Shane Solomon, Chair, IHPA Wednesday 15 May 2013

1. The Independent Hospital Pricing Authority’s first year Shane Solomon, Chair, IHPAWednesday 15 May 2013

2. Welcome

3. Why does this matter? Fairness – same service, same price (no special deals) Consumer focus – paid for treating people (not reducing services to cut costs) Innovation globally – an ABF system that recognises out of hospital work and hospital avoidance Accountability for public funds – transparency and efficiency A “currency” for making better purchasing decisions (ABF is just the price….system manager must decide what to buy)

4. IHPA’s establishment The National Health Reform Agreement signed by all first Ministers in August 2011 IHPA legislation passed in November 2011 by federal parliament Pricing Authority members appointed in January 2012 (approved by COAG, with each state nominating)

5. The Pricing Authority

6. What does IHPA do? Independently set the national efficient “price” for activity based funded public hospital services Determine loadings for unavoidable costs Determine what is a “hospital service” and so eligible for Commonwealth funding Specify all of the classification, costing, data and modelling standards that are required to develop the national efficient price Determine the criteria for defining block funded services and their national efficient cost Resolve cross border disputes and assess cost shifting

7. IHPA’s strategic intent – modus operandi Transparency Value for money - efficiency Independence through collaboration National consistency Evidence-based

8. A lot has been done in a short time… Key determinations included: Resolving what is a “hospital service” for Commonwealth funding purposes ABF classification systems for acute inpatients, emergency department services, outpatient services, sub-acute, and mental health adjustments IHPA’s Pricing Framework and National Efficient Price for ABF services using a single currency (NWAU)(x two years): Indexation factor used to translate historical costs to future prices Pricing private patients in public hospitals Loadings for indigeneity, remoteness and specialist paediatric hospitals based on empirical data For Block Funded services: Block funding criteria to COAG for approval Small rural hospitals (weighting matrix based on size and location, at $4.738 million per weighted unit)

9. The threshold challenge: what is a “hospital service” All admitted programs including hospital in the home and forensic mental health inpatients All emergency department services Non-admitted services: Outpatient clinics Other non-admitted services that meet the criteria below The non-admitted service must be: Directly related to inpatient admission or emergency department attendance; OR Intended to substitute directly an inpatient admission or emergency department attendance; OR Expected to improve the health or better manage the symptoms of persons with physical or mental health conditions who have a history of frequent hospital attendance or admission; OR Reported as a public hospital service in the Public Hospitals Establishment Collection 2010

10. Critical Success Factors.... The Health Reform Agreement – gives the building blocks and $ for future IHPA behaves independently, is driven by evidence, and takes a national approach Collaboration with jurisdictions – strong governance framework Testing of ideas (Draft Pricing Framework), and openness to respond to sound arguments Commitment of each jurisdiction to introduce ABF funding The transition years…time to get it right, or as right as possible before ‘go live’ Commonwealth ABF funding in 2104-15

11. What next – the core? After the transition – from 2014-15 onwards greater focus on system manager’s purchasing policy frameworks Improved costing information – still variable quality New mental health classification system – cross care type boundaries Teaching, training and research Review classification systems for emergency department and outpatient services

12. What next – towards international standard Towards world leading pricing: Incentives for the more efficient/efffective service option? Quality incentives, P4P? Pre-defined care pathways? Bundled payments that incentivise substitution of better care options? Paying for value? Normative pricing demands greater clinician engagement and will be a challenging debate that has to happen

13. Thankyou