Mr James Downie, CEO, presented on the topic 'Moving towards value based funding' at the Healthcare reform, funding and innovation conference, hosted by AventEdge on 27 June 2017.

1. MOVING TOWARDS
VALUE BASED FUNDING
James Downie
CEO
Independent Hospital Pricing Authority

3. Addendum to the NHRA
• ABF Continues until 2020
• Commonwealth growth capped at 6.5% (price +
volume)
• Reforms to improve efficiency of public hospitals:
‒Healthcare homes
‒Safety and quality considerations
‒Avoidable readmissions
‒Potentially preventable admissions
• New agreement beyond 2020 agreed by 2018
3 www.ihpa.gov.au

4. Strategic intent of ABF
• Transparency
• Value for money
• Independence
• National comparability
• Technical Efficiency
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5. About IHPA
• Independent of all governments
‒Can not be directed on pricing
• Governed by a 9 member board
• 28 member clinical advisory committee
‒Senior medical, nursing and allied health
• 40 staff
‒Data management, statistical, classification, policy
and comms
• Strong consultation and transparency agenda
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6. IHPA’s functions
•Set the National Efficient Price
•Classification systems
•Data standards
•Cross border and cost shifting disputes
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7. Progress so far
• ABF
‒Admitted Acute
‒Subacute
‒Emergency
‒Non-admitted
• Block Funding
‒Community Mental Health
‒Teaching, training and
research
‒Small rural and remote
hospitals
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8. Significant slowdown in costs
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3664
3809
4023
4312
4400
4548 4549
4588
2006-7 2007-8 2008-9 2009-10 2010-11 2011-12 2012-13 2013-14
Cost per NWAU
Growth Rate: 4.2%
Growth Rate: 1.1%

9. Benchmarking portal
•ABF generates masses of data
‒ Cost data collection >1,000,000,000
records
•Used properly this data can help improve
the efficiency of hospitals by reducing
variation
•Have to make it accessible at the
hospital level!

10. 10www.ihpa.gov.au

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12. 12www.ihpa.gov.au

13. Pricing for Safety
and Quality
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14. Premise
• Australian and international costing studies estimate that adverse
events explain between 12.0% and 16.5% of total costs
• ICD-10-AM data is a rich source of safety and quality data,
currently underutilised
• Literature review:
‒ Good evidence that the provision of timely clinical information to
clinicians & managers leads to improvements in patient
outcomes
• Pricing signals:
‒ Provide clear sign that government values safety and quality
‒ Promote discussion of safety and quality systems amongst
clinicians AND managers
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15. Approach
• Three areas of focus:
‒Sentinel Events
‒Hospital Acquired Complications
‒Avoidable readmissions
• Data provision to clinicians and managers a critical
component of work
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16. Sentinel Events
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1. Procedures involving the wrong patient or body part resulting in death or major
permanent loss of function
2. Suicide of a patient in an inpatient unit
3. Retained instruments or other material after surgery requiring re-operation or
further surgical procedure
4. Intravascular gas embolism resulting in death or neurological damage
5. Haemolytic blood transfusion reaction resulting from ABO incompatibility
6. Medication error leading to the death of a patient reasonably believed to be due
to incorrect administration of drugs
7. Maternal death associated with pregnancy, birth and the puerperium
8. Infant discharged to the wrong family

17. Sentinel Events
• From 1 July 2017 no funding for episodes of care with
a sentinel event
• ~100 events per annum (public hospitals)
• Funding impact ~$5 million per annum
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18. Hospital Acquired Complications
• Coded data differentiates between conditions present on
admission, and those arising during admission
• Measured using CHADx system:
‒ Too much noise
‒ No measure of preventability
• Hospital Acquired Complications:
‒ Developed by clinicians
• Clear criteria:
‒ Preventability
‒ Patient Impact
‒ Cost Impact
‒ Clinical priority
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Pressure injury Gastrointestinal bleeding
Falls resulting in fracture and intracranial
injury
Medication complications
Healthcare associated infection Delirium
Surgical complications requiring
unplanned return to theatre
Persistent incontinence
Unplanned Intensive Care Unit
admission
Malnutrition
Respiratory complications Cardiac complications
Venous thromboembolism Third and fourth degree perineal
laceration during delivery
Renal failure Birth trauma
Hospital Acquired Complications

20. HACs add cost
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HAC
Incremental
cost
All HACs 8.6%
Pressure injury 13.8%
Falls resulting in fracture or other intracranial injury 1.7%
Healthcare associated infection 8.8%
Surgical complications requiring unplanned return to theatre 10.9%
Unplanned intensive care unit admission
Respiratory complications 15.9%
Venous thromboembolism 12.4%
Renal failure 21.7%
Gastrointestinal bleeding 10.0%
Medication complications 8.2%
Delirium 9.8%
Persistent incontinence 2.3%
Malnutrition 7.4%
Cardiac complications 11.3%
Perineal laceration 23.2%
Neonatal birth trauma 10.8%

21. Rates vary
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22. Principle referral hospitals
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0
2
4
6
8
10
12
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frequency
Raw HAC rate per 100 episodes

23. Age is a driver
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24. Risk Adjustment Critical
• Patient risk factors:
‒Age
‒DRG
‒Charlson Complexity Score (predicts the one year
mortality for a patient with a range of specific
comorbidities)
‒ICU admission
‒Emergency admission
• Can calculate risk score for every patient
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27. Preventable Readmissions
• All admissions are currently paid for
• Some evidence of preventable readmissions in system
• Currently no nationally agreed, clinically acceptable list
of readmission causes
• List currently being developed – clinically led, data
driven project
• Possible inclusions:
‒Preventable hospitalisations
‒Readmission for HACs
‒Constipation
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28. 28 www.ihpa.gov.au

29. www.ihpa.gov.au
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