MOVING TOWARDS VALUE BASED FUNDING

James DownieCEO

Independent Hospital Pricing Authority

Australia:• Area: 7,692 million km2

(5% of the world’s land area)• Population: 24 million(~3% Aboriginal & Torres Strait Islander) • 1 person every 3,200 hectares

Ireland:• Area: 70,273 km2

• Population: 4.6 million• 1 person every 1.5 hectares

3 www.ihpa.gov.au

Australian Health Care System

• Universal Health Insurance

‒Primary Care

‒Specialist care

‒Public Hospital Care

‒Pharmaceuticals

• Private Hospitals

‒Private Health Insurance

4

• Private and Public Mix

5 www.ihpa.gov.au

v

6 www.ihpa.gov.au

7 Footer appears here

Casemix in Australia

• 25 year history

‒ 1992 AN-DRGs released

‒ 1993 Victoria introduces case mix funding

‒ 1995 National Hospital Cost Data Collection established

‒ 1998 AR-DRGs and ICD-10-AM

‒ 2008-2010 Nationally consistent classification

‒ 2012 IHPA established. National Efficient Price released

‒ 2017 Safety and quality dimensions introduced

8

Strategic intent of ABF

• Transparency

• Value for money

• Independence

• National comparability

• Technical Efficiency9

About IHPA

• Independent of all governments

‒Can not be directed on pricing

• Governed by a 9 member board

• 28 member clinical advisory committee

‒Senior medical, nursing and allied health

• 40 staff

‒Data management, statistical, classification, policy and comms

• Strong consultation and transparency agenda

10

IHPA’s functions

•Set the National Efficient Price

•Classification systems

•Data standards

•Cross border and cost shifting disputes

11

Progress so far

• ABF

‒Admitted Acute

‒Subacute

‒Emergency

‒Non-admitted

• Block Funding

‒Community Mental Health

‒Teaching, training and

research

‒Small rural and remote

hospitals

12

Challenges

• Workforce – scale and skill

‒Coding

‒Costing

‒Analytics – Big data

• Data collections

‒New collections and new items have long lead time

• Controlling activity growth

13Footer appears here

Significant slowdown in costs

14

3664

3809

4023

4312

4400

4548 45494588

2006-7 2007-8 2008-9 2009-10 2010-11 2011-12 2012-13 2013-14

Cost per NWAU

Growth Rate: 4.2%

Growth Rate: 1.1%

Benchmarking portal

•ABF generates masses of data

‒ Cost data collection >1,000,000,000 records

•Used properly this data can help improve the efficiency of hospitals by reducing variation

•Have to make it accessible at the hospital level!

Best Practice Pricing

19

Best Practice Pricing for Hip Fracture

• Good evidence that following clinical guidelines for hip fracture reduces mortality

• Australia has a new Hip Fracture Clinical Registry

• Collects process variables

20

Process measures

21

• Working with clinicians agreed 5 measures to be met:

‒Surgery occurred on the same day or the day following presentation for patients who had surgery

‒An orthogeriatric model of care was used for patients aged over 65 years, and over 50 years for Indigenous patients

‒Remobilisation occurred on the day after surgery (for surgical patients)

‒An abbreviated mental state test was conducted for all patients; pre-operatively for surgical patients

‒A falls and bone health assessment was conducted before the patient was discharged.

Limitations

• Time consuming to design

• Requires registry data

• How much to pay?

• Doesn’t address outcomes

22

Next Steps

• Wider roll out of registry (underway)

• Sourcing and linking registry data

• Determination of bonus quantum

• Consultation and implementation

23

Bundled Pricing

24

Bundled pricing

• IHPA prices public hospital services on an ‘activity based funding’ (ABF) basis wherever practicable.

• ABF separately pricesdiscrete episodes of care.

• Public hospitals may receive multiple ABF payments for a single patient in the course of their care.

• In contrast, a bundled pricing approach involves a single price per patient which reflects the average cost of care across multiple episodes and settings.

25

Intention of bundled pricing

• The intention of a bundled pricing approach:

‒ for resources and funding to be easier for hospitals to manage

‒ to allow financial flexibility to experiment with new models of care

‒ to provide transparency on the total cost of maternity care

‒ to drive a long-term view of good practice.

• IHPA does not intend for bundled pricing to:

‒ prescribe a clinical care pathway

‒ reduce clinically necessary maternity care

‒ impact on care which is unrelated to the maternity episode

26

Activity based funding

Bundled pricing

$

$$$

$

$

$

$

$How can each service be delivered more efficiently?

What is the most effectiveway to deliver care to the patient?

Starting with Maternity care

• In response to the 2016-17 and 2017-18 Consultation Papers, IHPA received stakeholder support for bundled pricing for other conditions.

• Maternity care was identified as a good starting point given stakeholder support, its materiality to the public hospital system and as it has a relatively predictable service delivery pathway with clear start and end points to care.

• In early 2016, IHPA convened the Bundled Pricing Advisory Groupto oversee investigatorywork on bundled pricing for maternity care.

27

Scope of the maternity bundle

Stages of maternity care:

• The Advisory Group has considered what stages of care should be included in the bundled pricing approach.

• The Advisory Group considers that including all stages of care appears to offer the greatest opportunity for service redesign.`

28

Antenatal Birth Postnatal

• Opportunity to addressvariance in the number and type of antenatal visits

• Limited value on its own as the pricewill continue to reflect DRG pricing.

• Its inclusion provides transparencyon the total cost of patient care andallows for long-term hospital planning.

• Opportunity to addressunderservicing inpostnatal care.

How would it look?

• Single payment, risk adjusted by DRG, plus other factors:

‒Diabetes

‒Anaemia

‒Multiple births

• Single patient identifier critical

• Requires good patient level non-admitted data

29

30

Pricing for Safety and Quality

31 Footer appears here

Premise

• Australian and international costing studies estimate that adverse events explain between 12.0% and 16.5% of total costs

• ICD-10-AM data is a rich source of safety and quality data, currently underutilised

• Literature review

‒Good evidence that the provision of timely clinical information to clinicians & managers leads to improvements in patient outcomes

• Pricing signals:

‒Provide clear sign that government values safety and quality

‒Promote discussion of safety and quality systems amongst clinicians AND managers

32

Approach

• Three areas of focus:

‒Sentinel Events

‒Hospital Acquired Complications

‒Avoidable readmissions

• Data provision to clinicians and managers a critical component of work

33

Sentinel Events

34

1. Procedures involving the wrong patient or body part resulting in death or major permanent loss of function

2. Suicide of a patient in an inpatient unit

3. Retained instruments or other material after surgery requiring re-operation or further surgical procedure

4. Intravascular gas embolism resulting in death or neurological damage

5. Haemolytic blood transfusion reaction resulting from ABO incompatibility

6. Medication error leading to the death of a patient reasonably believed to be due to incorrect administration of drugs

7. Maternal death associated with pregnancy, birth and the puerperium

8. Infant discharged to the wrong family

Sentinel Events

• From 1 July 2017 no funding for episodes of care with a sentinel event

• ~100 events per annum (public hospitals)

• Funding impact ~$5 million per annum

35

Hospital Acquired Complications

• Coded data differentiates between conditions present on admission, and those arising during admission

• Measured using CHADx system:

‒Too much noise

‒No measure of preventability

• Hospital Acquired Complication:

‒Developed by clinicians

• Clear criteria:

‒Preventability

‒Patient Impact

‒Cost Impact

‒Clinical priority36

37

Pressure injury Gastrointestinal bleeding

Falls resulting in fracture and intracranial injury

Medication complications

Healthcare associated infection Delirium

Surgical complications requiring unplanned return to theatre

Persistent incontinence

Unplanned Intensive Care Unit admission

Malnutrition

Respiratory complications Cardiac complications

Venous thromboembolism Third and fourth degree perineal laceration during delivery

Renal failure Birth trauma

Hospital Acquired Complications

HACs add cost

38

HAC Incremental

cost

All HACs 8.6%

Pressure injury 13.8%

Falls resulting in fracture or other intracranial injury 1.7%

Healthcare associated infection 8.8%

Surgical complications requiring unplanned return to theatre 10.9%

Unplanned intensive care unit admission

Respiratory complications 15.9%

Venous thromboembolism 12.4%

Renal failure 21.7%

Gastrointestinal bleeding 10.0%

Medication complications 8.2%

Delirium 9.8%

Persistent incontinence 2.3%

Malnutrition 7.4%

Cardiac complications 11.3%

Perineal laceration 23.2%

Neonatal birth trauma 10.8%

Rates vary

39

Principle referral hospitals

40

0

2

4

6

8

10

12

14

fre

qu

en

cy

Raw HAC rate per 100 episodes

Age is a driver

41

Risk Adjustment Critical

• Patient risk factors:

‒Age

‒DRG

‒Charlson Complexity Score (predicts the one year mortality for a patient with a range of specific comorbidities)

‒ICU admission

‒Emergency admission

• Can calculate risk score for every patient

42

43

44

Preventable Readmissions

• All admissions are currently paid for

• Some evidence of preventable readmissions in system

• Currently no nationally agreed, clinically acceptable list of readmission causes

• List currently being developed – clinically led, data driven project

• Possible inclusions:

‒Preventable hospitalisations

‒Readmission for HACs

‒Constipation45

46 www.ihpa.gov.au

www.ihpa.gov.au

47