Implementing Activity Based Funding – an Irish Experience
Nigel Michell (PHS) and Brian Donovan (HSE)
Irish Facts


Weather:


Four seasons in one day!
•



Can’t predict a thing.

Met Eireann:
•

•

Cool summers, mild wi...
Overview of Ireland – People & Society


Population – 4.6 million (Estimated April 2013)





Land area: 68,883 sq km
...
Overview of Ireland - Economy


Small trade dependent economy, member of the EEC since 1973





GDP €164 billion in (...
Overview of Ireland – Debt to GDP

5
Overview of Ireland – Road to Recovery


Road to Recovery




Challenge was to reduce Government spending from a high ...
Public Sector Health WTEs
WTE Totals

WTE - Per Grade Category

113,000
111,505

44,000

111,025

111,000

9,000

109,753
...
Health Services in Ireland


Department of Health and Children




Health Service Executive (HSE)







Policy Se...
OECD Health Expenditure Growth

Source: OECD Health Data 2012

9
Hospitals in Ireland


Numbers of Hospitals


48 Public Acute Hospitals in ROI
•




38 Hospitals (above) included in ...
Current Health Funding



Previously Retrospective Funding
Block Grant (The Base)







Plus Inflation / Deflation...
Drivers for moving from Retrospective to Prospecting Funding


International Experience




Australia, UK, France, Germ...
What MFTP is and what it isn’t


What is MFTP:


A fairer and more transparent system of resource allocation than the pr...
On the Road to MFTP


Orthopaedic Funding Project



Prospective activity-based approach for 4 elective Orthopaedic DRG...
Orthopaedic Funding Project Results
Jan-Jun 2011 versus Jan-Jun 2012
All Hospitals

Phase 1 Hospitals

Phase 2 Only
Hospit...
Money Follows the Patient (MFTP)


Background






Program for Government committed to a universal, single-tier healt...
Proposed MFTP Interim Governance Structure

Department of
Health and
Children

Healthcare
Pricing Office

Healthcare
Commi...
Money Follows the Patient - Process




Healthcare Pricing Office (HPO) sets the National Price using cost and activity...
Money Follows the Patient - Implementation




Retrospective shadow funding of one hospital in each Group and review ABF...
Money Follows the Patient – Readiness and Where To From Here


Readiness study undertaken by international expert in 2013...
Moving towards ABF – Patient Costing Studies


PowerHealth Solutions (PHS) were contracted by the HSE, in 2010, to undert...
Moving towards ABF – Patient Costing Studies .. 2


Methodology (cont.):








Outpatients, ED and Feeder files s...
Costing Studies Feedback Loop

Hospital Sites
GL Data

Patient Level Data
Integrity Checking
Applets
PHS
Process in PPM
Re...
Cost Output Distribution by Site - 2011

24
Feeder Files By Site - 2011
Hospital

HOS01 HOS02 HOS03 HOS04 HOS05 HOS06 HOS07 HOS08 HOS09 HOS10 HOS11 HOS12 HOS13 HOS14 ...
% Indirect to Direct Costs

40.00%

35.00%

30.00%

25.00%
2009
20.00%

2010
2011

15.00%

10.00%

5.00%

0.00%
HOS04

HOS...
Inpatient Average Cost per Case and ALOS
7,500

9.50

9.16

9.00
7,000

6,968
8.50

8.28

8.17

8.00
6,421

6,500

7.28

6...
Avg Cost per Case
Day Case / Emergency / Outpatient
700

600

575

560

551

247

242

148

154

152

2008

2009

2010

51...
Renal Dialysis
Average Day Case Costs
500.00

431.76

450.00
400.00

387.27

383.97
365.51

350.00

326.40
302.57

300.00
...
Appendicectomy
Average Costs and ALOS
5,500.00

4.10
5,063.50

5,000.00

4,897.50

3.88

3.90
4,479.08

4,414.61

4,500.00...
Conclusion






Ireland recognises the need to more effectively fund quality healthcare
There is a commitment at all...
Thank you!

32
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Nigel Michel, Powerhealth Solutions: Implementing Activity Based Funding – An Irish Experience

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Nigel Michell, Director – European Operations, PowerHealth Solutions delivered this presentation at the 2014 Activity Based Funding conference at Toronto Convention Centre. Presentations at the event explored the risks, benefits and experiences of activity-based funding from around the world. For more information about the annual event, please visit the conference website: http://www.healthcareconferences.ca/activitybasedfunding

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Nigel Michel, Powerhealth Solutions: Implementing Activity Based Funding – An Irish Experience

  1. 1. Implementing Activity Based Funding – an Irish Experience Nigel Michell (PHS) and Brian Donovan (HSE)
  2. 2. Irish Facts  Weather:  Four seasons in one day! •  Can’t predict a thing. Met Eireann: • • Cool summers, mild winters, consistently humid, overcast half the time Rainfall: – 750-1000mm (East) – 1000-1250mm (West)  Sports:    First Duty Free Airport:   Gaelic football Hurling Shannon – 1947. Famous Exports:    Guinness U2 The Cranberries/Boyzone/Wesliffe 2
  3. 3. Overview of Ireland – People & Society  Population – 4.6 million (Estimated April 2013)    Land area: 68,883 sq km    12% of the population is made up of non-Irish nationals Avg Life Expectancy – 80.5 year (2011) 20th largest island in the world 32 Counties (6 Counties in Northern Ireland) Politics  Constitutional Republic with a Parliamentary system of Government •    Fine Gael (Centre Right) / Labour Party (Centre Left) Coalition Uachtarán - Head of State - primarily a figurehead with some constitutional powers Taoiseach (Prime Minister) – Enda Kenny - Head of the Government Main Political Parties: • • Not the traditional Left or Right wing but have emerged as a result of a split during the 192223 Civil War. Centralist with a preference for either Left or Right wing ideologies. 3
  4. 4. Overview of Ireland - Economy  Small trade dependent economy, member of the EEC since 1973    GDP €164 billion in (2012) – 1.5% growth in 3rd Quarter of 2013 (CSO 19/12/2013) Balance of Payments surplus €7.25 billion (2012) Financial Crash  Irish GDP fell by 7% from 2009 to 2010 as a result of: – The global financial crisis – Bursting of the property bubble (late 2009) – Bank guarantee (2008) – Passed burden of Bank losses on to the to the taxpayer   Resulted in very high Debt to GDP ratio in Ireland which led to a series of severe budgets and cutbacks. Unemployment rate:   13.5% (July 2013) 12.5% (Nov 2013) 4
  5. 5. Overview of Ireland – Debt to GDP 5
  6. 6. Overview of Ireland – Road to Recovery  Road to Recovery    Challenge was to reduce Government spending from a high of €63B in 2009 2013 Budget - €54B Reductions in Government spending achieved through: – – – – Reductions in the Capital budget of 50% since 2009 (€3B) Austerity budgets No recruitment Croke Park / Haddington Road Agreements insured that no industrial action would take place in exchange for no lay-offs Public Sector wage reductions of 5-10% Pay cut for new Public Sector employees by 10% from Jan 1, 2011 Redeployment / multi skilling / reorganisation Cost avoidance initiatives Public Sector Headcount: » Aim to reduce by 38,000 by 2015; and » Reduce Pay and Pensions bill by €3.5B by 2015. » Pension levy on Civil Servants based on salary levels (around 7%) » » » » » 6
  7. 7. Public Sector Health WTEs WTE Totals WTE - Per Grade Category 113,000 111,505 44,000 111,025 111,000 9,000 109,753 39,006 8,500 39,000 109,000 107,971 8,351 33,766 106,273 107,000 34,000 8,000 8,005 34,583 104,391 105,000 7,500 29,000 103,000 101,978 7,000 101,503 101,000 24,000 6,792 6,500 98,724 99,000 19,000 97,000 6,000 96,501 13,838 12,900 14,000 95,000 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 WTE Totals 5,500 9,996 9,000 5,000 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: Health Service Personnel Census (as at 31/12 or 31/10 for 2012 figures) Nursing General Support Staff Medical/Dental 7
  8. 8. Health Services in Ireland  Department of Health and Children   Health Service Executive (HSE)      Policy Setting Policy Implementation Service Delivery Funded directly by parliament Currently funder and provider Acute Hospitals:   HSE owned and managed hospitals Voluntary hospitals funded by the HSE •  Hospitals managed by an independent board. They may be privately owned but publicly funded. Economic and Social Research Institute (ESRI)  Independent Government Agency that collects and classifies Hospital Inpatient activity • HIPE (Hospital In-Patient Enquiry) system records all admitted acute activity  Responsible for developing Clinical Coding Standards and training of health coders.  ICD Coding: • •  ICD-10-AM - Version 6 Australian Classification of Health Interventions (ACHI) - Version 6 DRG Classification System: • Australian Refined Diagnosis Related Groups – Version 6.0 8
  9. 9. OECD Health Expenditure Growth Source: OECD Health Data 2012 9
  10. 10. Hospitals in Ireland  Numbers of Hospitals  48 Public Acute Hospitals in ROI •   38 Hospitals (above) included in Casemix funding 21 Private Hospitals (Acute & Mental Health) •  6 + Paediatric Hospitals (made up of both voluntary and HSE hospitals) Will eventually be separate legal entities Statistics:  Acute Inpatient Discharges – 615,577 •     Providing approximately 2,000 beds (Source www.independenthospitals.ie) In 2013, start of legislation to create Hospital Groups • •  12,541 Beds (IP+DC) in 2012 (Source: Health In Ireland – Key Trends 2013:Table 3.1) ALOS = 5.38 days Acute Day Case Discharges – 913,711 ED Attendances – 1.279 million Outpatient Attendances – 2.355 million (Source: Health In Ireland – Key Trends 2013:Table 3.1) Funding:  Public Health Expenditure €13.89 billion 2008 (€'000s) National Hospitals Office 2009 (€'000s) 5,272,179 5,475,000 2010 (€'000s) 2011 (€'000s) 2012 (€’000s) 5,428,000 4,207,000 3,978,000 Source: Adapted from Health In Ireland – Key Trends 2013 – Table 6.2 10
  11. 11. Current Health Funding   Previously Retrospective Funding Block Grant (The Base)      Plus Inflation / Deflation and new developments Plus / minus One Off payments Plus / minus Casemix Adjustment (retrospective - no more than 5% of total Budget) 2010 costs used in 2011 to determine 2012 Funding Funded on the basis of (all budget neutral):  Inaptients and Day Cases – Coded attendances on Hospital Inpatient Enquiry (HIPE) •  CMI = 1 ED – Weightings for First (1) v Return (0.5) visit and CMI of Admitted patients •  TRG Cost Weight * Outpatient Amount (2013 - €130 ) Co-payments:   Inpatients - €75 / night to €750 per annum. Day Cases - €75 (Public patients only) Private Patients – any bed can now be designated Private •    New or Return * ED Amount (2013 - €268) Outpatients – Treatment Resource Groups (TRGs) •  CMI = 1 – Inpatients = €4,580, – Day Cases = €637 Funding €1,000 to €813 per day depending on Shared / Not Shared. Day Case - €407 GP attendance - €50 and ED attendance - €100 Medications – Drugs Payment Scheme – Individual or family - €144 /month Medical Cards:  Free healthcare to low income or unemployed individuals. 11
  12. 12. Drivers for moving from Retrospective to Prospecting Funding  International Experience   Australia, UK, France, Germany, etc Documentation  Future Health - A Strategic Framework for Reform of the Health Service 2012 – 2015 (DOH 2012) • •  HSE - National Service Plan – 2013 •  A new Money Follows the Patient (MFTP) funding model will be introduced in order to create incentives that encourage treatment at the lowest level of complexity that is safe, timely, efficient, and is delivered as close to home as possible. This shift will be used as an opportunity to use money as a lever to achieve quality and safety objectives rather than simply being a means of paying for activity. Ultimately, the MFTP system will be designed so that money can follow the patient out of the hospital setting to primary care and related services (Source: 2012:iv). The core of the Government’s health reform program is a single-tier health service, supported by Universal Health Insurance (UHI) (Source: 2012:iv). The HSE will move to a ‘money follows the patient’ approach on a shadow basis in 2013 and commence funding on this basis in 2014 (Source: 2012:8) HSE – National Service Plan – 2014 • The phased implementation of a ‘money follows the patient’ (MFTP) approach across acute hospitals. In the first phase, the hospitals currently part of the Casemix program will, from January 2014, have their inpatient and day case activity funded on the basis of activity completed and the achievement of predetermined activity targets subject to an overall budgetary ceiling. A new National Pricing Office will be established on an administrative basis and will have responsibility for the pricing / tariff function (Source: 2013:4) 12
  13. 13. What MFTP is and what it isn’t  What is MFTP:  A fairer and more transparent system of resource allocation than the previous Historic Block Grant system • “Providers will be paid for the needs they address, the quantity and quality of the services they provide and the outcomes they deliver” (Source: Future Health. A Strategic Framework for Reform of the Health Service 2012-2015: DOHC:2012:4)      Hospital budgets are set based on agreed target levels of activity (at the DRG level). Hospitals are funded as they produce the activity Will help to drive efficiency and improve quality It is about the distribution of the ‘pie’ and not the size of the ‘pie’ What MFTP is not:    It is not about increasing the level of funding available to the acute hospital system It is not a means to carrying out additional unapproved activity to increase the hospital’s budget It is not a panacea for all the ills of the acute healthcare system 13
  14. 14. On the Road to MFTP  Orthopaedic Funding Project   Prospective activity-based approach for 4 elective Orthopaedic DRGs in 2011 and 2012 Aims: • •  Undertaken in 2011 (7 hospitals) & 2012 (12 hospitals) • •  To identify the issues involved for hospitals and funder (HSE) in moving to a DRG based funding model. Study the impact to learn lessons for a wider rollout of MFTP 4 elective Orthopaedic DRGs - 2 Hip (I03A, I03B) + 2 Knee (I04A, I04B) Funding taken out of Budget model at 2009 costs less 15% cost reduction Key Findings: • HIPS (I03B) – ALOS reduced from 7.8 to 6.1 days. DOSA improved from 22% to 58% • KNEES (I04B) – ALOS reduced from 7.2 to 5.8 days. DOSA improved from 23% to 62% • • • • • • • Need for improved engagement between Clinicians and Coders and with all stakeholders To be effective for funding purposes coding turn around needs to be improved Target determination will be critical (some sites exceeded targets) Clinical Leadership is a critical success factor Patient Level costing is essential to compare cost versus price Training/ Education of all end-users Use data and not opinions for discussion, review and planning. 14
  15. 15. Orthopaedic Funding Project Results Jan-Jun 2011 versus Jan-Jun 2012 All Hospitals Phase 1 Hospitals Phase 2 Only Hospitals -1.7 (7.8 to 6.1) -1.3 (7.6 to 6.3) -3.0 (8.7 to 5.7) +164% (22 to 58) +217 % (18 to 57) +71% (35 to 60) -1.4 (7.2 to 5.8) -1.0 (7.1 to 6.1) -2.7 (7.9 to 5.2) +170% (23 to 62) +177% (22 to 61) +110% (30 to 63) Hip Replacement (I03B) ALOS (Days) DOSA Rate (%) Knee Replacement (I04B) ALOS (Days) DOSA Rate (%) 15
  16. 16. Money Follows the Patient (MFTP)  Background    Program for Government committed to a universal, single-tier health insurance, which guarantees access to medical care based on need, not income supported by Universal Health Insurance (Source: Government for National Recovery 2011-2016: 32) This separation of purchaser-provider functions will enable the development of a money follows the patient system of purchase of care for people without insurance before the implementation of the UHI system (Source: Government for National Recovery 2011-2016: 36) Policy Objectives:     Ultimately support a move to an equitable, single-tier universal health insurance system; Ensure a fairer system of resource allocation; To drive efficiency in the provision of high quality hospital services; and To increase transparency in the provision of hospital services (Source: Money Follows the Patient – Policy Paper on Hospital Financing 2013:3)  Policy Features:      Must be driven by principles of ‘comparing like with like’ and encouraging quality care at lowest level of complexity Should cover all Inpatient, Daycase and comparable outpatient episodes of care Single National DRG price independent of setting Should cover all costs associated with patient treatment Excludes teaching, research, ED, capital, superannuation and bad debts 16
  17. 17. Proposed MFTP Interim Governance Structure Department of Health and Children Healthcare Pricing Office Healthcare Commissioning Agency Hospital Group Hospital Group Hospital Group … Source: Modified from Money Follows the Patient – Policy Paper on Hospital Financing 2013:44 17
  18. 18. Money Follows the Patient - Process    Healthcare Pricing Office (HPO) sets the National Price using cost and activity data Minister of Health sets global hospital budget and national service targets and priorities Healthcare Commissioning Agency (HCA) agrees performance contracts ultimately with Hospital Groups, using capped cost and volume contracts    Hospital Group determines the setting for the activity to be undertaken, eg which hospital     Also includes quality targets underpinned by financial sanctions Additional activity must be pre-approved and will be paid at the marginal rate plus any other factors Will encourage quality and effective care Information on activity provided will be sourced from HIPE (’the bill’) In addition to payment, hospital information will also be used for performance monitoring, audit and quality assessment, as well setting future prices System holds itself to account through structured consultation 18
  19. 19. Money Follows the Patient - Implementation   Retrospective shadow funding of one hospital in each Group and review ABF against Block Funding in 2013. Based on experience in other countries, should be phased in over a number of years.        Phased implementation will reinforce capability development while limiting risk to funder and hospitals Clear governance arrangements to oversee implementation Time frame should be incorporated into a high level plan to act as both a roadmap for implementation and a key communication tool   Inpatients / Day Cases – 2014; Outpatients – 2015 (probably based on Australian Tier 2 Clinic list); and ED – 2016 Full MFTP – 2017 / 2018? Need to communicate phases and timings, clearly, positively and simply. Careful Project Management of process, with milestones, deliverables and goals 19
  20. 20. Money Follows the Patient – Readiness and Where To From Here  Readiness study undertaken by international expert in 2013. Found that:    Ireland is in a good position to commence the implementation of MFTP in 2014 on a phased basis Irish casemix tools on which much of the MFTP system will be based, is in a more highly developed state than many of the countries that already have activity based funding systems Make a start and make it real Immediately •  Don’t let perfection be the enemy of the good! Where To From Here: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Establish Project Management and Implementation Steering Group Develop Implementation Plan Agree on the Phased Implementation approach for 2014 and beyond Develop Funding & Policy Guidelines Introduce Compliance Reports around data collection Establish Data Quality Framework Develop collection timelines and counting rules for Outpatient and ED activity Collect non-coded activity to form check point for MFTP counts and reconciliations Assess staffing and skill sets required for core functions Collect Patient Level data used for MFTP funding decisions in a single data repository 20
  21. 21. Moving towards ABF – Patient Costing Studies  PowerHealth Solutions (PHS) were contracted by the HSE, in 2010, to undertake Patient Costing Studies in up to 20 hospitals per year.  Since this date the following individual studies have been completed in between 6 and 16 hospitals (average 15 hospitals per year): • •   Costing Studies mean that data in standard formats is provided by the Sites to PHS, who process the data in PowerPerformance Manager (PPM). PHS audit the resulting information and return any issues to the Sites, who review their data so that PHS can update the PPM configuration and reprocess.. Standardised Costing Methodology developed in two lead sites and then rolled out to the other hospitals.   2008, 2009, 2010, 2011 and 2012 2013 Study commences in February 2014 (will be last Study). Based on National Specialty Costing processes; Methodology included:        GL Costing Manual; Standard Area Prefixes; Standard Cost Outputs; (Rollup of like Account Codes) Submission Templates; Training on the completion of GL and Patient Level Templates; Mapping Tables for Account Codes; Inpatient data sourced from HIPE; 21
  22. 22. Moving towards ABF – Patient Costing Studies .. 2  Methodology (cont.):       Outpatients, ED and Feeder files sourced from local hospital systems; Standard HIPE codes used for all files, eg Specialty, Admit & Discharge Codes, Gender, etc; Integrity Checking applets; Detailed processing reports and identification of issues to be addressed; QlikView and other reporting tools to allow drill down to the Patient and Service Level. Deliverables:  Annual Patient Costing results; •   Feed into the development of localised AR-DRG Service Weights developed by Laeta Pty Ltd; Reporting Tools; and Vision Report (where to from here with Patient Costing). 22
  23. 23. Costing Studies Feedback Loop Hospital Sites GL Data Patient Level Data Integrity Checking Applets PHS Process in PPM Results Analysis QlikView and other Reporting Tools 23
  24. 24. Cost Output Distribution by Site - 2011 24
  25. 25. Feeder Files By Site - 2011 Hospital HOS01 HOS02 HOS03 HOS04 HOS05 HOS06 HOS07 HOS08 HOS09 HOS10 HOS11 HOS12 HOS13 HOS14 HOS15 HOS16 HOS017 Admitted                  Diagnosis                  Procedure                  Transfer                  Outpatient Clinic Attendances                  Emergency Department                 Imaging                  Pathology                                    Blood Products        Allied Health   Theatre High Cost Drugs Endoscopy     Pharmacy High Cost Consumables ICU / NICU Cardiology                              Recovery    Anaesthetics           Blood Transfusions  Radiotherapy Neuro Referral  DC Procedures  Cystic Fibrosis Plaster Bay   25
  26. 26. % Indirect to Direct Costs 40.00% 35.00% 30.00% 25.00% 2009 20.00% 2010 2011 15.00% 10.00% 5.00% 0.00% HOS04 HOS16 HOS03 HOS14 HOS02 HOS13 26
  27. 27. Inpatient Average Cost per Case and ALOS 7,500 9.50 9.16 9.00 7,000 6,968 8.50 8.28 8.17 8.00 6,421 6,500 7.28 6,218 7.50 7.00 6,000 6.50 5,580 6.00 5,500 5.50 5,000 5.00 2008 2009 2010 Avg Cost 2011 LOS Source: Patient Costing Study Results Databases 27
  28. 28. Avg Cost per Case Day Case / Emergency / Outpatient 700 600 575 560 551 247 242 148 154 152 2008 2009 2010 517 500 400 300 235 200 245 137 100 DC Emergency 2011 Outpatient Source: Patient Costing Study Results 28
  29. 29. Renal Dialysis Average Day Case Costs 500.00 431.76 450.00 400.00 387.27 383.97 365.51 350.00 326.40 302.57 300.00 274.74 272.15 250.00 200.00 150.00 112.53 105.35 81.40 100.00 93.36 50.00 2008 2009 Direct Cost 2010 Indirect Cost 2011 Total Cost Source: Patient Costing Study Results 29
  30. 30. Appendicectomy Average Costs and ALOS 5,500.00 4.10 5,063.50 5,000.00 4,897.50 3.88 3.90 4,479.08 4,414.61 4,500.00 4,042.71 3.70 4,015.73 4,000.00 3,676.68 3,660.21 3.50 3,500.00 3.34 3,000.00 3.30 3.14 2,500.00 3.10 2.92 2,000.00 2.90 1,500.00 1,020.80 1,000.00 881.77 754.40 802.40 2010 2.70 2011 500.00 2.50 2008 2009 Direct Cost Indirect Cost Total Cost LOS Source: Patient Costing Study Results 30
  31. 31. Conclusion      Ireland recognises the need to more effectively fund quality healthcare There is a commitment at all levels to move towards activity based funding and structural change of the health system Whilst, knowledge of some of the concepts is not developed this will come with time A lot of work has been undertaken developing robust prices over the last five years The gradual uplift in the economy, commitment to eHealth strategies and the desire to implement an Universal Health Insurance system mean that now is the right time to make this health funding sea change. 31
  32. 32. Thank you! 32

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