University Report: Activity Based Funding (PHE5HEF Exercise 3)

This report examines Activity Based Funding (ABF), a system used by governments to manage healthcare funding in public hospitals. It explains how ABF, utilizing Diagnosis-Related Groups (DRGs), aims to reshape incentives within healthcare systems. The report highlights the advantages of ABF, such as fixed reimbursement tariffs, incentives for cost reduction, improved quality of care through optimized internal pathways, increased hospital resource pools, and enhanced transparency and efficiency. It also discusses the challenges of introducing ABF, including inadequate resources (human, financial, and IT), infrastructure deficits, lack of change champions, and insufficient leadership support. The report references several studies to support its analysis.