Improving the measures on which to fund hospital services
Australian Study
In 2005, the primary author of this article was involved with a leading Australian teaching hospital in a study to link patient incident data with patient costing information.
In the end, the project proved relatively simple and provided interesting results namely:
89% of adverse events resulted in an average cost increase of 20%
The potential annual savings through better management of adverse events in this one hospital alone was between $6 and $17 million dollars
The study offered a realistic and replicable methodology to distribute to other hospitals.
Unfortunately, the study went no further, which should not come as a complete surprise given there is no funding component under the Australian Casemix reimbursement model that rewards quality.
Agreement on Care Quality
Fast forward to February 2011 and the Council of Australian Governments (COAG) Heads of Agreement: National Health Reform; have agreed in principle to the following quality related reforms, namely:
An expert panel is to be established to advise COAG on the effective implementation of the national standards and the right balance between reward and facilitation payments
The Australian Commission on Safety and Quality in Health Care will develop national standards for clinical safety and quality improvement
The National Health Performance Authority (NH PA), which is to be established from 1 July 2011, will monitor performance of Medicare Locals and Local Health and Hospital Networks, and produce public reports on the performance of hospitals and health care services that are uploaded to the MyHospitals website.
In the US, Medicare is introducing Value Based Purchasing whereby a portion of a hospital's reimbursement will be linked to quality, in the form of Quality Indicators (70 percent) and Patient Satisfaction (30 percent). Value based purchasing in the US is designed to be budget neutral. Medicare will ‘withhold’ 1 percent of its hospital payments in 2013. Hospitals will get greater than 100 percent of their ‘withhold’ back at the end of the year if their combination of Quality Indicators and Patient Satisfaction falls in the top 25 percent of hospitals in the USA. For those hospitals that fall below the top quartile, they will receive the appropriate percent back based on their percentile position for the year. Therefore some hospitals will stand to lose significant amounts of their ‘withhold’.
While it is difficult at this time to ascertain what Australian hospitals will need to put in place in order to manage quality, it is clear that a focus on quality will bring positive results, both for the patient and the organisation as a whole.
Case Study
At Community Hospital Anderson in the US for example, where Dr VanNess is CEO, their focus on quality has facilitated an average cost per adjusted discharge of US$1,800 less than their peers. Data provided by the Indiana Hospital Association Databank Program in the US, for the period 1/1/2010 through 31/12/2010, highlights the cost per adjusted discharge as shown in the graph below.
As a physician, who also happens to be a hospital CEO, Dr VanNess has always felt that the focus should always be on quality and patient satisfaction while maintaining cost effectiveness.
“We don’t know exactly where healthcare reform will take us but I do believe that if an organisation is to be successful they must have strong performance on established quality and patient indicators accompanied by low costs. To accomplish these goals, accurate ‘real time’ information to make well-informed decisions will be critical.”
Like the US, Australia should link the efficient price in some way with quality. In addition, while the US appears to have their quality payment framework in place, Australia has yet to provide any clear definitions around the model.
It is evident that the creation of the National Health Performance Authority (NHPA) should result in the introduction of rigorous performance indicators at a national level, which in principle should drive both health system quality and performance in Australia.
However at this time there is very little information regarding the areas for performance measurement and whether Australian public hospitals will be rewarded, through the ‘efficient price’ under activity based funding (ABF) or some other means, for quality.
This is important because while US hospitals can put a financial value on the change and therefore have some measure of encouragement to put in place the required processes and systems required to appropriately collect the required data, Australian hospitals remain in the dark.
Data Quality
This introduces a second aspect of quality that is also important to consider, namely data quality. Although the clinical quality indicators remain unknown at this time, what is clear is that the ‘efficient price’ under ABF will be derived from the current costing systems used in Australia. Given the well known issues around the lack of quality and consistency across Australian hospitals’ costing information, it seems clear that rewarding hospitals for the production of robust costing information should also fall under the NHPA's purview.
Therefore, under ABF, Australian hospitals should also be rewarded for submitting quality data. If the past 15 years under casemix funding has taught us anything, it’s that a national approach with a focus on standardising the use of the information nationally to better manage hospitals, rather than on the development of the funding model itself (alongside the concept of ‘central processing/ local ownership’ and a ten-year plan for ongoing improvements and refinements in the costing process) is what's required if ABF is to deliver the anticipated gains for which it is being put in place.
