Department of Health National ABF Implementation Reference Group Meeting 2, 23 March 2012. Bruce Prosser Director – Funding and Information Policy. Overview of topics. Update since previous meeting Key milestones and timelines Structure of new funding arrangements
IHPA National Efficient Price (NEP) Determination (establishes Commonwealth funding distribution)
Includes NEP, cost weights, details of funding model, block funding criteria, scope of services, indexation
Finalisation of State Government funding distribution
Discussion - Timelines
Key issues at interface of NEP Determination and Victorian Government funding distribution
Level at which the NEP is set
New ABF models
A single NEP for multiple service streams
A new approach to pricing private patients in public hospitals
These issues are discussed in turn in the following slides
Level at which NEP is set
The IHPA appears likely to set a NEP that is significantly higher than the price implied by the average Victorian cost data, due to the inclusion of national data in the calculation. While this could be interpreted as a funding increase to the Victorian system, in practice:
Commonwealth price paid + State price paid < 100% NEP
as there is a capped Commonwealth funding envelope for 2012-13 and 2013-14 and the NEP is tied to average cost, not current funding levels.
This will manifest in an apparent ‘reduced’ percentage of the NEP paid by the State and Commonwealth to hospitals.
Discussion - new funding models
The new funding models appear likely to generate significant implied funding redistribution across health services.
The preferred option for Victoria in managing these distortions is to pay the NEP at a reduced level. This will enable the payment of transitional block grants to maintain continuity in Health Service Budgets.
Given that some of the new ABF models are more robust than others, the price reduction would need to be greater in some service streams (i.e. Outpatients and Emergency Departments)
Single NEP for multiple service streams
The IHPA appears likely to propose a single price for all service streams. This price would be anchored to the average acute admitted price to maintain the stability of the price over time.
Under this approach, the new ABF models appear likely to result in an implied funding redistribution across service streams (i.e. more funding to flow to Emergency Departments and Outpatients at expense of Acute Admitted).
This is due to ED funding for admitted patients being removed from the admitted price and paid instead through an ED activity payment for both admitted and non-admitted patients
Also newer and less comprehensive datasets underpinning ED and outpatient cost weights is likely to overstate their relative weight.
Discussion - single NEP for multiple service streams
The preferred option for Victoria in maintaining continuity in service stream funding is to apply adjustments to the percentage of the ‘single’ price paid by the state.
The level of these adjustments would need to vary according to service stream (i.e., greater reduction in the price paid for Emergency Departments and Outpatients).
The IHPA appears likely to propose a set of separate private patient weights. They advise that this is due to observed variation between DRGs in the level of private patient costs/revenue.
This is in contrast to a single private patients price as is currently in place in Victoria.
Discussion – private patients
In its response to the IHPA’s draft NEP determination, Victoria intends to oppose the creation of separate private patient weights, in favour of a single private patient price.
In the event that separate private patient weights are established, what do you think the impact will be on:
Doctors undertaking private work?
The intention of ABF reform is to wherever possible remove specified grants and roll into price.
IHPA draft pricing framework included two broad criteria for block funding being:
The technical requirement for ABF are not met
The absence of economies of scale.
It is proposed in 12/13 to continue the following specified grants:
National Funded Centres
National Funding Body
The National Funding Body will make payments out of the National Funding Pool (for ABF activities) directly to health services. This will encompass both State and Commonwealth funding. Administered by a single National Administrator.
State managed fund will be created to manage teaching, training, research and block (specified) grants.
Direct DH funding to Health Services will continue for the provision of capital and services provided in a community setting (for example dental services, primary care, Home and Community Care (HACC), Residential Aged).
Funding from third parties such as the Commonwealth for specific functions (pharmaceuticals, TAC and WorkCover for compensable payments) to continue.
States will control the timing and amount that flows out of the National Funding Pool to LHNs
Commonwealth contribution to the Pool occur once a month. Depending on timing, States may be required to cashflow Commonwealth component.
Victoria is reviewing the payment arrangements to health services (or LHNs) to ensure there is no unintended cashflow or liquidity issues.
Health services will continue receive aggregate payment information from the State, encompassing all payment sources.
Proposed meeting dates
12 April 2012 (scheduled)
23 April 2012 (out of session feedback on draft response)
15 May 2012 (TBC)
13 June 2012 (TBC)