Just As We Thought Hospital Funding Had Been Sorted It All Gets Messed Up Again!

Two articles appeared last week.

First we had this piece from the Medical Journal Of Australia (MJA)

Health reform and activity-based funding

Shane Solomon

Med J Aust 2014; 200 (10): 564.

doi:  10.5694/mja14.00292

Independent evidence-based evaluation will determine the success of activity-based funding in Australia

In August 2011 the National Health Reform Agreement (NHRA) was signed by the Council of Australian Governments. New financial arrangements to enable the federal, state and territory governments to work in partnership were a key component of the NHRA,1 with one aim being to “improve patient access to services and public hospital efficiency through the use of activity based funding (ABF) based on a national efficient price”.2

The NHRA established the Independent Hospital Pricing Authority (IHPA) to determine a national efficient price (NEP) for public hospital services that are able to be funded on an activity basis (see http://www.ihpa.gov.au). The NEP underpins activity-based funding and is used by the states and territories as an independent benchmarking tool to measure the efficiency of their public hospital services.

Activity-based funding is payment for the number and mix of patients treated, reflecting the workload and giving hospitals an incentive to provide services more efficiently. Most countries that have introduced activity-based funding systems have done so with two broad aims: to increase the transparency of how funds are allocated to services; and to give hospitals incentives to more efficiently use those funds.3

…..

While data consistency has improved considerably over recent years, activity-based funding is only as good as the activity and costing data available. To set an NEP and NEC that accurately reflect the reality faced by public hospitals, the IHPA is committed to obtaining accurate activity, cost and expenditure data from jurisdictions on a timely basis. Ongoing consultation, collaboration and evidence-based evaluation will improve the pricing process and create a more accurate, transparent and sustainable funding system that in turn will drive efficiency and quality and provide better value for public money.

The full article is here:

https://www.mja.com.au/journal/2014/200/10/health-reform-and-activity-based-funding

There is commentary on this editorial.

Hospital funding uncertainty

Nicole MacKee

Friday, 30 May, 2014

THE federal government’s plan to abandon activity-based funding for payments to state hospitals from 2017–2018 in favour of indexation has been cautiously welcomed by a health funding expert.

Professor Johannes Stoelwinder, professor and chair of health services management at Monash University, said while he reserved judgement on the amount the federal government contributed to state hospital funding, the new funding mechanism was an improvement on the previous government’s reforms.
  
“It clearly places the states in the role of purchasing hospital services and removes the Commonwealth from duplicating that role”, Professor Stoelwinder told MJA InSight.

He was commenting on an MJA article by Shane Solomon, chair of the Independent Hospital Pricing Authority (IPHA), which said significant progress had been made in establishing activity-based funding since the National Health Reform Agreement was signed in 2011. (1)

Mr Solomon described activity-based funding as payment for the number and mix of patients treated, reflecting the workload and giving hospitals an incentive to provide services more efficiently.

…..

He recently wrote in the MJA of his concerns about the effectiveness of activity-based funding. (3)

He told MJA InSight that activity-based funding was a good system for driving efficiency in hospitals and agreed with Mr Solomon’s view that the mechanism was only as good as the activity and costing data available.

However, Professor Stoelwinder said the idea that activity-based funding could determine the correct level of funding for all hospitals was a myth based on the assumption that all hospitals were equal.

“Different hospitals have different cost structures. If [a hospital does] a lot of work in one particular condition, it will have a lower cost structure,” he said, adding that the additional cost burden on small rural hospitals was recognised by providing grants rather than activity-based funding.

Professor Stoelwinder said in the absence of major reforms addressing the fragmented funding of Australian hospitals, risk-adjusted population-based funding would be a fairer model for Commonwealth funding of state hospitals.

Lots more here:

https://www.mja.com.au/insight/2014/19/hospital-funding-uncertainty

Oh great! We have politics and bureaucracy going at it again and just when a system that might have worked was finally being implemented, we have all change!

Reminds on of this:

In recent times, a popular quotation (actually by Charlton Ogburn, 1957^[1]) on reorganization is often (but spuriously^[2][3]) attributed to a Gaius Petronius. In one version it reads:

“We trained hard ... but it seemed that every time we were beginning to form up into teams we would be reorganized. I was to learn later in life that we tend to meet any new situation by reorganizing; and a wonderful method it can be for creating the illusion of progress while producing confusion, inefficiency, and demoralization.”

See here:

http://en.wikipedia.org/wiki/Petronius_Arbiter

That certainly describes what has been going on in attempts to properly manage and constrain hospital costs while delivering more service.

Interesting that both article note that any realistic costing will be data dependant and that we really don’t have the data yet. Heard that one before?

Politics and real complexity surely do not mix well together!

David.