Priority Setting and Resource Allocation in Healthcare: Learning from Local Government

William Hall, MSc, Neale Smith, MA, MEDes, Craig Mitton, PhD, Stirling Bryan, PhD


Introduction: Although seemingly disparate in nature, healthcare and local governments share a commitment to serving the public - as citizens and as patients - by ensuring their health and long-term wellbeing. Beyond this mutual interest, both areas face growing scarcity of resources while demands for services continue to rise. As a result, leaders in both disciplines must face difficult decisions related to setting priorities and allocating resources.

Method: From an established position within healthcare including decades of understanding and application of health economics, a team of Canadian Health Economists and Health Services researchers launched an exploratory literature review of priority setting and resource allocation (PSRA) in local government. Searches of six databases and multiple grey literature resources were conducted – 565 papers were identified, 121 papers were left for full review, and 38 were used to inform the research topic.

Results: Budgeting theory and practice in local government were identified as drivers for PSRA. Budgeting theories included: Incrementalism and Rationalism, and budgeting practice included: Line-item, Program, Performance, Outcome, Participatory, and Priority Based Budgeting. Each theory and practice is outlined in the article as well as key comparisons to current practice in healthcare. Ultimately, the intention is to create stronger links between healthcare and local government by highlighting common challenges and approached to this critical area of study and practice.


Full Text:



Poetz M, Franke N, Schreier M. Sometimes the Best Ideas Come from Outside Your Industry [Internet]. Harvard Business Review. [cited 2015 Oct 12]. Available from:

Jung AL, Szczerba RJ, Huesch MD. What Else Can Health Care Learn From the Aerospace and Defense Industries?: J Patient Saf. 2014 Nov;1.

Mackenzie J, Hall W. “Lean” in Canadian Health Care: Doing Less While Achieving More [Internet]. [cited 2015 Nov 12]. Available from:

Williams I, Dickinson H, Robinson S. Rationing in health care: the theory and practice of priority setting. Bristol; Chicago: Policy Press; 2012.

Health funding formula helps Ottawa, burdens provinces - Politics - CBC News [Internet]. [cited 2013 Aug 3]. Available from:

Matier C. Renewing the Canada Health Transfer: Implications for Federal and Provincial -Territorial Fiscal Sustainability [Internet]. 2012 [cited 2013 Aug 3]. Available from:

Budget and Fiscal Plan (2012//13 - 2014/15) [Internet]. Ministry of Finance; [cited 2013 Aug 29]. Available from:

Tax shift: Companies dump burden of taxes on squeezed municipalities [Internet]. The Globe and Mail. [cited 2015 Aug 13]. Available from:

Strong Fiscal Futures: A Blueprint for Strengthening BC Local Governments’ Finance System. Union of British Columbia Municipalities; 2013.

Forrester JP, Spindler CJ. Managing Municipal Services in an Era of Decuning Federal Assistance. Rev Policy Res. 1990;10(1):63–84.

Hall W, Smith N, Mitton C, Gibson J, Bryan S. An evaluation tool for assessing performance in priority setting and resource allocation: multi-site application to identify strengths and weaknesses. J Health Serv Res Policy. 2015 Aug 7;1355819615596542.

Bish RL, Clemens EG, Union of British Columbia Municipalities. Local government in British Columbia. Richmond, B.C.: Union of British Columbia Municipalities; 2008.

Schwochau S, Feuille P, Delaney JT. The Resource Allocation Effects of Mandated Relationships. Adm Sci Q. 1988 Sep;33(3):418.

Lindholm D, Wildavsky A. The Politics of the Budgetary Process. Adm Sci Q. 1965 Jun;10(1):139.

Schmidtlein FA. Assumptions Underlying Performance-Based Budgeting. Tert Educ Manag. 1999 Jun 1;5(2):157–72.

Hurley J. Health Economics. 1 edition. S.l.: McGraw-Hill Ryerson; 2010. 448 p. [Internet]. [cited 2015 Aug 13]. Available from:

NICE | The National Institute for Health and Care Excellence [Internet]. [cited 2015 Aug 13]. Available from:

Gibson JL, Martin DK, Singer PA. Evidence, economics and ethics: resource allocation in health services organizations. Healthc Q Tor Ont. 2005;8(2):50–9, 4.

Donaldson C, Mitton C. Priority Setting Toolkit: Guide to the Use of Economics in Healthcare Decision Making. London: BMJ Publishing Group; 2004.

Kavanagh S, Johnson J, Fabian C. Anatomy of a Priority Based Budget Process [Internet]. 2010 [cited 2014 Dec 13]. Available from:

Khan A, Hildreth WB. Budget Theory in the Public Sector. Greenwood Publishing Group; 2002. 322 p.

Mitchell SW. An Exploratory Study of Priority Based Budgeting: Identification of Public Values and Public Priorities through Citizen Engagement in Government Budgeting Decisions [Internet]. Lawrence Technological University; 2014 [cited 2014 Dec 13]. Available from:

Tassonyi A. Municipal budgeting. Can Tax J. 2002;50(1):181–198.

M.M. Ibrahim, R.A. Proctor. Incremental Budgeting in Local Authorities. Int J Public Sect Manag [Internet]. 1992 May 1 [cited 2014 Dec 14];5(5). Available from:

Reddick CG. Canadian Provincial Budget Outcomes: A Long–run and Short–run Perspective. Financ Account Manag. 2002;18(4):355–82.

Reddick CG. Testing Rival Decision-Making Theories on Budget Outputs: Theories and Comparative Evidence [Internet]. Rochester, NY: Social Science Research Network; 2003 Mar [cited 2014 Dec 14]. Report No.: ID 330761. Available from:

Public Budgeting in America by Lynch, Thomas D.: Prentice Hall Faux Leather, Third Edition - Dr. Eliot’s Twice Sold Tales [Internet]. [cited 2014 Dec 13]. Available from:

Simon HA. Administrative Behavior, 4th Edition. 4th Revised edition edition. New York: Free Press; 1997. 384 p.

Lindblom CE. The Science of “Muddling Through.” Public Adm Rev. 1959;19(2):79.

Martin LL, Kettner PM. Measuring the Performance of Human Service Programs. SAGE; 1996. 156 p.

Fabian C, Collins S, Johnson J. Getting Your Priorities Straight [Internet]. 2008 [cited 2014 Dec 13]. Available from:

Atteberry D. Your Budget: From Axe to Aim [Internet]. ICMA Publications; 2007 [cited 2014 Dec 13]. Available from:

Plant JF, White LG. The Politics of Cutback Budgeting: An Alliance Building Perspective. Public Budg Finance. 1982 Mar 1;2(1):65–71.

Kelly JM. Budget theory in local government : the process-outcome conundrum. 2008.

Yazici Aydemir N. Performance-Based Budgeting: A Case Study about the Effects of Performance Measures on the Agency Budgeting Process in West Virginia State Government [Internet]. Ohio University; 2010 [cited 2014 Aug 29]. Available from:

Raili M. Pollanen. Performance measurement in municipalities. Int J Public Sect Manag. 2005 Jan 1;18(1):4–24.

Otley D. Extending the Boundaries of Management Accounting Research: Developing Systems for Performance Management. Br Account Rev. 2001 Sep;33(3):243–61.

Neely AD. Business Performance Measurement: Theory and Practice. Cambridge University Press; 2002. 386 p.

Kong D. Performance-Based Budgeting: The U.S. Experience. Public Organ Rev. 2005 Jun 1;5(2):91–107.

Smith JF. The Benefits and Threats of PBB: An Assessment of Modern Reform [Internet]. Rochester, NY: Social Science Research Network; 2004 Oct [cited 2014 Dec 14]. Report No.: ID 468276. Available from:

Julnes PDL. Performance Measurement An Effective Tool for Government Accountability? The Debate Goes On. Evaluation. 2006 Apr 1;12(2):219–35.

Osborne D. Reinventing Government: How the Entrepreneurial Spirit is Transforming the Public Sector. Plume; 1993. 436 p.

Making Connections: Municipal Governance Priorities Today. [Internet]. The Institute of Public Administration of Canada; 2004 [cited 2014 Dec 13]. Available from:

Ho A, Coates P. Citizen-Initiated Performance Assessment: The Initial Iowa Experience. Public Perform Manag Rev. 2004 Mar 1;27(3):29–50.

Poister TH, Streib G. Performance Measurement in Municipal Government: Assessing the State of the Practice. Public Adm Rev. 1999 Jul;59(4):325.

Baiocchi G. Emergent Public Spheres: Talking Politics in Participatory Governance. Am Sociol Rev. 2003 Feb;68(1):52.

Naylor S. Participatory budgeting - a neighbourhood manager's perspective.

Wampler B. A Guide to Participatory Budgeting. 2007 [cited 2014 Dec 14]; Available from:

Alfaro C, Gomez J, Lavin JM, Molero JJ. A configurable architecture for e-participatory budgeting support. JeDEM - EJournal EDemocracy Open Gov. 2010 Apr 26;2(1):39–45.

Pinnington E. Participatory budgeting in North America: the case of Guelph, Canada. 2009.

Baiocchi G. Participation, Activism, and Politics: The Porto Alegre Experiment [Internet]. Univeristy of Wisconsin Madison; [cited 2014 Dec 13]. Available from:

Abers R. Inventing Local Democracy: Grassroots Politics in Brazil. Lynne Rienner Publishers; 2000. 288 p.

Carpini MXD, Cook FL, Jacobs LR. PUBLIC DELIBERATION, DISCURSIVE PARTICIPATION, AND CITIZEN ENGAGEMENT: A Review of the Empirical Literature. Annu Rev Polit Sci. 2004 May 17;7(1):315–44.

Koontz TM, Johnson EM. One size does not fit all: Matching breadth of stakeholder participation to watershed group accomplishments. Policy Sci. 2004 Jun 1;37(2):185–204.

Feldman MS, Quick KS. Generating Resources and Energizing Frameworks Through Inclusive Public Management. Int Public Manag J. 2009 May 20;12(2):137–71.

Rossi J. Participation Run Amok: The Costs of Mass Participation for Deliberative Agency Decisionmaking [Internet]. Rochester, NY: Social Science Research Network; 2004 Aug [cited 2014 Dec 14]. Report No.: ID 571127. Available from:

Simonsen W, Robbins MD. Citizen Participation in Resource Allocation. Westview Press; 2000. 202 p.

Priority Based Budgeting [Internet]. International City Management Association; [cited 2014 Dec 13]. Available from:

Oettinger J. Priority-based budgeting in twelve cities: Motivating factors and early outcomes. University of California; 2011.

Middleton N. Priority Based Budgeting: A Model for the City of Oakland’s Long Term Fiscal Sustainability [Internet]. 2014 [cited 2014 Dec 4]. Available from:

(CIHI) CI for HI. The Financial Management of Acute Care in Canada [Internet]. 2001 [cited 2015 Apr 30]. Available from:〈=en&media=0

Sutherland J, Crump RT, Repin N, Hellsten E. Paying for Hospital Services – A Hard Look at the Options [Internet]. C.D Howe Institute; [cited 2015 Apr 29]. Available from:

Marini G, Street A. A transaction costs analysis of changing contractual relations in the English NHS. Health Policy Amst Neth. 2007 Sep;83(1):17–26.

Kathryn M Antioch MKW. The risk-adjusted vision beyond casemix (DRG) funding in Australia. International lessons in high complexity and capitation. Eur J Health Econ HEPAC Health Econ Prev Care. 2004;5(2):95–109.

Wolfe PR, Moran DW. Global budgeting in the OECD countries. Health Care Financ Rev. 1993;14(3):55–76.

Sutherland JM, Crump RT, Canadian Health Services Research Foundation. Exploring alternative level care (ALC) and the role of funding policies an evolving evidence base for Canada [Internet]. Ottawa, Ont.: Canadian Health Services Research Foundation; 2012 [cited 2014 Sep 19]. Available from:

Lisac M, Blum K, Schlette S, Maarse H, Bartholomée Y, McDaid D, et al. Health Systems and Health Reform in Europe. Intereconomics. 2008 Jul;43(4):184–218.

Dredge R. Hospital Global Budgeting [Internet]. 2004 [cited 2015 Apr 29]. Available from:

van de Vijsel AR, Engelfriet PM, Westert GP. Rendering hospital budgets volume based and open ended to reduce waiting lists: does it work? Health Policy Amst Neth. 2011 Apr;100(1):60–70.

Coding Variations in the Discharge Abstract Database (DAD) Data; FY 1996-1997 to 2000-2001. [Internet]. 2003 [cited 2015 Apr 29]. Available from:

Preyra C. Coding response to a case-mix measurement system based on multiple diagnoses. Health Serv Res. 2004 Aug;39(4 Pt 1):1027–45.

Mitton CR, Donaldson C. Setting priorities and allocating resources in health regions: lessons from a project evaluating program budgeting and marginal analysis (PBMA). Health Policy Amst Neth. 2003 Jun;64(3):335–48.

The Participatory Budgeting Project [Internet]. The Participatory Budgeting Project. [cited 2015 Aug 18]. Available from:

Fabian C, Johnson J, Kavanagh S. The Challenges and Promise of Program Budgeting [Internet]. Government Finance Officers Association; 2015 [cited 2016 Jan 1]. Available from:


  • There are currently no refbacks.

©Journal of Health Care Finance