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Casemix Funding
James Downie
A/ Project Director, National Reform Projects
National Health Reforms
National Health Reform
i) 2008 NPA – “National ABF System”
ii) 2010 COAG – “Dominant Funder”
iii) 2011 COAG – “Transparency, Transparency and Transparency”
But 1 common theme – National ABF, National Efficient Price, based on nationally consistent costing.
ABF starts 1 July 2012
National Reform Agreement
From 2014, the Commonwealth will contribute 45% of “efficient growth” funding.
From 2016, this increases to 50%.
Overtime, the Commonwealth’s share of funding may increase.
There is a guarantee of a minimum $16.4B in additional Commonwealth funding by 2020.
ABF Proposal
2008 NPA recognises differing degrees of development of various workstreams.
Admitted Acute was completed in June 2010.
Outpatients, ED, Sub Acute and Mental Health was scheduled for June 30 2012.
2010 and 2011 Agreements propose “proxy” classifications for the underdeveloped areas.
What is ABF??
A method of allocating funds
Based on activity or outputs
Funding based on agreed volume & price
Funding that provides equity, transparency & accountability
A platform for driving technical efficiency
So what is this ABF thing…
The Australian Feb 26 2011
Casemix:Misconceptions vs Actual Case
Misconception
Actual Case
Casemix is a health
policy in its own right
Casemix is a funding tool within
a health policy
Casemix is about cutting
hospital budgets
Casemix is about allocating each
hospital’s fair share of a fixed State budget
Casemix fixes the budgets of individual clinical units within hospitals
Casemix only determines
hospital budgets; CEOs allocate resources within organisations
But is it perfect??
NO!
Not everything can be output funded – very high cost, statewide services, specialist hospitals
Measures and rewards outputs – no measure of outcomes
Potential for perverse incentives
General Principles
Every Patient Type Identified (acute, sub acute, mental health)
Every Patient Classified (eg DRG B77Z – Headache)
Patients Costed
Cost weights and prices calculated
Limitations of a basic casemix model
One cost weight applied to each and every patient in a DRG
Not every patient in a DRG needs exactly the same level of care
Creates financial risk to providers & purchasers of health care
Cost versus time in hospital
Patient Cost versus Time in Hospital
Total Cost $
Days in Hospital
Total Cost $
Days in Hospital
Total Cost $
Days in Hospital
Financial risk versus time
Financial risk versus Time in Hospital Total Cost $
Days in Hospital
Fixed Payment
Cost < Payment
Cost > Payment
Financial
Risk
Total Cost $
Days in Hospital
Total Cost $
Days in Hospital
Total Cost $
Days in Hospital
Fixed Payment
Financial
Risk
Victorian casemix model: WIES (Weighted Inlier Equivalent Separations)
Adjusts cost weights for patients with different types of stay
Extended hospital stay (high outlier)Typical hospital stay (inlier)Short hospital stay (low outlier)Same day & overnight care
Allocates additional cost weights for special types of care (co-payments)
Patients requiring ventilation support in ICUsSome specific conditions & treatments
Cost weight adjustments for length of stay (IES)
Low Boundary
High Boundary
Average Cost
Length of stay (days)
1.00
AVG
Setting DRG boundaries
Victorian uses multiplicative boundaries
For most DRGs:
• Low boundary = 1/3 * Ave LOS
• High boundary = 3 * Ave LOS
For a minority of DRGs:
• Low boundary = 2/3 * Ave LOS
• High boundary = 3/2 * Ave LOS
Cost weights are updated every financial year
To ensure funding policy captures
Latest cost data
More activity (hospitals & separations)
Changes in clinical practice
New technologies
New policy initiatives
Updated policy• Refresh boundaries• Refresh same-day DRG status
WIES Targets
DH agrees to fund a set number of WIES (Target)
Variable payment for each HS = WIES Target * WIES price
Hospitals largely decide which DRGs to fund
Target payments are made by instalments through a financial year
Why different WIES prices?
Payment = WIES Value x WIES Price
Prices vary by:
Hospital type• Different economies of scale• Remoteness
Patient type• Different funding mechanisms
How much cost does WIES price cover?
About 70-80% of the average cost of treating a patient
WIES price not set to cover 100% of cost
Other sources of funding (e.g. grants)
Change in WIES price should match change in overall average cost of treating a patient
Grant funding
Types of grants
Teaching and ResearchNew technologySpecified grants for specific reasonsIncentive schemesCompensation grants
Other funds
Donations, research grants, canteen, laundry services, etc.
These additional funding steams mean that WIES on average reimburses ~70-80% of actual cost
Questions?
