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Health and Money: A sick system for sick people?

Almost everyone would agree that decisions about health funding and service delivery should be based on robust data.

However, there are many areas of health care where data is not being used to its full extent.

For example, Professor Stephen Duckett from the Grattan Institute argued this week for data on hospital complication rates to be made more widely available in order to drive improvements in quality and safety.

Data can also be used to monitor provider behaviour and ensure that the community is receiving value for money for its investment in health care.

According to the group of dental experts who wrote today’s TalkingTeeth post, this is necessary due to the inherent perverse incentives in our activity-based fee-for-service model, where providers get paid depending on their level of activity (rather than another measure, such as outcome).

Professor Marc Tennant  (International Research Collaborative, Oral Health and Equity, The University of Western Australia) Professor Laurie Walsh, (Dental School, University of Queensland) Professor Estie Kruger (International Research Collaborative, Oral Health and Equity, The University of Western Australia) and Dr Andrew Brosteck (School of Dentistry, The University of Western Australia) argue that this system has a number of fundamental flaws and discuss alternatives, such as capitation and salaried health care providers.

They also propose the development of a new tool to use item number data to monitor provider activity in real time and identify problems, such as over-servicing and ‘up-scheduling’.  This would help ensure that the public funding going into Medicare and other funding programs is being used to achieve maximum community benefits.


Marc Tennant and colleagues write:

While everyone needs an income to live, income is not directly linked to factors that are important to sustaining a strong and healthy society. Modern Western societies have become progressively more money-focused, which can lead to the idea that the higher the income received, the more “important”, or contributory, is the person to society. Obviously this is not true.  Every week, those who come and remove the rubbish bins from our homes are critical linchpins in keeping us healthy, as are maintenance workers who keep modern infrastructure such as transport systems and utilities working. Those who work to maintain water and sanitation systems, including sewerage systems, are instrumental in maintaining public health and increasing life expectancy.

Activity-based models

At the same time we expect that our health systems should not only improve the health of the population, but also be financially sustainable to society. We the tax-payers, contribute a great deal of funds towards these systems – in Australia, around 10% of GDP ($175 billion per year). Much of this funding is distributed to health care professionals through various payment systems. In general practice medicine and dentistry, billions of dollars are distributed through fee-for-service models that are based on item numbers.

Each of these items represents a procedure or intervention, in other words, an input or form of activity, rather than a distinct health output. Hence the question in the private sector, do the activity-based models that now dominate Australian health care provide the best health outcomes?

Of course what activity does link to, is payment directly to those providing the services. Certainly in the private sector, whether that payment comes from personal disposable income, or partly from the taxpayer, the end result is the same, namely that health care professionals are paid based on their activity, with item numbers being the gears that link the system back to the individual practitioner.

Perverse incentives for providers

Practitioners in private practice are running small businesses, so they have to sustain those businesses, taking into account the costs of practice, and how these affect the personal income received. Achieving a profit is the economic reality of operating a small business. Therein comes the dilemma. The health maxim is to do “as little as possible and as much as necessary” to ensure that the health of the patient is improved, however on the small business side the natural emphasis is to maximise profit.

For example, does the practice “up-schedule” (use more complex codes that produce more income), or maximise the total number of items of care provided, to achieve the greatest gap between cost-of-provision and profit? Practitioners do make these sorts of decisions, as has been seen in the different baskets of items provided for patients under different funding conditions. In dentistry, some significant examples have been discussed in previous ‘TalkingTeeth’ articles. There are parallel examples in medicine and other disciplines.

What the discussion misses to this point, is what the patient actually needs, or wants. Surely, that should be the starting point, rather than a post-script!

The distorting effect of fee-for-service

The concern here is that using a simple fee-for-service reimbursement model can lead to warping, where the true needs of a patient for maximising health, are distorted by a desire to maximize wealth by overtreatment. A buffer to the profit motive exists in some places where the government intervenes to alter the dollar value of services in order to incentivise some treatments and discourage others.

But is this the best way, or indeed the only way? There certainly are health systems where item codes for medical and dental treatments do not exist, or are not used as the gears that drive the system. One interesting approach that departs from the focus on “item number production” is capitation. Here a practitioner is paid a fixed monthly or yearly amount to keep a person healthy. Such models have been used in Australia and overseas, and are being used in pilot schemes in the British NHS.

Alternative models

However, these approaches can become distorted as well. Practitioners could scramble to have only healthy people in their care, so they are paid to do little. Alternatively, practitioners may look to refer or “move-on” patients in their pool who are not doing so well, to attenuate the costs of having to look after those with greater needs, as a form of supervised neglect. There could also be attempts to limit accessibility of certain patients to care, whilst still taking the regular capitation payment. Capitation systems can work, but these issues all need to be recognised and addressed.

An alternative approach takes away the small business drivers by having clinicians on a salary. In Scandinavia, this approach has been highly effective in re-focusing clinicians onto providing evidence-based care, and adapting rapidly to new models of care, with an emphasis on prevention and health promotion. The focus is now clearly on the patient and their needs, rather than on the practitioner and their income.

The altruistic emphasis on the betterment of society as a whole and promoting social justice and societal good are powerful benefits of this approach. Salaried clinicians in the defence forces and in the public sector in Australia are contemporary local examples, albeit as a minority of the Australian health system.

The case for increased monitoring

So, if one assumes a lack of will to move strongly to capitation or salaried clinicians as carte blanche approaches, what can be done to make the best from an activity-based system that is focussed on item numbers? The answer is better systems for post-provision monitoring of service patterns. Profiling item number usage is not something new, of course, since DVA and private health insurers have been doing this (albeit with different levels of sophistication) for quite some time.

What is needed, in our view, is a system that operates in real time with analysis by state of the art artificial intelligence based algorithms, to better monitor the health system performance as a whole. What we are suggesting is a system that brings together and holds all health item number data, with associated integrated real-time monitoring systems. The feedback from such a centralised system would empower several activities – the review of patterns of service by practitioners and their peers, as well as third-party providers (including government).

The system would need to develop a high level of sophistication to cover the many recognised specialties within clinical practice, but this could be developed over time, once general practice medicine and dentistry were included as a starting point.

Using health item number data to drive change

If it were mandatory for the data to flow (in a secure and private way) to a centralised independent analysis, then there would be a powerful way to identify changes in the pattern of care and the mix of services being provided to patients. Such information could inform the emergence of appropriate enhanced funding models for care for socially deprived groups in the community, ensuring that taxpayer funds provided were being used in the right way and in the right place.

Likewise, at an all-of-system level, one could quickly see the effect of changes in federal government policy on the provision of services. The monitoring function should enable greater traction for the development of schemes to fund care for patients with disabilities other special needs, which would align with the principles behind the NDIS.

At the moment, our data systems for item numbers are limited and fragmented. Good data can protect us the economic winds that blow across health care, and help keep us safe and well, while limited fragmented unconnected data will not.

This is not a new idea.  Many countries that have effective (and efficient) health systems have been doing this for decades. Organised data in places like Sweden and Norway is saving their health systems billions of dollars a year, and at the same time saving people in the community from inappropriate or unnecessary care.

Thanks to the team at the International Research Collaborative – Oral Health and Equity at The University of Western Australia, who are some of Australia’s leading experts and graduate students driving innovation in dental public health in Australasia, for contributing this series for Croakey readers.

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Croakey Conference News Service 2013 – 2019
2013 conferences
Australian Centre for Health Services Innovation Forum 2013
Australian Health Promotion Association Conference 2013
Closing the Credibility Gap 2013
CRANAplus Conference 2013
FASD Conference 2013
Health Workforce Australia 2013
International Health Literacy Network Conference 2013
NACCHO Summit 2013
National Rural Health Conference 2013
Oceania EcoHealth Symposium 2013
PHAA conference 2013
2014 conferences
#IPCHIV14
AIDA Conference 2014
Congress Lowitja 2014
CRANAplus conference 2014
Cultural Solutions - Healing Foundation forum 2014
Lowitja Institute Continuous Quality Improvement conference 2014
National Suicide Prevention Conference 2014
Racism and children/youth health symposium 2014
Rural & Remote Health Scientific Symposium 2014
2015 conferences
#CPHCEforum
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#OTCC15
Population Health Congress 2015
2016 conferences
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#cphce2016
#CPHCEforum16
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2017 conferences
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Australian Palliative Care Conference
2018 conferences
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