QUESTION
Describe your assignment
One of the key features of the health services reform process underway in Australia is the change to ‘Activity Based Funding” hospital services. Review the related reports and COAG decisions of the last two years. Document and explain the proposed process of funding acute impatient services that is scheduleed to take effect from july 1 2012. Your answer will explain the role of the various state and federal organisations that will enable this funding to take place. How is this process different from the earlier funding model? Will it be better? Explain how and why for whichever case you argue.
SOLUTION
Activity Based Funding: Background
The Council of Australian Governments (made up of governments of the jurisdictions and the Commonwealth Government) in 2008 signed the National Partnership Agreement wherein they had jointly agreed to go ahead with Activity Based Funding approach at national level for public hospital services. The National health Reform Agreement was found in August 2011,states and territories, and the Commonwealth Government.
Through Activity Based Funding, it will enable it to fund all the public hospitals as per the number of services and different kinds of services that is provided by them. As the efficient price of delivering services increases .Under National Health Reform, the Commonwealth Government will increase its contribution to 45 per cent by the end of 2014-15, this amount will be increased to 50 per cent from 2017-18 onwards. This has been done for efficient growth funding for hospitals and thus better services being provided by them.
It is a well known fact that budgets set by the states and the government budgets will be burdened as there has been an increase in health spending. This increase in health spending is not only due to the ageing population but also tremendous increase in chronic diseases and the diseases which are preventable. Another reason for the increased spending on health is the rising costs of health care facilities. This may significantly strain their ability to provide the services that may be available in the current market.
The commonwealth government has been taking various actions to address these challenges which include Transparent National Health Funding Pool. The NHFP will be operational by 1 July 2012.
With the implementation of activity based funding the funding processes of the government will become flexible, streamlined, transparent and collaborative. An independent administrator and the single National Health Funding Pool will be created. The local hospitals will be paid from the pool which will based on the national consistent and definite approach to activity based funding.
There has been a move and certain steps taken up for setting up and to have in place activity based funding maintained by a nationally-consistent strategy to activity-based funding for services that is being or may be provided in public hospitals as per the services that will be available in the markets
Activity based funding is a management functioning tool which will not only help in capturing information in detail and also will accurately measuring the costs of delivery. It will also provide assistance in creating a relationship between funds that have been allocated for providing the services and the services that are actually provide. This will help in encouraging managers to look into the variations in costs, the factors that are responsible for the variation and practices to subdue these factors so these can be managed at a limited level which will result in improved efficiency and effectiveness of the services being provided.
Effective performance management will be very important for establishing and analyzing the amount spent and the services we provide to patients and the community.
The roadmap to Activity Based funding is shown below as per the National Health Reform Agreement for its implementation (Department of Health, 2011);
By July 2012
- Acute Admitted Care
- Non Admitted Care
- Emergency Care
By July 2013
- Mental health care
- Sub Acute Care
Activity Based funding, focuses on key performance indicators and brings focus on the outcomes delivered to the patients. Thus the budget we are allocated by the government for the services provided in efficient and efficient manner with higher degree of satisfaction to the patients.
The application of activity based funding in all Australian states currently using it is complemented by Activity Based Management (ABM). In practice this involves a Performance Management Framework (PMF) designed to drive better patient outcomes and more efficient service delivery.
As per the report by Government of Western Australia (Department of Health) following steps will be taken in working towards Activity based funding:
- Open and clear association among the services provision and allocation of funds will be created
- Build up management’s focal point on results, outcomes and quality to ensure that continuous improvement is being taking place.
- Improve the planning and provide the ability for managers to recognize, administer and decrease discrepancy in practices of clinical, patient outcomes and rates.
- Support with the National effort crosswise the existing element and work streams of the Australian funding of health system and any succeeding and agreed reform.
Following are the main National Bodies that have been involved in promoting the Activity Based funding as per the National Health Reform Agreement (Department of Health, 2011)
National Health Performance Authority
The National Health Performance Authority (NHPA) will prepare quarterly report that will provide the information on the performance of public and private hospitals. This will be done through Hospital Performance Reports and Healthy Communities Reports.
Australian Commission on Safety and Quality in Health Care
The Commission has been established to recommend standards for safety that have been agreed upon nationally and improvement in the quality of services that are being provided, they will also report publicly on performance against the standards, that have been set As per the financial arrangements of the national health reform agreement the maximum amount of funding available from the Commonwealth to the States and Territories for activity based funding will be $ 55.52 million whereas there will no contribution from states for activity based funding. While there will be contribution to workforce enabler. (Chirikos and Sear 2000)
The payments to states that will be made in advance to develop a nationally consistent activity based funding capability is shown below:
| State | 2012-13 |
| $m | |
| NSW | 16.45 |
| Vic | 14.73 |
| Qld | 9.38 |
| WA | 5.52 |
| SA | 4.80 |
| Tas | 1.66 |
| ACT | 1.32 |
| NT | 1.66 |
| Aust | 55.52
|
The role of states and federal organizations
Role of the Commonwealth
(Counsel of Australian Governments, n.d )
The roles and responsibilities of the Commonwealth and the states have been defined in order to facilitate smooth funding. The roles of both Commonwealth and state hav been discussed below.
Below are the roles and responsibilities of Commonwealth
(a) The first main responsibility of the commonwealth will to act as national leader and coordinate to develop the classification system at national level. The responsibility also includes developing model for funding required for activity based funding.
(b) Commonwealth will manage the pilot cost studies along with the states and will also review it for future enhancements.
(c) Commonwealth will be engaging and working with the private sector. The aim of this working will be to enable simpler and clearer comparison of the performance of public sector with that of the private sector.
(d) The mechanism shall be established for supplying Commonwealth the data required for planning and implementation
(e) The arrangements shall be made for reporting and implementation of monitoring at the national level
Although these have been set as the roles and responsibilities of the Commonwealth but most of them have to be done in collaboration with the states and territories with Commonwealth playing the lead role.
Role of the States and Territories
(Counsel of Australian Governments, n.d)
The roles and responsibilities of the States and Territories are as follows:
(a) The State will have to develop the costing models and implement the classification system. Also on agreement by the COAG states will also be developing the funding models that are required for establishing Activity based funding.
(b) The state s will also be reviewing the cost studies and the management along with the Commonwealth
(c) The states will also be playing critical role in establishing the governance arrangements. These arrangements will include standards and the audit arrangements that are independent and fully efficient. This will be required to enhance the application of activity based costing consistently as per the agreement.
(d) The mechanism shall be established for supplying Commonwealth the data required for planning and implementation
(e) The arrangements shall be made for reporting and implementation of monitoring at the national level
Future of Activity Based Funding: A Boom or Nothing
Acute inpatient services are the first stage for the implementation of activity based funding as mentioned in the national health reform agreement.
Different policy objectives of activity based funding can result in different approaches that will guide the design and framework for pricing within which Activity based funding will be implemented. This can be illustrated with the help of an example. For framing a policy for more transparency in the system it will be necessary to have first hand information on the base price and the price of different structures of hospitals and health providers to adjust the cost differences.(Busse and Quintin 2011) The concern for societal value will be there in case the main purpose of activity based funding is to reduce the waiting time.
Activity based funding will be the cornerstone that will provide for more transparent, efficient and equitable allocation of resources. It will also give governments and the community confidence that scarce health funds are being used as efficiently as possible
The ABF enables to promote improvements in the safety and quality of patient care. This has been done by reducing numbers of patients who stay a long time in hospitals. This not only promotes better discharge planning but also the development of alternative care
Activity based funding will help in balancing the following objectives
(www.health.wa.gov.au ,n.d)
The other advantages of activity based funding will be that it will help in allocating resources service providers in a more equitable and transparent manner that are delivering similar services.
The other advantage of activity based funding will be:
- Setting the prices at an efficient rate or in other words at a particular average level
- Mechanism can also be set for testing scenarios of demand management
- Mechanisms for implementation of incentives and/or rewards to service providers can also be set
- Another advantage of activity based funding will be the implementation of a Safety and Quality funding and monitoring framework;
- For negotiation with Government regarding the budget appropriation a clear process setup will also be made.
References
- Department of Health 2011,Annual Performance management Framework, viewed on 4th april 2012, http://www.health.wa.gov.au/activity/docs/abf_abm_training_and_education_manual.pdf
- Counsel of Australian Govenrments , n.d, National Partner Agreement on Hospital and Health Workforce Reform, Retrieved from http://www.coag.gov.au/intergov_agreements/federal_financial_relations/docs/national_partnership/national_partnership_on_hospital_and_health_workforce_reform.pdf,
- Government of Western Australia Department of Health n.d, Understanding the ABF Operating Model, Retrieved from http://www.health.wa.gov.au/activity/docs/Modules_Operating_Model.pdf
- Busse, R., and W. Quentin. (2011). Moving towards transparency, efficiency and quality in hospitals: conclusions and recommendations, in: R. Busse, A. Geissler, W. Quentin and M. Wiley (Eds), Diagnosis Related Groups in Europe: Moving towards transparency, efficiency and quality in hospitals, Maidenhead: Open University Press.
Chirikos, T. N., & Sear, A. M. (2000). Measuring hospital efficiency: a comparison of two approaches. Health Services Research, 34(6), 1389-1408
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