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