TOWARDS AN ABF PRICING FRAMEWORK AND A NATIONAL EFFICIENT PRICE

1. TOWARDS AN ABF PRICING FRAMEWORK AND A NATIONAL EFFICIENT PRICE Professor Ric Marshall, Consultant on ABF Systems Independent Hospital Pricing Authority – 21MAR12

2. Australian Health Reform Agreements • Transparency and responsibility for results • Independent Hospital Pricing Authority • National Funding Body • National Performance Authority • National uniform measures • Comprehensive coverage of all hospital services • Local Hospital networks – as points of responsibility for results (outcomes) • States as Hospital system managers • Australian Commission for Safety and Quality in Health

3. Role of the IHPA • In 2010-11, the Australian Government committed $91.8 million over four years to establish an Independent Hospital Pricing Authority to: • manage the development of national activity based funding arrangements • advise on cross border and cost shifting between jurisdictions • set the efficient price for public hospital services • The National Health Reform Agreement (NHRA) agreed by COAG in August 2011 details these arrangements • National Health Reform Amendment (Independent Hospital Pricing Authority) Bill 2011, currently before the Parliament provides the statutory basis for IHPA

4. Structure of the IHPA 4 • The IHPA Board has a Chair appointed by the Commonwealth, a Deputy Chair appointed by the States and a member appointed by each jurisdiction • Chair – Shane Solomon • Deputy Chair – Jim Birch • A CEO is responsible for day-to-day administration • Acting CEO – Dr Tony Sherbon • The IHPA has around 40 employees (including the CEO) • The IHPA will be supported by jurisdictional, clinical and technical committees and will draw on external expert advice

5. Jurisdictional Advisory Committee (JAC) 5 • A Jurisdictional Advisory Committee (JAC) has been included in the legislation • The JAC will provide high level advice on the implementation of strategic pricing framework • The Committee will consist of 9 members: • a Chair appointed by the IHPA • one representative from the Commonwealth • one representative from each state and territory

6. ABF Technical Committee 6 • Chaired by the Acting IHPA CEO, the ABF Technical Committee will: • advise the IHPA and the JAC on clinical costing, clinical classification, data processing and modelling that underpins Activity Based funding; • provide a mechanism for the states, territories and the Commonwealth to participate in the development of ABF; • provide a forum for the negotiation of the technical structures of the activity based funding system

7. ABF Working Groups • The TAC is supported by working groups for: • Hospital Costing (National Hospital Cost Data Collection) • Emergency Care • Non Admitted Care • Sub-acute Care • Mental Health • The working groups include Commonwealth and state and territory members

8. ABF Developmental Elements

9. Clinical Advisory Committee (CAC) 9 A Clinical Advisory Committee (CAC) has been included in the legislation The CAC will provide expert clinical advice to the IHPA Members clinicians appointed by the Commonwealth minister for health, in consultation with other health ministers and the IHPA The CAC consists of a chair and at least 8 other members The CAC can establish sub-committees as required

10. Functions of the IHPA 10 • To deliver ABF, the IHPA will determine : • the scope of health services • national classifications, data collection and coding standards • the national efficient price for in-scope health services, including adjustments to account for variances in service delivery • provide annual national efficient price projections for a 4 year period • resolve cost-shifting and cross-border disputes as required

11. Timetable for implementation of ABF 11 • Introduction of national activity based funding (ABF) • 1 July 2012 - ABF for acute admitted, emergency and non-admitted services starts • 1 July 2013 - ABF for sub acute and mental health services starts • The key short term tasks for the IHPA are: • March 2012 - supply national efficient price for 2012-13 (using 2009-10 data) to states • 1 July 2012 - finalise rolling 3 year data plan • November 2012 - supply national efficient price for 2013-14 (based on 2010-11 data) • November 2013 - supply national efficient price for 2014-15 (based on 2011-12 data)

12. Improving transparency 12 • ABF will improve transparency in hospital funding and use evidence to inform hospital pricing. The IHPA will determine the data it requires. • In relation to hospital services to patients, the IHPA may require: • information identifying the patient to whom the services were provided; • the public or private status of the patient; • the nature of the service; and • the facility providing the service; • The IHPA will draw on hospital activity and costing data from the States data, and may require additional data from Commonwealth, including AIHW, ABS and DOHA

13. Improving transparency: public reporting 13 • The IHPA will improve transparency by publicly reporting on: • the national efficient price • ABF, including release of nationally consistent classifications, costing methods and data and efficient prices • its advice in respect of block funding and the basis of that advice • its findings and supporting analysis on cost-shifting and cross border issues raised by parties to the agreement • The IHPA will also : • report to Commonwealth and State/Territory Ministers, as required • publish an annual report.

14. Data and information requirements • To deliver its functions the IHPA will require the states and the Commonwealth to provide (as necessary): • hospital activity data • hospital costing data • Medicare and pharmaceutical benefits data • advice on block funding criteria • advice on the scope of services • advice and data on cost shifting and cross border arrangements • The IHPA will also seek public submissions on an annual basis to inform its work

15. Data Flowforfundingmodels Hospital Information Systems Hospital Financial Data Costdata - GL mappings -AllocationStatistics • Minimum Basic Data Set-DRG Data EntryTool • Clinical Data, DRG • Resource Consumption Data (preparecostsheet) (analysistool) (volumefile) (costfile) (separationstbl) DiagnosisandProcedures Analysis Reports Combo Software PICQ Software CostReports Coding Analysis Reports Data Analysis Reports

16. Data principles and privacy • The National Health Reform Agreement includes principles to underpin data collection to: • ensure patient privacy • minimise administrative burden • improve the evidence base of hospital funding • The Commonwealth and the States will enter into a National Health Information Agreement by that reflects the objectives of the National Health Reform Agreement

17. Towards a national pricing model for hospitals • What is a hospital? • Normative pricing >>> best practice pricing • Indexation rules • Private patients • http://www.ihpa.gov.au/internet/ihpa/publishing.nsf/Content/EB8EFD07DF85BC70CA25798300033BE1/$File/IHPA%20Draft%20Pricing%20Framework_long%20version.pdf

18. Health Policy Solutions (in association with Casemix Consulting and Aspex Consulting) Page 58

19. Where does quality come in? • NHPA • ACSQH • Sentinel events loops • Clinical pathways • Complaints • Pricing signals • Epidemiology • Clinical trials • R&D new technology marketing

20. Health Policy Solutions (in association with Casemix Consulting and Aspex Consulting) Page 59

21. How to measure quality • Process indicators • Protocol compliance • Outcome indicators • Effort • Inputs • Failures and risks • Value for money

22. The idea of efficient cost • Quicker and sicker? • Is it possible for something to be efficient without quality? • Efficiency ?and? Effectiveness • Unnecessary healthcare – can that be efficient? • Allocative efficiency – allocative quality • Prevention and early intervention • Demand – how much is enough