How are New Zealand's district health boards funded and does it matter if we can't tell?

In 2011 the Population Based Funding Formula (PBFF) was used to distribute a $9 billion share of Vote Health amongst District Health Boards (DHBs), making it one of the single largest determinants of the allocation of public funds and exerting considerable influence on the healthcare sector. However, there is minimal public information available regarding the methods used in the PBFF and, consequently, the process of determining DHB allocations. We sought to investigate how the PBFF works and found that no comprehensive description of the process in its entirety has ever been produced. In light of this, based on information we obtained from the Ministry of Health, we have compiled our own version of how we believe the PBFF allocations are determined. This article summarises our findings and includes an example calculation of the inpatient cost weights to illustrate our understanding of the process. Our hope is that this article will improve understanding and stimulate debate on the PBFF as well as highlight the need for greater transparency around the funding process.