Mr. Phillip Battista Senior Manager, Funding Models SA Health

1. ACTIVITY BASED FUNDING CONFERENCE CONFERNCE 2013South Australian CasemixFunding Model – Recognition Of Differences In Patient Severity Across Hospitals Mr. Phillip Battista Senior Manager, Funding Models SA Health

2. South Australian Casemix Funding Model • Casemix funding was implemented in South Australia in 1994-95. • From the beginning it was recognised that the SA funding model needed to account for differential patient severity, based on the premise that: • “patient severity correlates with the intensity of patient care and therefore the volume of resources consumed.”

3. Recognising Patient Severity • Using the most current available Diagnostic Related Groups (DRG's). • Costliness Index - applied in 1994-95 in lieu of severity index. • Discrete Intensive Care Unit funding introduced in 1995-96. • Severity Index introduced 1997-98. • Paediatric cost weights introduced 2000-01.

4. Costliness Index • Costliness Index 1994-95, in lieu of severity index • was applied based on the type of hospital i.e. teaching, large non-teaching and other. • Metropolitan teaching hospitals 10% loading on inpatient funding • All other metropolitan and country hospitals 5% loading

5. Costliness Index Profile

6. Severity Index 1997-98 • Introduced to address concerns that: • DRG’s did not adequately account for variation in the severity in patient illness (Horn,1985) leading to a potential inequity in the funding allocation

7. Severity Index 1997-98 • The Severity Index calculation is largely based on: • the number of diagnosis and procedure codes per patient record regressed against length of stay (Hindle, Degeling, and van der Wel, 1997) • length of stay is used as proxy for cost • derives the additional days due to the number of diagnosis and procedures

8. Severity Index – Counting Diagnosis & Procedures • Diagnoses listed as co-morbidities and complications (CC’s) are used in the assignment of DRGs. • Weighted score, based on the Patient Clinical Complexity Level (PCCL) is computed in the DRG assignment. • CC’s weighted on a severity scale of 1 (minor) to 4 (catastrophic) • Procedure codes used in the assignment of a DRG

9. Severity Index – Adjusted Length of Stay • Patient length of stay varies and between hospitals for identical DRGs. • Variation in length of stay can be due to variations in clinical practices. • ABF can assist in removing inefficiencies due to inappropriate length of stay by promoting good clinical practices.

10. Severity Index – Adjusted Length of Stay • Variation in length of stay to non clinical practices • variation in hospitals’ length of stay can reflect activity differences not accommodated in the DRG classification • e.g. discharge practices • The focus of the SI is on the clinical aspects of an episode

11. Severity Index – Adjusted Length of Stay • The SI calculation excludes: • Short stay outliers • Long stay outliers • Intensive care days • Same day and Day only DRGs • The calculation: • Eliminates the difference in mean length of stay between hospitals • Maintains the variation in length of stay between patients in the same hospital

12. Severity Index – Adjusted Length of Stay

13. Prediction of Length of Stay for Weighted Complexities and Procedure

14. Severity Index For Each Hospital Predicted days of stay Number of days predicted by the regression model • Base DRG days of stay • Number of days expected on the basis of the DRG data alone • Crude Index • Predicted/Base • Rebased Index Value • Crude index of each individual hospital divided by the lowest hospital crude index from the 25 hospitals where an SI was deemed appropriate

15. Severity Index v Costliness Index

16. Severity Index – Possible Revision • Use diagnosis and procedures NOT used in the assignment of a DRG • Flagged by the Grouper • Only weight and count what has not been used in the DRG grouping process • Reflects the complexity not picked up in the DRG grouping process

17. Severity Index

18. Severity Index Comments/Questions • In the SA Casemix Funding the Severity Index redistributes funding between hospitals • For two of the largest tertiary hospitals, one gets an additional $6m (2.3% of inpatient funding) and the other gets $18m (4.8%) • Length of stay is being used as a proxy for cost. Is this a reasonable approach? • What is going to be the impact of the new AR-DRG v7.0?

19. Severity Index Comments/Questions • There is a proposed review of the Patient Clinical Complexity Level Scores • Are the current PCCL scores appropriate? • Does the SI have more meaning with updated PCCL scores?

20. Application of Severity Index in National Model • Is there need for a Severity Index in a National ABF model? • It could be argued that the new DRG version and the review of the PCCL scores will better explain the variations in complexity therefore costs. • However in a recent review by KPMG is was reported that there: • “appears to be a systemic difference in costliness between the tertiary referral hospitals and other major city hospitals after adjusting for patient attributes (casemix, remoteness indigenous status (KPMG November 2012).”

21. Questions ?