Casemix Evolution A Journey from the Dark Side From Casemix Sceptic to Convert

1. Casemix Evolution � A Journey from the Dark Side��From Casemix Sceptic to Convert Jim Birch, Lead Partner, Health and Human Services, Ernst &Young � November 2008

2. Introduction Where it all began�...a justified sceptic The journey from the dark side and back again�.to a Department CE The view from another room�..a consultant Form follows function � why objective financial allocation systems will be more important than ever Slash and burn or sophistication � A different way at looking at performance optimisation in hospitals

3. Circa 1993 � South Australia � The case for the prosecution Post State Bank collapse - Casemix introduced to provide �fairer� budget allocation process � large budget cuts impacting on the casemix price Large variable component to budget allocations A number of health services with large transition grants�.mine included Variable knowledge and capability � financial and clinical management, quantitative methods and business analysis Focus on counting, reducing overhead costs, los (without adequate community support) and maximising codes Gaming Sent the wrong signals � fee for service outputs not outcomes Some destructive competitive behaviours

4. Circa 1995 � 1997 � The case for the defence

5. Circa 1995 � 1997 the case for the defence ICT investment in patient information, clinical costing and some decision support Analysis of clinical outliers and clinical variations � however preaching to the converted � Orthopaedics Devolution of authority to clinical managers Dashboard KPI reporting and management focus on KPIs � however largely financial Emergence of Safety and Quality focus � AIMS, readmissions, unnecessary admissions, ouliers (low and high cost) Emergence of process improvement - Deming

6. It was coming good but we hit the wall The budget cuts caught up Competition for staff Too many casemix exceptions � �site specific grants� Taken over by social engineers � the emergence of DHS structures We reduced authority and responsibility at the clinical unit level IT investment not maintained Demand drove tactics � often ad hoc and uncoordinated pilots Not all jurisdictions maintained the focus on �payment for results�

7. A State Health and Human Services CEO � Circa 2002 to 2006 70% managing up, 30% managing the health system One headline equals days of distractions Working hours are 24/7, 335 days a year 13 unions Ministerial staffers Clinical staff allegiances The media Community expectations Commonwealth and State demarcations �.a true strife of interests Headaches and heartache are the lot of health chiefs The pressures of heading a health department can quickly destroy the hopes and aspirations of chief executives, says Mike Daube

8. Impact on Casemix of strong political influence in health care Raft of site specific payments Exceptions frequently made Year end adjustments for budget overruns Loss of cost centre accountability Reduction of variable component vs. fixed component Gradual return to historical based funding Clinician dissatisfaction

9. The View From Another Room � A Consultant