Activity Based Funding and Palliative Care Professor Kathy Eagar

Activity Based Funding and
Palliative Care
Professor Kathy Eagar
Director, Australian Health Services Research Institute
Sydney Business School
Palliative Care Australia Forum, Canberra October 2012
Some important background to start
with
The starting point for our western
health care system
New South Wales became a (penal) colony in 1788,
followed progressively by the other Australian States.
Australia didn’t became a country until 1901
A federation
Commonwealth
(national) government
6 State (previously colony) and 2 Territory governments
Constitution (1901) - health is the responsibility of the States
– Except quarantine matters
Amended
in 1946
– To allow Commonwealth to provide health benefits and services to
returned soldiers
Commonwealth
didn’t have a formal role in health care until
1972 (Medibank)
– Except for war veterans
States
and territories own all public health facilities and
infrastructure
Public hospital funding - 1
Commonwealth
originally agreed to contribute 50% of public
hospital funding in 1972 (with inception of Medibank)
5 year Commonwealth-State agreements from 1983
– Current agreement is 2008-2013
Progressive
but slow decline in Commonwealth share,
particularly during 2000s
2003 agreement - Commonwealth effectively ended 30 year
commitment to 50%
– argued that private health insurance (PHI) tax rebate would take
pressure off public hospitals
PHI
took no pressure off public hospitals and public hospitals
perceived to be increasingly in ‘crisis’ since then
Public hospital funding - 2
Public
hospital ‘crisis’ over the last decade largely due
to Commonwealth decision to reduce it’s funding
contribution in real terms in the 2003-2008 agreement
– last agreement under Howard government
Rudd
government elected in 2007
– provided an injection of funds in 2008 and began planning for
‘national reform’
The
states and territories wanted a return to a 50%
share by the Commonwealth
– they got ‘national health reform’ instead
National reform agenda
A plethora of reviews and reforms
Election commitments (GP Super
Clinics, dental etc)
National Healthcare Agreement and NPAs 2008-2013
National Prevention Taskforce
National Primary Care Strategy
Australia 2020 recommendations
National Health and Hospitals Reform Commission
Culminating
in the COAG National Health and
Hospitals Network Agreement
National Health Reform Agreement
(NHRA)
Signed by COAG 31 July 2011
Core design features
Brave new world
Health
system splits into 5
– Hospitals - State responsibility
Commonwealth to contribute its share on an activity basis
– Private sector primary care - Commonwealth responsibility
– “Aged care” including Home and Community Care (HACC)
for people 65 years and over - Commonwealth
except Victoria and Western Australia
– Disability services - State responsibility
All disability, HACC and residential care for people less than 65
years
– Community health, population health and public health State responsibility
New entities
National
– Independent Hospital Pricing Authority (IHPA)
– National Health Performance Authority (NHPA)
– National Health Funding Pool
Reserve bank accounts (one for each state and territory) with an independent
administrator
State
– Ongoing reorganisations of most departments
Local
– Local Hospital Networks (LHN)
Local Health Districts in NSW, Hospitals and Health Services in Qld etc
– ‘Medicare Locals’
Commonwealth Premise
Hospitals -
big white buildings surrounded by a
fence
Everything outside the fence is either ‘primary care’
or ‘aged care’ or a ‘disability service’
– no terms defined
Specialist services outside the
fence (public and
private) not adequately recognised in original
agreement
– but IHPA has gone some way to addressing this since
Hospitals
The centre of the health reform
- creating perverse incentives for some
very regressive thinking!
Commonwealth and State
joint responsibilities
Funding public hospital services
– using Activity Based Funding (ABF) where
practicable and block funding in other cases
Nationally consistent standards for healthcare
and performance reporting
Collecting and providing comparable and
transparent data
Commonwealth role
Pay
a ‘national efficient price’ for every public hospital
service
– Funding at current levels (around 38%) until 2014
– 2014-2017 - fund 45% of efficient growth in public hospitals
– 2017 on - fund 50% of efficient growth in public hospitals
Fund
Commonwealth will never get back to 50% of total hospital funding
Current estimate is that Cw contribution will be about 44% in 2030
States (and through them LHNs) a contribution for:
– teaching, training and research
– block funding for small public hospitals
Agreement
has detailed arrangements for defining a
‘hospital’ service that the Commonwealth will partly fund
Scope of Commonwealth funding
Hospital services provided to both public and private patients in a
range of settings (including at home) and funded either:
– on an activity basis or
– through block grants, including in rural and regional communities;
teaching and training undertaken in public hospitals or other
organisations (such as universities and training providers)
research funded by States undertaken in public hospitals and
public health activities managed by States
From 1 July 2012 funding to be “provided on an ABF basis wherever
possible”
State responsibilities
Management
of public hospitals, including:
–
–
–
–
hospital service planning
purchasing services from LHNs
planning, funding and delivering capital
planning, funding (with the Commonwealth) and delivering
teaching, training and research
– managing Local Hospital Network performance
Lead
role in public health
Management and 100% funding of community health
and public sector primary care
States responsible for system-wide
public hospital service planning and
policy and capital works
LHN reports to State (and
through to C’wealth) on
activity and performance
Quarterly financial
adjustments for
variations in volumes as
per Service Agreement
Based on this planning, States
enter into a Local Health
District (LHD) Service Agreement
with each LHD that specifies
services to be provided
State and Commonwealth
transfer funding for these services to
the National Health Funding Pool
LHN receives C’wealth and State funds
from National Health Funding Pool
Commonwealth
contribution
based on ‘efficient
price’ as determined
by Independent
Hospital Pricing
Authority
State
contribution
determined
by each State
Activity Based Funding
Also known as ‘casemix’ funding
CHSD
Centre for Health Service Development
But first, Casemix 101
A Definition of Casemix
The
The
mix of cases
classification of patient episodes
based on those patient attributes that
best explain the cost of care (‘cost
drivers’)
What makes a good classification?
Consumer
related cost drivers
– Consumer (but not necessarily ‘clinical’) characteristics
– Not the type, or extent, of services used.
Variance
reduction
– Minimum variation within each class and maximum
differences between classes.
Sensible
clinical groups
Ease of collection
– Variables used should be capable of routine collection,
coding and data entry.
Diagnosis Related Groups
The
most widely used casemix
classification
Used to classify acute care
Classes defined by principal medical
diagnosis, plus variables such as other
diagnoses, age and procedures
COST WEIGHT
an index of relative costliness for each casemix class
the average cost per patient treated is given a
weighting of 1
a cost weight of 1.2 means that the cost is 20% above
the average
a cost weight of 0.5 means that the cost is 50% below
the average
used to "casemix adjust" information about hospital
performance
Example of cost weights by class
ARDRG
V4.1
No.
AR-DRG Title
Cost
Weight
O01A Caesarean Delivery W Multiple Complicating Diagnoses, At Least O
2.22
O01B Caesarean Delivery W Severe Complicating Diagnosis
1.63
O01C Caesarean Delivery W Moderate Complicating Diagnosis
1.66
O01D Caesarean Delivery W/O Complicating Diagnosis
1.39
O02Z Vaginal Delivery W Complicating O.R. Procedure
1.08
O03Z Ectopic Pregnancy
0.90
O04Z Postpartum and Post Abortion W O.R. Procedure
0.52
O40Z Abortion W D&C, Aspiration Curettage or Hysterotomy
0.33
O60A Vaginal Delivery W Multiple Complicating Diagnoses, At Least One
1.19
O60B Vaginal Delivery W Severe Complicating Diagnosis
0.90
O60C Vaginal Delivery W Moderate Complicating Diagnosis
0.86
O60D Vaginal Delivery W/O Complicating Diagnosis
0.70
Some neonatal DRGs
ARDRG
V4.1
No.
P03Z
P04Z
P05Z
P06A
P06B
P60A
P60B
P61Z
P62Z
P67A
P67B
P67C
P67D
AR-DRG Title
Neonate, AdmWt 1000-1499 g W Significant O.R. Procedure
Neonate, AdmWt 1500-1999 g W Significant O.R. Procedure
Neonate, AdmWt 2000-2499 g W Significant O.R. Procedure
Neonate, AdmWt > 2499 g W Significant O.R. Procedure W Multi Maj
Neonate, Adm Wt > 2499 g W Significant O.R. Proc W/O Multi Major
Neonate Died or Transf <5 Days of Adm, W/O Significant O.R. Proc
Neonate Died/Transf <5 Days of Adm, W/O Significant O.R. Proc, N
Neonate, AdmWt < 750 g
Neonate, AdmWt 750-999 g
Neonate, AdmWt > 2499 g W/O Significant O.R. Procedure W Multi M
Neonate, AdmWt > 2499 g W/O Significant O.R. Procedure W Major P
Neonate, AdmWt > 2499 g W/O Significant O.R. Procedure W Other P
Neonate, AdmWt > 2499 g W/O Significant O.R. Procedure W/O Probl
Cost
Weight
19.37
13.11
11.42
13.21
4.50
0.50
0.89
22.10
19.93
3.79
1.89
1.06
0.76
IHPA role
Set
the price that the Commonwealth will pay for
a cost weight (National Weighted Activity Unit)
IHPA determines the price paid to States (via
LHNs)
IHPA does not determine the price paid by a
state or territory to an LHN or hospital
– Although states and territories are free to adopt the
IHPA price if they want
IHPA does not
determine the funding for
individual palliative care services
Problems with DRG-centred models
DRGs don't work for many case types:
rehabilitation
psychiatric
Because the
principal diagnosis
chronic illness
is not the main
cost driver
palliative care
intensive care
The way we once thought
(and some people still do)
Health care
hospitals
inpatients use AN-DRGs
everything else
everything
else - ignore
ignore
Known cost drivers in health care
acute inpatients
diagnosis, age, procedure
rehab
functional impairment, ADL function
psychiatry
ADL function, severity of symptoms,
social and economic circumstances, aggression
palliative care
pain, symptoms, carer support, ADL function
emergency
urgency
neonatology
birth weight
3 Care Types
Diagnosis-related care (acute)
Function-related care (sub-acute, including
rehabilitation and palliative care) and
Supportive care (non-acute, including NHTP)
AN-SNAP
Adopted by IHPA as the initial casemix
classification for palliative care
Key Cost Drivers - 1
Case Type - characteristics of the person and the goal of
treatment
function (motor and cognition) - all Case Types
phase (stage of illness) - palliative care
impairment - rehabilitation
behaviour - psychogeriatric
age - palliative care, rehab, GEM and maintenance
Key Cost Drivers - 2
There are additional cost drivers in ambulatory care:
problem severity - palliative care
phase - psychogeriatric
usage of other health and community services
and probably:
availability of Carer
instrumental ADLs (eg. medication management, food
preparation)
AN-SNAP
Version 1
developed in 1996, Version 2 in 2007,
Version 3 in 2012
Based on a study of 30,057 episodes in 104 services
in Australia and New Zealand
150 classes in the current version:
Care Type
GEM
Maintenance
Palliative Care
Psychogeriatric
Rehabilitation
Grand Total
Ambulatory Inpatient
8
16
22
7
15
68
7
11
12
7
45
82
Total
15
27
34
14
60
150
An example: AN-SNAP v2
palliative care inpatient classes
ClassNo
S2-101
S2-102
S2-103
S2-104
S2-105
S2-106
S2-107
S2-108
S2-109
S2-110
S2-111
Description
Assessment only
Stable, RUG-ADL 4
Stable, RUG-ADL 5-17
Stable, RUG-ADL 18
Unstable, RUG-ADL 4-17
Unstable, RUG-ADL 18
Deteriorating, RUG-ADL 4-14
Deteriorating, RUG-ADL 15-18, age <=52
Deteriorating, RUG-ADL 15-18, age >=53
Terminal, RUG-ADL 4-16
Terminal, RUG-ADL 17-18
S2-112
Bereavement
Future possibilities
Cost drivers
Need
to distinguish between classification and
pricing
Are additional classification variables required
to better explain differences between patients?
Do additional factors need to be taken into
account in pricing to better explain legitimate
cost differences between providers?
– Eg, location, travel
What unit of counting?
Person
Per s on
Epis ode of Illnes s
1
Epis ode of Illnes s
2
Epis ode of Illnes s
etc
Person
Episode of
Illness 1
bundle to
form
Episode of
care 1
Episode of
care etc
Episode of
care 2
Episode of
Illness 2
Episode of
Illness etc
Person
Episode of
Illness 1
Episode of
Illness 2
bundle to
form
Episode of
care 1
bundle to
form
Day of care
1
Day of care
etc
Day of care
2
Episode of
care 2
Episode of
care et c
Episode of
Illness etc
Person
Episode of
Illness 1
Episode of
Illness 2
bundle to
form
Episode of
care 1
Episode of
care 2
bundle to
form
Day of care
1
bundle to
form
Event or
service 1
Event or
service etc
Day of care
2
Day of care
etc
Episode of
care etc
Episode of
Illness etc
Capitation or
needs-based
funding to provider
Person
Provider carries
most risk
Person
Person
Episode of
Illness 1
Episode of
Illness 2
Episode of
Illness etc
bundle t o form
Episode of
care 1
Episode of
care 2
Episode of
care etc
bundle t o form
Day of care 1
Day of care 2
Day of care etc
bundle t o form
Event or
service 1
Event or
service etc
Purchaser
carries most
ri sk
Other future developments?
How
to deal with gaming?
– Manipulating your data so patients are assigned to
higher-paying classes
New
classification variables (cost drivers) or a new
classification?
New models of care?
– Consultation liaison?
Price for
quality and outcomes, not based on
current average cost?
– Pay for Performance (P4P)?
Conclusion
Casemix (ABF)
funding is here to stay
We will need better health information and
classification systems regardless of how the
reform is fine-tuned as it unfolds
We will need to try and shift the debate from cost
to value for money
Want to know more?
http://ahsri.uow.edu.au/chsd/abf/index.html
ABF Information Series No. 1. What is activity-based funding?
ABF Information Series No. 2. The special case of smaller and
regional hospitals
ABF Information Series No. 3. Lessons from the USA
ABF Information Series No. 4. The cost of public hospitals - which
State or Territory is the most efficient?
ABF Information Series No. 5. Counting acute inpatient care
ABF Information Series No. 6. Subacute care.
ABF Information Series No. 7. Research and training
ABF Information Series No. 8. Mental health