DEPARTMENT OF HEALTH
Notes prepared for the Public Hearings of the Select Committee on Finance
Public Hearings on the Division of Revenue
Information Required
Formula and criteria used in the formulation of the grants (incl. Statistical data) and its relation to section 214 of the Constitution
Data on trends in allocations, transfers and actual expenditure, including per capita allocations
Monitoring capacity and past performance as set out by conditions in the DORA, including queries raised by the Auditor-General and SCOPA
Quantitative and qualitative indicators, especially non-financial performance indicators
Why we must keep these grants as conditional grants.

Currently the National Dept of Health administers the following Conditional grants:
National Tertiary services grant
Health Professionals training and Development grant
Hospital Revitalisation
Hospital Management and Quality improvement grant
HIV/AIDS
Integrated Nutrition and Primary School nutrition Programme
Hospital Construction Grant – Pretoria academic

A seventh grant is the Medico-legal services grant.
SECTION 214: Equitable shares and allocations of revenue
214.(1) an Act of Parliament must provide for

The equitable division of revenue raised nationally among the national, provincial and local spheres of government;
The determination of each province’s equitable share of the provincial share of that revenue; and
Any other allocations to provinces, local government or municipalities from the national government’s share of that revenue, and any conditions on which those allocations may be made.

(2) The Act referred to in subsection (1) may be enacted only after the provincial governments, organized local government and the Financial and Fiscal Commission have been consulted, and any recommendations of the Commission have been considered, and must take into account

The national interest;
Any provision that must be made in respect of the national debt and other national obligations;
The needs and interests of the national government, determined by objective criteria;
The need to ensure that the provinces and municipalities are able to provide basic services and perform the functions allocated to them;
The fiscal capacity and efficiency of the provinces and municipalities;
Developmental and other needs of provinces, local government and municipalities;
Economic disparities within and among the provinces;
Obligations of the provinces and municipalities in terms of national legislation;
The desirability of stable and predictable allocations of revenue shares; and
The need for flexibility in responding to emergencies or other temporary needs, and other factors based on similar objective criteria.
PART 1: Formula and Criteria
National Tertiary Services Grant
The purpose of this grant is to fund the provision of National Tertiary services as identified and costed by the National dept of Health. The provision of funding in relation to tertiary services is done to ensure equitable access to tertiary health care but also to ensure national planning of services.

The allocation/division of the grant is determined as follows:
A cost model is used that standardises the unit cost of each of the designated tertiary services.
The level/quantity of tertiary services that each province provides is determined
On the basis of the cost and quantity, the allocations for each province is determined

This approach deals explicitly with two elements:
It ensures that provinces are funded equitably for the range of services they provide
It ensures that services are funded against the volume of services they provide.

The data used in the cost model comes directly from hospitals providing tertiary services and is contained in a study called "the review of highly specialised services", which is available on the Dept of Health website. The cost model is reviewed on an annual basis and service activity data and cost data is adjusted in the light of changes that occur.

This grant as it stands presently, is an amalgamation of the Central Hospitals and Redistribution of Tertiary services Grants. During 2001, the National Department reviewed the appropriateness of these grants and found that enormous inequities existed in the allocation of funds in relation to services being provided. The NTSG represents a move towards the addressing of the inequities by funding services on a like-for-like basis. 2003/04 is the second year of a five-year phasing period to eliminate the inequities.

It must be stressed that the grant as it stands at present does not fully fund the full range of tertiary services that are provided in South Africa. To some extent services had to be fitted into the envelope of financial resources made available in terms of this grant.


Health Professionals Training and Development Grant
The purpose of the Health Professionals training and Development (HPTD) Grant is to compensate provincial health departments for the service costs associated with the training of Health Professionals. It is not the intention of this grant to fund the training of health professionals.

The grant is allocated/divided in the following manner:
a) The Health Professionals training Component (R950m)
Is determined by the number of final year medical students in each of the eight medical schools. This a mere proxy and predetermination of funding of medical schools
10% of this grant component is divided equally between provinces without a medical school. Each province without a medical school receives an equal share of the 10%.
b) The Development component.
The funds are allocated primarily to provinces without medical schools (but also includes KZN and Eastern Cape). This is due to the skewed availability of medical specialists. The funds are allocated according to the cost required to have a system of equitably distributed medical registrars in all provinces (proportionately scaled down).

Hospital Revitalisation Grant
The purpose of the hospital revitalization grant is to transform and modernise hospitals in line with national policy and to achieve a sustainable infrastructure from which modern, equitable and sustainable services can be delivered.

This grant was originally called the hospital rehabilitation and reconstruction grant and was based on the 1995 survey of the state of public hospitals. Funds were approved by Cabinet to address the poor state of public hospitals. The grant in its early days was only a construction/capital grant.

In 2001, following a comprehensive review of this grant, it was realized that merely focusing on capital or infrastructure was insufficient to get public hospitals to the level they needed to be. The strategy needed to marry the components of construction with improved management, improvement in quality of care and better and newer equipment. It also had to e done within a coherent planning framework, which related to service delivery and improved efficiency.

The allocation/division of this grant to provinces is calculated as follows:
Allocations are based on projects comprised of at least one hospital per province
The number of projects per province will be agreed between national DOH and National Treasury each year subject to the availability of resources and progress with current projects
Allocations take into consideration performance in achieving planned and national targets

Each province conducted a long-term strategic assessment of service delivery; this was called the provincial Strategic position statement. This information is not only used for the development of the medium term strategic plan but also used to inform the sequencing of hospitals to be revitalised.


Hospital Management and Quality Improvement Grant
The primary purpose of this grant is to strengthen management in hospitals including the development of management systems and structures, especially in the following areas:
Financial management including cost centre accounting
Hospital management information systems and patient administration systems
Support improvement of monitoring and evaluation capacity of hospital services at provincial level
Support quality of care interventions to substantially improve quality of hospital services

This grant was originally introduced as a general financial management grant, but has now been focussed exclusively on improving hospital management in respect of the following areas:
Improving financial management, skills and systems
Improving human resource management
Improving management information systems.

The grant is integrally linked to the hospital revitalisation grant and the funds are targeted at use in revitalisation hospitals, if appropriate.

The allocation/division of the grant is calculated as follows:
The grant accommodates funding, on a limited scale, of the existing activities/projects started in the 2001/2 financial year
Allocations are based on the number of revitalisation projects and the costs of these projects per province.

Hospital Construction Grant – Pretoria Academic
This grant is relatively small (R92m) and ends in 2003/04. It supports the construction costs of the new Pretoria Academic Hospital.

The value is determined by the cost of the building and involves a sharing of the total costs. A similar grant was used for the now completed Nkosi Albert Luthuli Central Hospital in Duran and the Nelson Mandela Academic Hospital in Umtata.

HIV/AIDS Grant
The purpose of this grant is specifically to enable the health sector to develop an effective response to HIV/Aids epidemic. A number of key areas of intervention have been identified to develop this response, including:
To support approved interventions including voluntary counseling and testing (VCT),
Mother to child transmission prevention (PMTCT) programmes,
Strengthening of provincial management,
Post exposure prophylaxis (PEP),
Home based care and step-down care

Most of these areas are new interventions and requires national co-ordination and guidance. Furthermore, the HIV/AIDS epidemic (prevalence and incidence of the epidemic) does not mirror the process of allocating the equitable share and requires targeted intervention. (Some provinces are more harder hit than others and the equitable share formula does not weight for this)

The allocation/division of funds is based on a few data sources and methodology, as the interventions cannot all fit within one approach. The following data sources inform the provincial allocation of the resources.
2001 Antenatal HIV Prevalence Survey,
Estimated share of HIV+ births,
Share of reported rapes,
Estimated share of Aids cases

The size/value of this grant has grown significantly over the past two years and continues to grow significantly in the next coming years. In order to facilitate the growth of the grant but to incorporate the fact that provincial priorities with respect to certain interventions are factored into the grant, the grant is prescriptive in terms of an overall package of services, but not in the balance of spending.

This is significant departure from the past when each of the categories each had an allocation attached to it. This system allows spending to occur in priorities, and will significantly improve patterns of spending.

Integrated Nutrition and Primary School Nutrition Programme
The integrated nutrition grant covers two areas:
Firstly, the integrated nutrition component; and
Secondly, the primary school nutrition programmes.

Overall, the purposes of this grant are as follows:
Improve the nutrition status of South African children;
Specifically to enhance active learning capacity and improve school attendance in schools
Improve nutritional knowledge, perceptions, attitudes and behavior amongst school learners, their parents and teachers

Over the past few years, this grant has remained static in nominal allocations. However, the adverse effects of high food prices, together with factors like the introduction of Grade R and the standardisation of menus and school feeding days have warranted a significant increase in the value of the grant.

Historically the division of the nutrition grant was determined by the 1991 population census. In 2002, the National Department of Health motivated for the changing of criteria used in the formulation of the grant, primarily centred on the use of indicators based on the 1996 census data. These included:
The INP conditional grant is distributed in total to the provincial departments of health according to an Index comprised of three indicators:
Indicator 1: 1996 poverty gap (65 per cent of Index)
Indicator 2: 1996 population 0 to 15 years living under the poverty line (30 per cent of Index)
Indicator 3: 2000 anthropometrics indicators (5 per cent of Index)

In addition, the use of new indicators and changing of weights meant that some provinces got more whilst others received less. With the approval of National Treasury this was adjusted in a way that no province received less than their existing allocations, only provinces requiring increases were adjusted.

Further, an inflationary factor was added to the value of the grant to compensate for the massive increases in food prices, etc.
PART 2: Trends in Allocations, Transfers and Payments
Past Performance
National Tertiary Services Grant
Funds have been flowing to provinces according to payment schedules as these funds form part of general recurrent funding within the health budget
Transition from former Central Hospitals Grant has been successfully achieved, including establishment of routine monitoring system for NTSG via DHIS


Health Professionals Training and Development Grant
Funds have been flowing to provinces according to payment schedules as these funds form part of general recurrent funding within the health budget

Hospital Revitalisation Grant
2001/2002
All allocated funds were transferred to provinces and all roll over from 2000/01 were spent
Under expenditure of R60 million, because of poor provincial cash flow projections and transition to revitalisation project
2002/2003
Spending amounts to 71,4 per cent of total available funds by the end of December 2002
Cash flows of currently committed projects indicate that all allocated funds will be spent
Rehabilitation projects will in future be funded from the provincial infrastructure grant and/or equitable share allocations

Hospital Management and Quality Improvement Grant
This Programme was funded as part of the financial management grant administered by National Treasury (2000/01). It has since been redefined to support the organizational development and quality components of the Hospital Revitalisation Programme and is now managed by the National Department of Health. The redefinition of focus is designed to strengthen internal efficiencies in the operational management of hospitals

Hospital Construction Grant – Pretoria Academic
Conditional grants have been allocated for the construction of the Nkosi Albert Luthuli Academic hospital in KZN (Durban Academic) and Nelson Mandela Academic (Umtata) hospital in the Eastern Cape in the past

HIV/AIDS Grant
2001//02 - Under spending was a problem in some provinces, procedures were simplified for 2002/03
Projections for 2002/03
43,1 per cent of allocated funds spent by end of December 2002
Four provinces remain significantly under spent; additional funds have been targeted towards provinces with stronger spending performance
It must be stressed, when the Provincial Heads of Health were queried on the under spending, they suggested that this was a book-keeping problem in that they did not create separate cost centre codes for HIV/AIDS activities, and hence were only reflecting expenditure against the equitable share. This will be resolved soon.

Integrated Nutrition and Primary School Nutrition Programme
2001/02
Although funds have been flowing as scheduled, under-spending has occurred at provincial level
Projected for 2002/03
Expenditure to up to the end of December 2002 amounts to 73,9 per cent 100 per cent expenditure is projected by the end of the year


TRENDS IN ALLOCATIONS [PMG Ed note: See accompanying Powerpoint presentation for following graphs]:
Figure 1: NTSG
Figure 2: HPTD
Figure 3: Hospital revitalisation
Figure 4: Hospital Management and quality improvement
Figure 5: HIV/AIDS
Figure 6: INP

PART 3: MONITORING CAPACITY
General Comments:
According to the DORA, the National Department of Health has certain obligations in terms of monitoring the conditional grants, e.g. payment according to approved business plans, monthly reporting to National Treasury.
Provincial Heads of Department also have certain responsibilities. They have to certify in the monthly reports to the national office that the funds have been spent in accordance with the approved business plans.
One of the issues that is proving difficult for the National Department of Health is the Actual Monitoring of the application of the conditional grants where it applies to capital works. Here the DORA specifies that site visits have to be conducted, but a human resource capacity problem in the NDoH made this very difficult in 2001/02. For the 2002/03 financial year this has been addressed through the appointment of appropriate additional staff.

During the early years of the conditional grants there was a tacit understanding between Health and Treasury, that the conditions would be "soft". This applied up to the end of 2001/02. Since the start of 2002/03, s significant amount of resources have been devoted to this, the development of appropriate monitoring structures including IT systems.

Main areas of non-compliance, problems include:
Late submission of reports and business plans
Non-submission of reports - sometimes
Incorrect figures (when the next report is submitted the previous months figures are amended).
Reports not signed by Financial Officer or Head of Health
No explanation for deviations on spending patterns etc.

Actions taken by the NDoH include:
Bi-lateral meetings with the provinces and this exercise have proved beneficial.
Provinces informed to report on figures after the forced closure i.e. the 10^th of the month; this should eliminate discrepancies in figures.
Provinces are always telephonically reminded on time to submit monthly expenditure reports before the 15^th to ensure that they meet the reporting deadline.
Letters written and faxed immediately to provinces from the 16^th day of the month. By this date this unit would know exactly the provinces that have failed to report on time.
The establishment of forums (national/provincial) is a forum where all issues pertaining to utilization of grant funds, spending patterns, and problems are addressed.
A decision has also been taken by PHRC that quarterly reports on conditional grants must be presented in its meetings. This reporting exercise will give an overview of spending pattern and problems encountered to PHRC members.
A business plan template was compiled based on DoRA requirements of each grant and sent to all provinces. All submitted business plans are reviewed and approved.

PART 4: Quantitative and Qualitative Indicators
The NDoH has introduced a wide rage of performance Indicators; these are represented in the DOR bill for 2003/04. Systems have been introduced to effectively monitor them.

a). NTSG
Conditions
Maintenance of a separate cost and management centre in each benefiting hospital
Appointment of a chief executive officer by 30 April 2003 for each benefiting hospital identified
Delegation of management, accounting officer, procurement, hiring, disciplining and dismissal powers to chief executive officer by 30 May 2003
Provision of designated national tertiary services
Provision of services at activity levels as agreed between the province and the national DOH
Provinces to include appropriate information in their strategic plans to be tabled by 31 March 2004
Departments that receive this grant must communicate in writing to each benefiting hospital the allocations made, conditions and expected service level outputs. For monitoring purposes, this information should be supplied to the national DOH
Monitoring mechanisms
Quarterly submission of NTSG monitoring data via District Hospital Information System (DHIS)
Measurable objectives/outputs
Improvement in management information in the befitting hospitals
Number of admissions, outpatients and day cases per specialised service unit
Number of treated patients managed from outside each province

b). HPTD
Conditions
Each province to publish, in its strategic plan for 2004, information as required by the national DOH, on the training of all medical personnel by institution, including any subsidies and other associated costs, deployment of additional registrars and specialists by gaining provinces and institutions showing current and proposed posts and related infrastructure
Provinces to create and budget for additional posts related to registrars and specialists as agreed with national DOH and the deans of medical faculties in universities
Timely submission of monitoring information as agreed with national DOH. The annual reports should also indicate additional numbers of registrars and specialists in gaining provinces
Monitoring mechanisms
Quarterly and annual reporting by provinces on number of students enrolled by discipline, level and training institution (frequency to be significantly decreased once national DOH has adequate database)
Quarterly and annual reporting by provinces on the number and duration of practical placements by health science students by type/level of health facility (frequency to be significantly decreased once national DOH has adequate data-base)
Quarterly and annual reporting by targeted provinces on achievement of planned expansion of specialist and teaching infrastructure
National department reports monthly on transfers
Measurable objectives/ outputs
Increase number and improve composition of health sciences students by province and institution
Shift in the location of practical training placements by discipline to regional and district facilities\
Expanded specialist and teaching infrastructure in target provinces

c). Hospital revitalisation
Conditions
Compliance with Integrated Health Planning Framework (IHPF) and monitoring and reporting requirements
Compliance with provincial priorities for sustainable service delivery as identified in the provinces’ Strategic Position Statements (SPS)
Allocations after 2003/2004 will depend on progressive increases in spending on maintenance up to targets set in IHPF
All projects must involve comprehensive revitalisation, including at least management, health technology, infrastructure and quality improvement programmes
Business cases in a standard format must be submitted to national Department of Health by 30th May 2003 for any additional projects to be funded in following years allocation
Monitoring mechanisms
Prescribed format and indicators in hospital and provincial monitoring modules
Monthly reporting on project implementation progress and expenditure to the national department
Measurable objectives/outputs
Number of hospitals revitalised


d) Hospital Management and Quality Improvement grant
Conditions
Business plans approved by HOD’s to be submitted before the first payment. These business plans will outline the projects/programmes in support of the purpose of the grant
Significant progress must be reported on spending and measurable outputs before the second and third payments are transferred
This grant is mainly to support revitalisation projects, it may also, to a certain extent, be used for other hospitals
Monitoring mechanisms
Monthly and quarterly financial reports to be submitted in the prescribed Treasury format.
Quarterly reports on progress against approved business plans
Measurable objectives/ outputs
Demonstrable progress with the delegation of personnel, financial and procurement functions to identified hospitals inclusive of the associated capacity development
Demonstrable progress with the implementation of standardised service delivery packages in identified hospitals
Mechanisms for quality improvements in all hospitals receiving funding in place –including complaints procedures, patient satisfaction surveys, medical audit, morbidity and mortality reviews and other structured systems of quality assessment
Implementation of standardised diagnostic and treatment protocols
Demonstrable progress towards the establishment of key management structures in terms of suitability and functionality in identified hospitals
Demonstrable progress with the implementation of strong financial systems including Cost Centre Accounting in hospitals
Demonstrable progress towards functional hospital management information systems. Systems for monitoring and evaluation of hospital services developed at provincial level

e). HIV/AIDS
Conditions
The flow of first installments is subject to approval of business plans
Quarterly monitoring returns to be submitted
Provinces should budget for long-term recurrent funding of home based care and step down care (i.e. once projects have matured)
Monitoring mechanisms
Quarterly reporting of output in terms of the monitoring framework established by national DOH
Provincial liaison and technical support visits by members of the national DOH
Regular meetings by the National Steering Committee
Measurable objectives/ outputs
Increased access to voluntary counseling and testing by 12,5 per cent of adult population aged between 15-49 years within three years, with specific targets for the youth and rural communities
Number of health districts which have voluntary counseling and testing facilities
Number of mothers receiving VCT and number of mother/baby pairs receiving PMTCT prophylaxis
Number of home based care teams in operation, caseload and number of patient contacts
Number of step-down facilities in operation, number of admissions and bed days
Number of adults and children receiving PEP after sexual assault
Number of projects targeting commercial sex workers and number of sex workers reached

f). INP
Conditions
Access of funding through business plans
Use of funds only for approved purposes
Grant must be kept on separate responsibility and objective codes
Feeding in poor primary schools should be a priority of the grant
Compliance with minimum norms and standards as determined by policy and implementation guidelines
Monitoring mechanisms
Provinces must report quarterly in terms of progress indicators
Provinces must report monthly in terms of financial indicators
Monitoring visits
Formal assessments
Measurable objectives/ outputs
Improve coverage of targeted primary school feeding from 86 per cent to 100 per cent
Improve coverage of planned feeding days from 85 per cent to 100 per cent
Improve compliance with nutritional criteria for school feeding from 0 per cent to 100 per cent
Decrease underweight, stunting and wasting in children from 10.3 per cent to 10 percent, 21.6 per cent to 20 per cent and 3.7 per cent to 2 per cent respectively
Increase provision of Road to Health Chart from 74.6 per cent to 85 per cent
Eliminate micronutrient deficiencies
Increase exclusive breastfeeding from 5 per cent to 10 per cent and breastfeeding from 67.9 per cent to 70 per cent
Increase baby-friendly health facilities from 40 to 72 out of 480

PART 5: WHY NOT INCORPORATED IN EQUITABLE SHARE
NTSG
Reason not incorporated in equitable share
Grant primarily targets certain provinces, which currently provide the bulk of tertiary health care. Although all provinces receive funding, allocations are based on the location of services. This requires that all provinces make available services, irrespective of provincial boundaries, thus requiring national co-ordination
Expansion and shifting of location of tertiary service units requires national planning and national coordination
Planning and provision of these services is problematic as people accessing them are from more than one province, and should not be left to provincial prioritization.

HPTD
Reason not incorporated in equitable share
Grant primarily targets certain provinces, which currently provide the bulk of health professionals training nationally
Expansion and shifting of location of teaching activities requires national coordination

Hospital Revitalisation
Reasons not incorporated in the equitable share
To provide the additional investment to provincial health departments to enable them to transform and modernise the hospital sector in line with nationally agreed goals and timeframes

Hospital Management
Reason not incorporated in equitable share
The main aim of the grant is to fund organisational development and quality improvement component of the Revitalisation Programme
Priority programmes still need dedicated funding otherwise they may be omitted

HIV/AIDS
Reason not incorporated in equitable share
National priority
Distribution of epidemic differs from equitable share distribution


INP
Reason not incorporated in
Equitable share
School feeding started as a Presidential Lead Project under the Reconstruction and Development
Programme (RDP). The Conditional Grant replaced the RDP allocation to ensure continued funding for nutrition and specifically for school feeding which is seen as one of Government’s key responses to poverty
The INP was once deferred to provinces, and the provinces pleaded that it be retained as a conditional grant due to problems in administration.


Annexure A: Expenditure trends
Table 1: Provincial Population Estimates

Table 2: National Tertiary Services Grant

Table 3: NTSG per capita allocations

Table 4: Health Professionals Training and Development Grant

Table 5: HPTD per capita allocations

Table 6: Hospital Revitalisation

Table 7: Hospital Revitalisation per capita allocations

Table 8: Hospital Management and Quality Improvement grant

Table 9: Hospital Management and Quality Improvement grant per capita allocations

Table 10: HIV/AIDS Grant

Table 11: HIV/AIDS per capita allocation

Table 12: Integrated nutrition programme grant

Table 13: Integrated nutrition programme per capita allocations

Table 14: Consolidated Conditional Grants for Health

Table 15: Per capita on consolidated grants