Interventions to facilitate health workforce restructure.

There are recognised shortages in most health professions in Australia. This is evidence that previous attempts at health workforce planning have failed. This paper argues that one reason for such failure is the lack of appropriate structures for health workforce planning. It also suggests that Australia needs to move beyond planning for particular professions and that health workforce planning needs to be based on identifying skill shortages as much as shortages in particular named professionals. The paper proposes specific policy suggestions to facilitate workforce flexibility and health workforce planning in Australia.

Australian hospital services: an overview.

Hospital services in Australia are provided by public hospitals (about 75% of hospitals, two-thirds of separations) and private hospitals (the balance). Australians use about one bed day per person per year, with an admission rate of about 300 admissions per thousand population per annum. Provision rates for public hospitals have declined significantly (by 40%) over the last 20 years but separation rates have increased. Average length of stay for overnight patients has been stable but, because the proportion of same day patients has increased dramatically, overall length of stay has declined from around seven days in the mid 1980s to around four days in the late 1990s. Overall, the Commonwealth and state governments each meet about half the costs of public hospital care, private health insurance meets about two-thirds of the costs of private hospitals.

Performance of diagnosis-based risk adjustment measures in a population of sick Australians.

OBJECTIVE: Australia is beginning to explore 'managed competition' as an organising framework for the health care system. This requires setting fair capitation rates, i.e. rates that adjust for the risk profile of covered lives. This paper tests two US-developed risk adjustment approaches using Australian data. METHODS: Data from the 'co-ordinated care' dataset (which incorporates all service costs of 16,538 participants in a large health service research project conducted in 1996-99) were grouped into homogenous risk categories using risk adjustment 'grouper software'. The grouper products yielded three sets of homogenous categories: Diagnostic Groups and Diagnostic cost Groups. A two-stage analysis of predictive power was used: probability of any service use in the concurrent year, next year and the year after (logistic regression) and, for service users, a regression of logged cost of service use. The independent variables were diagnosis gender, a SES variable and the RESULTS: Age, gender and diagnosis-based risk adjustment measures explain around 40-45% of variation in costs of service use in the current year for untrimmed data (compared with around 15% for age and gender alone). Prediction of subsequent use is much poorer (around 20%). Using more information to assign people to risk categories generally improves prediction. CONCLUSIONS: Predictive power of diagnosis-base risk adjusters on this Australian dataset is similar to that found in IMPLICATIONS: Low predictive power carries policy risks of cream skimming rather than managing population health and care. Competitive funding models with risk adjustment on prior year experience could reduce system efficiency if implemented with current risk adjustment technology.

The 2003-2008 Australian Health Care Agreements: an opportunity for reform.

The Australian Health Care Agreements govern the relationship between the Commonwealth and States about public hospital funding. The incentives enshrined in the Agreements can shape policy priorities. Although they provide for the largest specific purpose grant a State/Territory receives, the current negotiations should not be seen as providing the only opportunity for reform of health care for the next five years. This paper argues that the negotiations should focus on two key areas where Commonwealth-State frictions are high but reform is feasible. Specifically it is suggested that the Commonwealth should contribute its funding of public hospital inpatient services on a casemix basis, and secondly, should fund outpatient services directly.

Paying for hospital emergency care under a single-payer system.

Hospital emergency services are one of the key drivers of hospital activity, yet there has been surprisingly little attention paid to appropriate funding models for single-payer systems, in which funders must be concerned with issues of access and financial viability of emergency departments. This article analyzes the dynamics of hospital emergency services in terms of the key products and cost drivers. It reviews the currently available systems for categorizing emergency activity and evaluates their applicability for funding purposes with particular emphasis on the susceptibility to gaming of both triage and disposition. It identifies and evaluates 3 models for use in single-payer health systems for funding hospital emergency services (fully variable, fully fixed, and mixed variable/fixed) in terms of the key products and cost drivers in the ED. Approaches to the setting and rebasing of fixed grants are considered. Problems of potential incentive effects and double payment for admitted patients make the setting of variable payments problematic, particularly for patients subsequently admitted as inpatients. Key characteristics of an ED funding model in single-payer systems are proposed.

Payment policy for chemotherapy in public hospitals: a case for splitting DRG 780/R63Z.

OBJECTIVE: To assess the appropriateness of the current way chemotherapy is classified in the Australian casemix classification system. METHOD: Secondary analysis of patient-level data for all cases of DRG 780 separated from Victorian hospitals with clinical costing systems in the years 1994/95, 1995/96 and 1996/97 using the Chi-squared Automatic Interaction Detector (CHAID) option of Answer Tree Version 2.0. RESULTS: Different cancers have different costs. There is a significant difference (F=316.8, df=4, 11091, p=0.00) between the cost of colon cancer (mean=$289), breast cancer (mean=$481), lymphatic cancer (mean=$605), leukemia (mean=$1,118) and other cancers (mean=$512). The differences are sufficiently large that they meet the statistical criteria for splitting a DRG. CONCLUSION: Application of nationally agreed criteria for creation of Diagnosis Related Groups suggests that the existing DRG 780 should be split into five groups: colon, breast and lymphatic cancers, leukemia and a residual 'other cancers' category. The new groups increase the explanation of variation in costs (about a 10% reduction in variance). IMPLICATIONS: It is no longer valid for casemix development to be based on length of stay as a proxy for resource utilisation, especially for DRGs that are primarily same day.

The new health insurance rebate: an inefficient way of assisting public hospitals.

Private health insurance subsidy is now estimated to cost $2.19 billion; government support for private health care includes a further $1.2 billion of Medicare benefits expenditure in hospitals. The subsidy cannot be justified on efficiency grounds, as, on the basis of available evidence and taking casemix into account, public hospitals are more efficient than private hospitals. The original stated objective of the subsidy was to "take pressure off public hospitals". If the insurance subsidy and the Medicare Benefit Schedule rebate expenditure were applied to purchasing public hospital treatment at full average cost, 58% of current private sector demand could be accommodated. If 10% of the demand were met at marginal cost, this would increase to 65%. The objective of "taking pressure off public hospitals" could be more efficiently achieved by direct funding of public hospitals rather than through subsidies for private health insurance.

A therapy-relevant casemix classification system for school-age children with disabilities.

OBJECTIVE: To develop a clinically meaningful classification system of resource-homogeneous groups to describe therapy resource use for school-age children with disabilities. DESIGN: Work-time allocation survey of therapy services (physical therapists, occupational therapists, and speech pathologists). SETTING: Three main disability agencies in Western Australia. CLIENTS: All children of two agencies, a random sample of children of the third. A total of 644 clients and their services were studied. MAIN OUTCOME MEASUREMENT: Minutes of therapy service time expected over a 10-week school term. RESULTS: Forty-six percent of the variance in a measure of time spent with clients can be explained using a classification system of nine groups, based on splitting a mobility measure (4 major groups), then the nature of primary disorder (2 subgroups), independence in self care (3 subgroups), and expressive communication (3 subgroups). CONCLUSION: This study defines a preliminary classification system for the distribution of therapy resources to school-age children with disabilities. This model has the potential to be used to purchase services on a fairer basis than traditional, historical funding methods have allowed.

Hospital use for potentially preventable conditions in aboriginal and Torres Strait Islander and other Australian populations.

The poor state of Aboriginal and Torres Strait Islander health has been documented in many ways, most obviously by comparing the relatively higher age-specific mortality and morbidity rates. This paper demonstrates the use of acute hospital separation data as a way to identify potential deficiencies in providing appropriate primary health care services for Aboriginal and Torres Strait Islander populations. It does so by using 'ambulatory sensitive conditions': those conditions (and procedures) for which high-quality appropriate primary health services deliverable under ideal circumstances are though to potentially reduce or eliminate the need for hospitalisation. Potential or realised access to primary care is not analysed directly using primary health service data. In this study, 1993-94 acute hospital separation data from NSW, Queensland, South Australia, Western Australia and the Northern Territory were used to calculate separation rates and odds ratios for Aboriginal and Torres Strait Islander and non-Aboriginal and Torres Strait Islander populations. Age-specific acute hospital separation rates for ambulatory sensitive conditions were 1.7 to 11 times higher for the Aboriginal and Torres Strait Islander populations studied. This supports clinical contentions that much Aboriginal and Torres Strait Islander morbidity and mortality is preventable and that further consideration is needed to service delivery reform at all levels in the health system and the distribution of funding.

Casemix funding for acute hospital inpatient services in Australia.

Casemix funding was introduced first in Victoria in 1993-94, and since then most States have moved towards either casemix funding or using casemix to inform the budget setting process. The five States implementing casemix have adopted some common funding elements: all use AN-DRG-3; all have introduced capping, msot commonly at the hospital level; and all ensure accuracy of diagnosis and procedure coding through coding audits. Two funding models have been developed. The fixed and variable model involves a fixed grant for hospital overhead costs and a payment for each patient treated, covering only variable costs. The integrated model provides an integrated payment to hospitals for each patient treated, covering both the fixed and variable costs. There are different weight setting processes and base prices between the States, which result in marked differences in the price paid for the same type of case treated in similar hospitals. Learning across State boundaries should be encouraged, with knowledge of what is effective and what is ineffective in casemix funding arrangements being used to develop Australian best practice in this area.

Hospital payment arrangements to encourage efficiency: the case of Victoria, Australia.

The casemix funding arrangements introduced in Victoria on 1 July 1993 represent a significant departure from the previous approaches to public hospital funding in Australia. They are designed to change the economic incentives on hospitals by linking payment to the number and case complexity of patients treated. The new funding arrangements include a combination of fixed and variable payments to hospitals for inpatient services. Outpatient services remain funded on a historical basis. Special payments are made for teaching and research functions. Total payments to hospitals are capped through operation of an 'Additional Throughput Pool' which allows price to fluctuate inversely with volume to ensure an expenditure limit. Because of operations of specific conditions on the Additional Throughput Pool, hospitals were given an incentive to reduce waiting lists. Despite the success in reducing waiting lists and budgets, there are a number of problems with the casemix approach including both technical issues (how are payment rates to be updated?; the failure to address problems of capital) and ethical issues. These are discussed in the paper.

Hospitalisation of children under 15 years in Victoria.

OBJECTIVE: To determine whether the separation rate from the hospital for children aged 0-15 years in Victoria was higher for those resident in the country area of the State in comparison with the metropolitan area and, if it was, to investigate possible explanations. DESIGN: Discharge data from all public hospitals in Victoria for children aged 0-15 years for the financial years 1988-89, 1989-90 and 1990-91 were analysed with detailed analysis being done on the 1990-91 data set. Discharge rates were determined according to the local authority area of residence. Patients were grouped according to Diagnosis Related Groups (DRGs) version 5. RESULTS: Children living in the country area showed a separation rate of 50 per cent greater than that for the metropolitan area. Separation rates for local authority areas were remarkably constant over the three years. Country local authority areas with the highest separation rates had separation rates for asthma and bronchitis (DRG 98), almost four times that of metropolitan residents, and for otitis media and upper respiratory infection (URI), a rate almost ten times that of metropolitan residents. CONCLUSION: It is suggested that variation in medical practice was the most likely explanation for the observed differences.