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Casemix Funding

James Downie A/ Project Director, National Reform Projects. Casemix Funding. National Health Reforms. National Health Reform i) 2008 NPA – “National ABF System” ii) 2010 COAG – “Dominant Funder” iii) 2011 COAG – “Transparency, Transparency and Transparency”

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Casemix Funding

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  1. James Downie A/ Project Director, National Reform Projects Casemix Funding

  2. National Health Reforms National Health Reform i) 2008 NPA – “National ABF System” ii) 2010 COAG – “Dominant Funder” iii) 2011 COAG – “Transparency, Transparency and Transparency” But 1 common theme – National ABF, National Efficient Price, based on nationally consistent costing. ABF starts 1 July 2012

  3. National Reform Agreement • From 2014, the Commonwealth will contribute 45% of “efficient growth” funding. • From 2016, this increases to 50%. • Overtime, the Commonwealth’s share of funding may increase. • There is a guarantee of a minimum $16.4B in additional Commonwealth funding by 2020.

  4. ABF Proposal • 2008 NPA recognises differing degrees of development of various workstreams. • Admitted Acute was completed in June 2010. • Outpatients, ED, Sub Acute and Mental Health was scheduled for June 30 2012. • 2010 and 2011 Agreements propose “proxy” classifications for the underdeveloped areas.

  5. What is ABF?? • A method of allocating funds • Based on activity or outputs • Funding based on agreed volume & price • Funding that provides equity, transparency & accountability • A platform for driving technical efficiency

  6. So what is this ABF thing… The Australian Feb 26 2011

  7. Casemix:Misconceptions vs Actual Case

  8. But is it perfect?? • NO! • Not everything can be output funded – very high cost, statewide services, specialist hospitals • Measures and rewards outputs – no measure of outcomes • Potential for perverse incentives

  9. General Principles • Every Patient Type Identified (acute, sub acute, mental health) • Every Patient Classified (eg DRG B77Z – Headache) • Patients Costed • Cost weights and prices calculated

  10. Limitations of a basic casemix model • One cost weight applied to each and every patient in a DRG • Not every patient in a DRG needs exactly the same level of care • Creates financial risk to providers & purchasers of health care

  11. Total Total Total Cost $ Cost $ Cost $ Days in Hospital Days in Hospital Days in Hospital Cost versus time in hospital Patient Cost versus Time in Hospital

  12. Total Total Total Total Cost $ Cost $ Cost $ Cost $ F i n a n c Fixed Payment i a l R i s k Days in Hospital Days in Hospital Days in Hospital Days in Hospital Financial risk versus time Financial risk versus Time in Hospital F i n Cost > Payment a n c Fixed Payment i a l Cost < Payment R i s k

  13. Victorian casemix model: WIES (Weighted Inlier Equivalent Separations) • Adjusts cost weights for patients with different types of stay • Extended hospital stay (high outlier) • Typical hospital stay (inlier) • Short hospital stay (low outlier) • Same day & overnight care • Allocates additional cost weights for special types of care (co-payments) • Patients requiring ventilation support in ICUs • Some specific conditions & treatments

  14. Cost weight adjustments for length of stay (IES) Average Cost 1.00 Low Boundary High Boundary AVG Length of stay (days)

  15. Setting DRG boundaries • Victorian uses multiplicative boundaries • For most DRGs: • Low boundary = 1/3 * Ave LOS • High boundary = 3 * Ave LOS • For a minority of DRGs: • Low boundary = 2/3 * Ave LOS • High boundary = 3/2 * Ave LOS

  16. Cost weights are updated every financial year • To ensure funding policy captures • Latest cost data • More activity (hospitals & separations) • Changes in clinical practice • New technologies • New policy initiatives • Updated policy • Refresh boundaries • Refresh same-day DRG status

  17. WIES Targets • DH agrees to fund a set number of WIES (Target) • Variable payment for each HS = WIES Target * WIES price • Hospitals largely decide which DRGs to fund • Target payments are made by instalments through a financial year

  18. Why different WIES prices? • Payment = WIES Value x WIES Price • Prices vary by: • Hospital type • Different economies of scale • Remoteness • Patient type • Different funding mechanisms

  19. How much cost does WIES price cover? • About 70-80% of the average cost of treating a patient • WIES price not set to cover 100% of cost • Other sources of funding (e.g. grants) • Change in WIES price should match change in overall average cost of treating a patient

  20. Grant funding • Types of grants • Teaching and Research • New technology • Specified grants for specific reasons • Incentive schemes • Compensation grants • Other funds • Donations, research grants, canteen, laundry services, etc. • These additional funding steams mean that WIES on average reimburses ~70-80% of actual cost

  21. Questions?

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