Everyone seems to assume that because healthcare budgets are so big that they are immune to chance-based risk. Since most healthcare systems operate using capitated budgets (i.e. a fixed budget) you would think that the literature would be full of papers on how to calculate the risk associated with such budgets. All you will be able to find are a few UK studies from the early 90's when GP fundholding was first introduced.

It turns out that financial risk in healthcare is unacceptably high to provider and purchaser alike. This explains why achieving break even is such a strenuous task with high levels of swapping between budgets.

Studies by HCAF show that very large healthcare providers and commissioners can accumulate a huge debt simply due to chance variation in volume and case mix.

In particular, emergency admissions are a source of exceedingly high risk and studies by HCAF have shown that the risk is up to 3-times higher than simple chance variation alone. This is in addition to the financial pressures arising from the three to eight year pattern in medical emergency admissions (see Emergency Admissions folder).

HCAF are the leading UK source of actuarial evaluation in healthcare. Rather than wait for chance variation to overtake you unawares it may be a sensible idea to understand how this impacts your organisation and devise appropriate contingency plans using the output from such studies.

The issue of financial risk has a huge impact on the area of GP commissioning and many of the current policies in this area need significant revision to work in the real world. Refer to the 'HRG, PbR, PBC' folder for more details. The 'Emergency Admissions' folder contains additional research relating to trends in emergency admission from both a UK and international perspective.