systematic.
  • The program budgeting and marginal analysis (PBMA) framework is pragmatic and evidence-based, providing options for efficient service delivery and for directing resources to obtain maximum benefit.
  • The framework also helps to ensure accountability and transparency.
  • The framework has been successfully used in three Alberta health regions to set priorities and make resource allocation decisions. It should continue to be used in Alberta.
  • Managers in health organizations, within and external to Canada, should consider using the same framework.
  • There are organizational and managerial barriers to adopting the framework. When conducting framework exercises and adopting the framework, several factors are important for success, including:
    • stability (low staff turnover), especially in strategic planning divisions
    • strong leadership
    • a high level champion for the framework
    • training in relevant economic principles
    • a stronger relationship between physicians and health regions

Executive Summary

Context

Because of limited resources in health services, decision makers must make choices among competing claims on those resources. It has only recently been documented that health care managers do not necessarily have adequate skills to set priorities. Program budgeting and marginal analysis (PBMA) is an economic framework for priority setting that has been used in health authorities internationally since the mid-1970s. Despite this long history of use, there has been limited formal evaluation of the framework, either at the individual case study level or more broadly across studies internationally. This study provides such an evaluation.

Implications

Key decision-makers interviewed from Alberta reported that, generally speaking, resources are allocated on a historical basis without using a formal priority-setting process. It is apparent that health region personnel do not necessarily have the skills to set priorities and make choices about allocating scarce resources. They want an evidence-based process that is explicit, formal, and systematic.

The PBMA framework could feasibly be implemented in health regions in Alberta and was viewed favorably by managers and clinicians who participated in the case studies. It is a pragmatic framework that gives decision makers ways to examine options for service delivery, directing resources for maximum benefit. The framework aids in helping managers identify more efficient ways to deliver services, and can help to make resource allocation fair. It also helps to ensure accountability and transparency. Numerous lessons were learned about the methodology of conducting priority setting exercises and successfully adopting the framework, including the importance of having stability (low staff turnover), strong leadership, and a high level champion for the framework.

Results

The results of this research project are summarized in the following table:

Summary of project results


Phase


Key Findings


Authors Survey
  • PBMA used at least 78 times in 59 health regions
  • in 59% of cases, approach was viewed as having a positive impact
  • PBMA continues to be used in at least 52% of the health regions
  • barriers to success include personnel changes and lack of champions

Key Decision Makers Survey
  • clear process of setting priorities in 3 Alberta health regions does not exist
  • allocation of resources is based on historical trends
  • 22% of managers believe that the priority setting process works well
  • key concerns include lack of transparency of process, political influence, lack of meaningful physician involvement
  • 92% of respondents believe that PBMA would be useful in their region

Case Studies
  • 7 PBMA case studies at micro and meso levels in three health regions were conducted and evaluated against a diverse set of outputs
  • challenges included, in some cases, difficulty adopting the framework and, in others, difficulty in following through on exercise recommendations

Follow-up Survey
  • as a whole, managers and clinicians involved in PBMA case studies were positive about their experience and suggested future use of the framework
  • respondents highlighted numerous important outcomes on which a PBMA exercise should be judged: the effect on patient benefit, evaluation of historical services, identification of re-design options, resource re-allocation

An empirical model of the priority-setting process in health organizations was derived from this project. This model describes the prerequisites for conducting a framework exercise, as well as lists possible results. It also outlines key barriers to acceptance and use of the framework, and provides recommendations to help overcome those barriers. This model should be empirically validated in other jurisdictions and could be used as a tool for evaluating future PBMA framework case studies.

Approach

First, an exhaustive literature review on the framework was done. This was also used to identify principal authors of papers, who provided details on the specific PBMA exercise in question, including the short- and long-term impact in the specified health region. Key decision makers in three health regions in Southern Alberta were then identified and interviewed. They were asked to describe the current process of setting priorities and allocating resources, to provide specific feedback on how the processes could be improved, and to examine the potential for using the framework in their regions. Next, seven distinct priority setting case studies were done in the same three health regions in Alberta. Finally, structured follow-up surveys with all PBMA case study participants were conducted.

Additional Resources

Numerous peer-reviewed papers based on this research project have been done or are currently under review. Seminars on priority setting in health organizations have been given in Alberta, British Columbia, and Saskatchewan. The primary audience for these seminars has been health region personnel and clinicians. Specific presentation materials and copies of papers can be obtained from the principal investigator.

Further Research

Primary areas for future research that arose directly from this project include:

  • Continued use of the framework at the micro and macro levels in health regions, with the intention of evaluating it with the model derived from this project.
  • Exploration of priority setting at an organizational level, across portfolios within a health region. This would attempt to put in place an approach to priority setting that is systematically applied, is fair, and is based on economic principles of opportunity cost and the margin. (Development of a priority-setting "toolkit" for managers and clinicians, to serve as a guide for their own explicit, evidence-based priority setting activity.