This document discusses key terms related to healthcare pricing models: Money Follows the Patient (MFTP), Activity-Based Funding (ABF), and Diagnosis-Related Groups (DRGs). MFTP links funding to patients rather than institutions. ABF breaks up block grants into itemized payments for episodes of care. DRGs measure the complexity of treatments and illnesses, dividing healthcare into over 1,000 "products" that are priced based on cost data from hospitals. The goal is to link funding to the actual volume and types of services provided rather than blanket budgets.

1. Maureen Cronin
Healthcare Pricing Office
March 2015
MFTP, ABF, DRGs
What does it all mean ?

2. So many terms …..
 MFTP or “Money Follows the Patient”
 ABF or “Activity-Based Funding”
 DRGs or “Diagnosis-Related Groups”

3. Linking patients with money
MFTP

4. Itemised Payments
 MFTP is ‘linking’ money with patients - not
‘following’ them
 MFTP is simply Activity-Based Funding (ABF)
 Breaking up block grants into itemised
payments
 ABF stands alone – does not need UHI

5. Price and Volume
 Currently a hospital has a block budget of
€200m
 Number of “cases” is specified
 Not linked to “complexity” – is it toenails or
liver transplants
 We will remove this budget and create a price
and volume relationship
 Pay for episodes of care (ABF)

6. Current Assessment Model
Blue Hospital Green Hospital
Budget €100,000,000 €100,000,000
Expenditure €101,000,000 €99,000,000
Variance -€1,000,000 €1,000,000
Patients 10,000 20,000
Cost per patient €10,100 €4,950

7. New Model Example
Blue Hospital Green Hospital
Type of work Complex Simple
Measure of
complexity 2.5 0.75
Weighted units of
activity 25,000 15,000
Cost per weighted
unit €4,040 €6,600

8. Trend in Cost
Inpatient cost
per weighted
Unit
Daycase cost
per weighted
unit
2008 €5,042 €706
2013 €4,309 €564
change -733 -142
% change -15% -20%

9. Determining price
 Inpatient and day-case treatments are
recorded at hospital level
 1.5 million treatments per annum
 We use the International Classification of
Diseases – Australian Modified (ICD10-AM 8th
Edition)
 16,000 diagnoses
 These merge into 1,048 “diagnosis-related
groups” - DRGs

10. Health System ‘Products’
 DRGs measure complexity of care
 “Weighted units of care” – not cases
 Effectively 1,048 “products” delivered by the
health system
 We have €4.8 billion to spend in our hospitals
this year
 We should be able to list products adding
back to that amount

11. Product Listing
DRG
Measure of
Complexity
Inpatient
Cases
Inpatient
Weighted
Units of
Activity
I03B-Hip Replacement without
Catastrophic Complications or
Comorbidities 2.42 2,721 6,415
I04B-Knee Replacement without
Catastrophic or Severe Complications
or Comorbidities 2.53 1,576 3,868
D11Z-Tonsillectomy and/or
Adenoidectomy 0.73 4,677 3,452
8A06A-Tracheostomy with Ventilation
>95 hours with Catastrophic
Complications or Comorbidities 24.9 88 2,779

12. Cost Collection
 Each year we collect hospital expenditure
data via the audited accounts from 38 of the
50 Irish hospitals
 Merge cost and activity data to create a price
for each DRG
 Cost data is 2 years old – what about
innovation ?

13. Determining Volume
 Need assessment gives the health system a
sense of the volume of work which can be
anticipated
 Demographic trends, chronic conditions,
acceptable wait times
 Negotiate with funders for resource
 Model how much work can fit within the
‘envelope’ of funding
 Weighted units linked with money

14. Key considerations
 Not a ‘race to the bottom’
 Zero harm to patients
 Prices must reflect the appropriate staffing
levels to deliver safe care
 Must support reducing length of stay,
increasing output, improving outcomes
 Must enable innovation and new
developments in medicine