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A proposal for improving casemix funding, Victorian-style

While we’re on the subject of hospitals, and how to fund and run them, Dr Harry Hemley has some suggestions for improving Victoria’s casemix funding that he believes may have application nationally.

Hemley, a GP in Melbourne and president of AMA Victoria, writes:

“Hospitals require capacity, efficiency, effectiveness and innovation to thrive in their core function of serving local communities. We are short on hospital capacity — not enough beds. Hospitals are often inefficient and expensive. Hospitals are generally effective at curing the sick, but readmission rates suggest that a lot of hospitals concentrate on short term KPIs.

The key to improving patient care is reform and innovation. We can continue to do more of the same, or we can invest in productivity, build clinical engagement, and look at the best ways of serving our patients.

Casemix, or activity based, funding for hospitals has been a driver of innovation and efficiency in Victorian public hospitals for a decade and a half. Casemix funding has been so successful at driving down costs that the National Health and Hospitals Reform Commission recommended that casemix be rolled out around the country.

However, the short term efficiencies driven by casemix have come with a cost to long term investments in quality assurance, research and teaching. CEOs in Victorian hospitals generally last just a few years, while nurses and doctors often work at the same hospital for more than a decade. Doctors are telling us that the focus by upper management on KPIs and short term performance for political gain are coming at a cost to longer term necessities.

Hospital-specific, short term efficiencies are beginning to have a cost to the long term needs of the Victorian community as a whole.

It’s time to give casemix a tweak. AMA Victoria has asked the Victorian Government to consider a proposal that hospitals receive a proportion of their funding on a capitation basis, with the bulk of funding remaining activity-based. A proportion of hospital funding, rising gradually to ten per cent over five years, would be independent of activity and adjusted to the demographics of the population served. The funding would promote longer term objectives such as quality assurance, teaching and training, for which casemix provides disincentives.

Quality assurance, teaching, training and research provide benefits to the community as a whole, driving quality care for the health system into the future. Casemix actually provides a disincentive for these long term investments in our health system, as it only rewards short-term activity. Further, casemix does not allow more vulnerable communities to be directly targeted for assistance, unless they need hospital care.

After nearly two decades, it’s time to revamp casemix funding to address the weaknesses of short-term incentives. The time for change is now, as COAG considers the NHHRC recommendations for activity based funding. We’ve got it in Victoria, it’s the right way to go, but could be improved by the AMA Victoria proposal.

AMA Victoria has recommended that the half of the indexing of activity payments be redirected to a casemix plus pool. The casemix plus pool would be distributed to hospitals on a weighted per capita basis. Weights could be assigned for socio-economic status, and health indicators such as tobacco use and diabetes prevalence. This would not only improve incentives for long term investments in quality, research and training, but also ensure that vulnerable communities were more protected.

Victorian doctors have the longest experience of activity based funding in the country. We support casemix, but hospital management need some incentives to focus on longer term quality-building objectives. We need the quality assurance activities that drive better patient care. We need the clinical research that demonstrates innovation. We must teach the next generation of nurses, doctors and other health professionals.”

Comments 1

  1. Doctor Whom says:

    Casemix in Victoria has been a true success story. It has driven costs down and promoted true efficiencies. Despite the fears of clinical workers it has also driven safety and quality improvements as new, leaner ways of working are introduced the pressure to ensure that safety and quality are improved has been greater on the newer way than the old tried and true methods.

    However Harry Hemley is right. The casemix has morphed into a narrow procedure focused unit cost funding that doesn’t pay fro anything done outside hospital walls.

    Casemix initially was designed to include capital costs, teaching costs and even some research costs. But it has been eroded over the years to the point where even the DoH and Treasury acknowledge that it now doesn’t include capital costs.

    This means the new or improved buildings and patient flow improvements depending on architecture, are now part of a political lottery instead of a health/safety/efficiency business decision.

    Teaching and research have always been problematic due to the octopus like occupation of teaching hospitals by universities.

    The sponging of universities off the hospital funding is to some extent being unraveled successfully in Victoria and the relationship of hospitals to teaching and research is almost fully transparent in many places.

    This does raise the embarrassing issue of who should and will fund research, teaching and capital.

    The simplest one to solve is the capital issue. A great deal of the infrastructure is inadequate and obviously so even to a 12 year old schoolboy dragged in off the street.

    This ripe for federal funding. It is national infrastructure after all. It will supply building industry jobs. It is to some extent discreet one off funding. Very little recurrent funding is involved. It would stop a churning of staff from run down hospitals to newer infrastructure if workers had a clear commitment to decent building at some time. It would be easy for the Feds and states to combine to allocate priorities. It would disentangle essential infrastructure from state elections and politics. It can be entirely bi-partisan (and is almost that now) There is no reason not to have a clear 20 year plan.

    Victorian hospitals get something like 80% of funding from casemix – other funding is a mix of grants for various purposes.

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#AHMRC16
#ANROWS2016
#ATSISPEP
#AusCanIndigenousWellness
#cphce2016
#CPHCEforum16
#CRANAplus2016
#IAMRA2016
#LowitjaConf2016
#PreventObesity16
#TowardsRecovery
#VMIAC16
#WearablesCEH
#WICC2016
2017 conferences
#17APCC
#ACEM17
#AIDAconf2017
#BTH20
#CATSINaM17
#ClimateHealthStrategy
#IAHAConf17
#IDS17
#LBQWHC17
#LivingOurWay
#OKtoAskAu
#OTCC2017
#ResearchTranslation17
#TheMHS2017
#VMIACConf17
#WCPH2017
Australian Palliative Care Conference
2018 conferences
#6rrhss