Nigel Michell (PHS) and Brian Donovan (HSE)

Implementing Activity Based Funding – an Irish Experience

Irish Facts

Weather:

Four seasons in one day!

• Can’t predict a thing.

Met Eireann:

• Cool summers, mild winters, consistently humid, overcast half the time

• Rainfall:

– 750-1000mm (East)

– 1000-1250mm (West)

Sports:

Gaelic football

Hurling

First Duty Free Airport:

Shannon – 1947.

Famous Exports:

Guinness

U2

The Cranberries/Boyzone/Wesliffe

2

Overview of Ireland – People & Society

Population – 4.6 million (Estimated April 2013)

12% of the population is made up of non-Irish nationals

Avg Life Expectancy – 80.5 year (2011)

Land area: 68,883 sq km

20th largest island in the world

32 Counties (6 Counties in Northern Ireland)

Politics

Constitutional Republic with a Parliamentary system of Government

• Fine Gael (Centre Right) / Labour Party (Centre Left) Coalition

Uachtarán - Head of State - primarily a figurehead with some constitutional powers

Taoiseach (Prime Minister) – Enda Kenny - Head of the Government

Main Political Parties:

• Not the traditional Left or Right wing but have emerged as a result of a split during the 1922-23 Civil War.

• Centralist with a preference for either Left or Right wing ideologies.

3

Overview of Ireland - Economy

Small trade dependent economy, member of the EEC since 1973

GDP €164 billion in (2012)

– 1.5% growth in 3rd Quarter of 2013 (CSO 19/12/2013)

Balance of Payments surplus €7.25 billion (2012)

Financial Crash

Irish GDP fell by 7% from 2009 to 2010 as a result of:

– The global financial crisis

– Bursting of the property bubble (late 2009)

– Bank guarantee (2008)

– Passed burden of Bank losses on to the to the taxpayer

Resulted in very high Debt to GDP ratio in Ireland which led to a series of severe budgets and cutbacks.

Unemployment rate:

13.5% (July 2013)

12.5% (Nov 2013)

4

Overview of Ireland – Debt to GDP

5

Overview of Ireland – Road to Recovery

Road to Recovery

Challenge was to reduce Government spending from a high of €63B in 2009

2013 Budget - €54B

Reductions in Government spending achieved through:

– Reductions in the Capital budget of 50% since 2009 (€3B)

– Austerity budgets

– No recruitment

– Croke Park / Haddington Road Agreements insured that no industrial action would take place in exchange for no lay-offs

» Public Sector wage reductions of 5-10%

» Pay cut for new Public Sector employees by 10% from Jan 1, 2011

» Redeployment / multi skilling / reorganisation

» Cost avoidance initiatives

» Public Sector Headcount:

» Aim to reduce by 38,000 by 2015; and

» Reduce Pay and Pensions bill by €3.5B by 2015.

» Pension levy on Civil Servants based on salary levels (around 7%)

6

Public Sector Health WTEs

96,501

98,724

101,978

106,273

111,505 111,025

109,753

107,971

104,391

101,503

95,000

97,000

99,000

101,000

103,000

105,000

107,000

109,000

111,000

113,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

WTE Totals

WTE Totals

33,766

39,006

34,583

13,838 12,900

9,996

6,792

8,005

8,351

5,000

5,500

6,000

6,500

7,000

7,500

8,000

8,500

9,000

9,000

14,000

19,000

24,000

29,000

34,000

39,000

44,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

WTE - Per Grade Category

Nursing General Support Staff Medical/DentalSource: Health Service Personnel Census (as at 31/12 or 31/10 for 2012 figures)

7

Health Services in Ireland

Department of Health and Children Policy Setting

Health Service Executive (HSE) Policy Implementation Service Delivery Funded directly by parliament Currently funder and provider

Acute Hospitals: HSE owned and managed hospitals Voluntary hospitals funded by the HSE

• Hospitals managed by an independent board. They may be privately owned but publicly funded.

Economic and Social Research Institute (ESRI) Independent Government Agency that collects and classifies Hospital Inpatient activity

• HIPE (Hospital In-Patient Enquiry) system records all admitted acute activity

Responsible for developing Clinical Coding Standards and training of health coders. ICD Coding:

• ICD-10-AM - Version 6 • Australian Classification of Health Interventions (ACHI) - Version 6

DRG Classification System: • Australian Refined Diagnosis Related Groups – Version 6.0

8

OECD Health Expenditure Growth

Source: OECD Health Data 2012 9

Hospitals in Ireland

Numbers of Hospitals

48 Public Acute Hospitals in ROI

• 12,541 Beds (IP+DC) in 2012 (Source: Health In Ireland – Key Trends 2013:Table 3.1)

38 Hospitals (above) included in Casemix funding

21 Private Hospitals (Acute & Mental Health)

• Providing approximately 2,000 beds (Source www.independenthospitals.ie)

In 2013, start of legislation to create Hospital Groups

• 6 + Paediatric Hospitals (made up of both voluntary and HSE hospitals)

• Will eventually be separate legal entities

Statistics:

Acute Inpatient Discharges – 615,577

• ALOS = 5.38 days

Acute Day Case Discharges – 913,711

ED Attendances – 1.279 million

Outpatient Attendances – 2.355 million (Source: Health In Ireland – Key Trends 2013:Table 3.1)

Funding:

Public Health Expenditure €13.89 billion

2008 (€'000s) 2009 (€'000s) 2010 (€'000s) 2011 (€'000s) 2012 (€’000s)

National Hospitals

Office 5,272,179 5,475,000 5,428,000 4,207,000 3,978,000

Source: Adapted from Health In Ireland – Key Trends 2013 – Table 6.2

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Current Health Funding

Previously Retrospective Funding

Block Grant (The Base)

Plus Inflation / Deflation and new developments

Plus / minus One Off payments

Plus / minus Casemix Adjustment (retrospective - no more than 5% of total Budget)

2010 costs used in 2011 to determine 2012 Funding

Funded on the basis of (all budget neutral):

Inaptients and Day Cases – Coded attendances on Hospital Inpatient Enquiry (HIPE)

• CMI = 1 – Inpatients = €4,580, – Day Cases = €637

CMI = 1 ED – Weightings for First (1) v Return (0.5) visit and CMI of Admitted patients

• New or Return * ED Amount (2013 - €268)

Outpatients – Treatment Resource Groups (TRGs)

• TRG Cost Weight * Outpatient Amount (2013 - €130 )

Co-payments:

Inpatients - €75 / night to €750 per annum. Day Cases - €75 (Public patients only)

Private Patients – any bed can now be designated Private

• Funding €1,000 to €813 per day depending on Shared / Not Shared. Day Case - €407

GP attendance - €50 and ED attendance - €100

Medications – Drugs Payment Scheme – Individual or family - €144 /month

Medical Cards:

Free healthcare to low income or unemployed individuals.

11

Drivers for moving from Retrospective to Prospecting Funding

International Experience

Australia, UK, France, Germany, etc

Documentation

Future Health - A Strategic Framework for Reform of the Health Service 2012 – 2015 (DOH 2012)

• A new Money Follows the Patient (MFTP) funding model will be introduced in order to create incentives that encourage treatment at the lowest level of complexity that is safe, timely, efficient, and is delivered as close to home as possible. This shift will be used as an opportunity to use money as a lever to achieve quality and safety objectives rather than simply being a means of paying for activity. Ultimately, the MFTP system will be designed so that money can follow the patient out of the hospital setting to primary care and related services (Source: 2012:iv).

• The core of the Government’s health reform program is a single-tier health service, supported by Universal Health Insurance (UHI) (Source: 2012:iv).

HSE - National Service Plan – 2013

• The HSE will move to a ‘money follows the patient’ approach on a shadow basis in 2013 and commence funding on this basis in 2014 (Source: 2012:8)

HSE – National Service Plan – 2014

• The phased implementation of a ‘money follows the patient’ (MFTP) approach across acute hospitals. In the first phase, the hospitals currently part of the Casemix program will, from January 2014, have their inpatient and day case activity funded on the basis of activity completed and the achievement of predetermined activity targets subject to an overall budgetary ceiling. A new National Pricing Office will be established on an administrative basis and will have responsibility for the pricing / tariff function (Source: 2013:4)

12

What MFTP is and what it isn’t

What is MFTP:

A fairer and more transparent system of resource allocation than the previous Historic Block Grant system

• “Providers will be paid for the needs they address, the quantity and quality of the services they provide and the outcomes they deliver” (Source: Future Health. A Strategic Framework for Reform of the Health Service 2012-2015: DOHC:2012:4)

Hospital budgets are set based on agreed target levels of activity (at the DRG level).

Hospitals are funded as they produce the activity

Will help to drive efficiency and improve quality

It is about the distribution of the ‘pie’ and not the size of the ‘pie’

What MFTP is not:

It is not about increasing the level of funding available to the acute hospital system

It is not a means to carrying out additional unapproved activity to increase the hospital’s budget

It is not a panacea for all the ills of the acute healthcare system

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On the Road to MFTP

Orthopaedic Funding Project

Prospective activity-based approach for 4 elective Orthopaedic DRGs in 2011 and 2012

Aims:

• To identify the issues involved for hospitals and funder (HSE) in moving to a DRG based funding model.

• Study the impact to learn lessons for a wider rollout of MFTP

Undertaken in 2011 (7 hospitals) & 2012 (12 hospitals)

• 4 elective Orthopaedic DRGs - 2 Hip (I03A, I03B) + 2 Knee (I04A, I04B)

• Funding taken out of Budget model at 2009 costs less 15% cost reduction

Key Findings:

• HIPS (I03B)

– ALOS reduced from 7.8 to 6.1 days. DOSA improved from 22% to 58%

• KNEES (I04B)

– ALOS reduced from 7.2 to 5.8 days. DOSA improved from 23% to 62%

• Need for improved engagement between Clinicians and Coders and with all stakeholders

• To be effective for funding purposes coding turn around needs to be improved

• Target determination will be critical (some sites exceeded targets)

• Clinical Leadership is a critical success factor

• Patient Level costing is essential to compare cost versus price

• Training/ Education of all end-users

• Use data and not opinions for discussion, review and planning.

14

Orthopaedic Funding Project Results Jan-Jun 2011 versus Jan-Jun 2012

15

All Hospitals Phase 1 Hospitals Phase 2 Only Hospitals

Hip Replacement (I03B)

ALOS (Days) -1.7 (7.8 to 6.1) -1.3 (7.6 to 6.3) -3.0 (8.7 to 5.7)

DOSA Rate (%) +164% (22 to 58) +217 % (18 to 57) +71% (35 to 60)

Knee Replacement (I04B)

ALOS (Days) -1.4 (7.2 to 5.8) -1.0 (7.1 to 6.1) -2.7 (7.9 to 5.2)

DOSA Rate (%) +170% (23 to 62) +177% (22 to 61) +110% (30 to 63)

Money Follows the Patient (MFTP)

Background

Program for Government committed to a universal, single-tier health insurance, which guarantees access to medical care based on need, not income supported by Universal Health Insurance (Source: Government for National Recovery 2011-2016: 32)

This separation of purchaser-provider functions will enable the development of a money follows the patient system of purchase of care for people without insurance before the implementation of the UHI system (Source: Government for National Recovery 2011-2016: 36)

Policy Objectives:

Ultimately support a move to an equitable, single-tier universal health insurance system;

Ensure a fairer system of resource allocation;

To drive efficiency in the provision of high quality hospital services; and

To increase transparency in the provision of hospital services (Source: Money Follows the Patient – Policy Paper on Hospital Financing 2013:3)

Policy Features:

Must be driven by principles of ‘comparing like with like’ and encouraging quality care at lowest level of complexity

Should cover all Inpatient, Daycase and comparable outpatient episodes of care

Single National DRG price independent of setting

Should cover all costs associated with patient treatment

Excludes teaching, research, ED, capital, superannuation and bad debts

16

Proposed MFTP Interim Governance Structure

17

Department of Health and

Children

Healthcare Pricing Office

Healthcare Commissioning

Agency

Hospital Group Hospital Group Hospital Group

…

Source: Modified from Money Follows the Patient – Policy Paper on Hospital Financing 2013:44

Money Follows the Patient - Process

Healthcare Pricing Office (HPO) sets the National Price using cost and activity data

Minister of Health sets global hospital budget and national service targets and priorities

Healthcare Commissioning Agency (HCA) agrees performance contracts ultimately with Hospital Groups, using capped cost and volume contracts

Also includes quality targets underpinned by financial sanctions

Additional activity must be pre-approved and will be paid at the marginal rate plus any other factors

Hospital Group determines the setting for the activity to be undertaken, eg which hospital

Will encourage quality and effective care

Information on activity provided will be sourced from HIPE (’the bill’)

In addition to payment, hospital information will also be used for performance monitoring, audit and quality assessment, as well setting future prices

System holds itself to account through structured consultation

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Money Follows the Patient - Implementation

Retrospective shadow funding of one hospital in each Group and review ABF against Block Funding in 2013.

Based on experience in other countries, should be phased in over a number of years.

Inpatients / Day Cases – 2014;

Outpatients – 2015 (probably based on Australian Tier 2 Clinic list); and

ED – 2016

Full MFTP – 2017 / 2018?

Phased implementation will reinforce capability development while limiting risk to funder and hospitals

Clear governance arrangements to oversee implementation

Time frame should be incorporated into a high level plan to act as both a roadmap for implementation and a key communication tool

Need to communicate phases and timings, clearly, positively and simply.

Careful Project Management of process, with milestones, deliverables and goals

19

Money Follows the Patient – Readiness and Where To From Here

Readiness study undertaken by international expert in 2013. Found that:

Ireland is in a good position to commence the implementation of MFTP in 2014 on a phased basis

Irish casemix tools on which much of the MFTP system will be based, is in a more highly developed state than many of the countries that already have activity based funding systems

Make a start and make it real Immediately

• Don’t let perfection be the enemy of the good!

Where To From Here:

1. Establish Project Management and Implementation Steering Group

2. Develop Implementation Plan

3. Agree on the Phased Implementation approach for 2014 and beyond

4. Develop Funding & Policy Guidelines

5. Introduce Compliance Reports around data collection

6. Establish Data Quality Framework

7. Develop collection timelines and counting rules for Outpatient and ED activity

8. Collect non-coded activity to form check point for MFTP counts and reconciliations

9. Assess staffing and skill sets required for core functions

10. Collect Patient Level data used for MFTP funding decisions in a single data repository

20

Moving towards ABF – Patient Costing Studies

PowerHealth Solutions (PHS) were contracted by the HSE, in 2010, to undertake Patient Costing Studies in up to 20 hospitals per year.

Since this date the following individual studies have been completed in between 6 and 16 hospitals (average 15 hospitals per year):

• 2008, 2009, 2010, 2011 and 2012

• 2013 Study commences in February 2014 (will be last Study).

Costing Studies mean that data in standard formats is provided by the Sites to PHS, who process the data in PowerPerformance Manager (PPM). PHS audit the resulting information and return any issues to the Sites, who review their data so that PHS can update the PPM configuration and reprocess..

Standardised Costing Methodology developed in two lead sites and then rolled out to the other hospitals.

Based on National Specialty Costing processes;

Methodology included:

GL Costing Manual;

Standard Area Prefixes;

Standard Cost Outputs; (Rollup of like Account Codes)

Submission Templates;

Training on the completion of GL and Patient Level Templates;

Mapping Tables for Account Codes;

Inpatient data sourced from HIPE;

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Moving towards ABF – Patient Costing Studies .. 2

Methodology (cont.):

Outpatients, ED and Feeder files sourced from local hospital systems;

Standard HIPE codes used for all files, eg Specialty, Admit & Discharge Codes, Gender, etc;

Integrity Checking applets;

Detailed processing reports and identification of issues to be addressed;

QlikView and other reporting tools to allow drill down to the Patient and Service Level.

Deliverables:

Annual Patient Costing results;

• Feed into the development of localised AR-DRG Service Weights developed by Laeta Pty Ltd;

Reporting Tools; and

Vision Report (where to from here with Patient Costing).

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Costing Studies Feedback Loop

23

Hospital Sites

GL Data Patient Level Data

Integrity Checking Applets

PHS

Process in PPM

Results Analysis

QlikView and other Reporting Tools

Cost Output Distribution by Site - 2011

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Feeder Files By Site - 2011

Hospital HOS01 HOS02 HOS03 HOS04 HOS05 HOS06 HOS07 HOS08 HOS09 HOS10 HOS11 HOS12 HOS13 HOS14 HOS15 HOS16 HOS017

Admitted

Diagnosis

Procedure

Transfer

Outpatient Clinic Attendances

Emergency Department

Imaging

Pathology

Theatre

High Cost Drugs

Blood Products

Allied Health

Pharmacy

High Cost Consumables

ICU / NICU

Cardiology

Endoscopy

Anaesthetics

Recovery

Blood Transfusions

Radiotherapy

Neuro Referral

DC Procedures

Cystic Fibrosis

Plaster Bay

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% Indirect to Direct Costs

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

HOS04 HOS16 HOS03 HOS14 HOS02 HOS13

2009

2010

2011

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Inpatient Average Cost per Case and ALOS

6,968

6,218

6,421

5,580

9.16

8.17 8.28

7.28

5.00

5.50

6.00

6.50

7.00

7.50

8.00

8.50

9.00

9.50

5,000

5,500

6,000

6,500

7,000

7,500

2008 2009 2010 2011

Avg Cost LOS

Source: Patient Costing Study Results Databases

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Avg Cost per Case Day Case / Emergency / Outpatient

517

560 551 575

235 247 242 245

148 154 152 137

-

100

200

300

400

500

600

700

2008 2009 2010 2011

DC Emergency Outpatient

Source: Patient Costing Study Results

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Renal Dialysis Average Day Case Costs

274.74

326.40

302.57

272.15

112.53 105.35

81.40 93.36

387.27

431.76

383.97 365.51

50.00

100.00

150.00

200.00

250.00

300.00

350.00

400.00

450.00

500.00

2008 2009 2010 2011

Direct Cost Indirect Cost Total Cost

Source: Patient Costing Study Results

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Appendicectomy Average Costs and ALOS

Source: Patient Costing Study Results

4,042.71 4,015.73

3,660.21 3,676.68

1,020.80 881.77

754.40 802.40

5,063.50 4,897.50

4,414.61 4,479.08 3.88

3.34

3.14

2.92

2.50

2.70

2.90

3.10

3.30

3.50

3.70

3.90

4.10

500.00

1,000.00

1,500.00

2,000.00

2,500.00

3,000.00

3,500.00

4,000.00

4,500.00

5,000.00

5,500.00

2008 2009 2010 2011

Direct Cost Indirect Cost Total Cost LOS

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Conclusion

Ireland recognises the need to more effectively fund quality healthcare

There is a commitment at all levels to move towards activity based funding and structural change of the health system

Whilst, knowledge of some of the concepts is not developed this will come with time

A lot of work has been undertaken developing robust prices over the last five years

The gradual uplift in the economy, commitment to eHealth strategies and the desire to implement an Universal Health Insurance system mean that now is the right time to make this health funding sea change.

31

Thank you!

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