Health System Funding Forum
The Road Ahead
Edmonton, Alberta
November 25th-26th 2010
Jason Sutherland
UBC Centre for Health Services and Policy Research
Health System Funding Forum
• ‘Big picture issues’ that have been used to
drive health system reform and ABF
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Stimulating productivity and efficiency
Reducing lengths of stay
Reducing hospital waiting lists
Increasing competition between hospitals to improve
quality
Encouraging monitoring and benchmarking
Reducing excess capacity, increasing transparency in
hospital funding
Facilitating patient choice
Harmonizing payment mechanisms between public and
private provider
Ettelt, S., Thomson, S., Nolte, E. and Mays, N. Reimbursing highly specialised hospital
services: the experience of activity-based funding in eight countries. London : London
School of Hygiene and Tropical Medicine, 2006.
Health System Funding Forum
• Over $50 billion per year
• What isn’t working with current system?
• Possible provincial issues?
– Perceived inefficiencies
– Unexplained variation
– Transparency
– ‘Bending the cost curve’
Health System Funding Forum
• Why are you here?
– Knowledge exchange
– Learn more about activity based funding
• What are your big picture issues?
– Foster transparency in hospital funding
– Increase value for money for hospital spending
– Specific quality outcomes
– Improve timeliness of access
Health System Funding Forum
• Hospital funding reform:
– Some of the key ‘levers’ to induce changes in hospital
behavior
• ABF, P4P
– How would these funding policies ‘fit’ with existing
provincial funding programs and strategies?
• Who’s reportedly in favor of activity based
funding?
– CMA, BCMA, OHA, Kirby Commission (v.6)
Health System Funding Forum
• What is attractive about activity-based
funding?
– Using funding as a ‘lever’ to increase technical
efficiency
• Economic incentives
• Political incentives
– Many problems are known:
• No incentive to coordinate care, fragmented care
• Over-provide profitable services
• Upcoding ….
Health System Funding Forum
• Activity-based funding, the evidence:
• Tends to shorten lengths of stay
• Tends to increase the volume of hospitalizations
• Little evidence of effect on hospital quality
– Mixed effects:
• Efficiency
• Total spending
– Other potential impacts:
• Geographic access
• Equity of access
Health System Funding Forum
• No evidence:
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Improves evidence-based care
Improves effectiveness or appropriateness
Impact on other sectors
Provider engagement
Health System Funding Forum
• What do the stakeholders think?
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Health human resource implications
Waiting times
Quality
Access
• Geographic access
• Equity of access
– Patient satisfaction
– Hospital financial performance
Health System Funding Forum
• How does one get to activity-based
funding?
– Mutually agreed upon hospital ‘products’
– Deriving a ‘value’ for hospital products
Health System Funding Forum
Defining
the Product
CMG / DRG
Setting the
Value/Price
Payment
Health System Funding Forum
• Generally, the payer
defines the product
groups it is willing to
pay for
• Medicare (DRG)
• Department of
Health, UK (HRG)
• Department of
Health and Ageing,
Australia (AR-DRG)
Defining
the Product
CMG / DRG
Health System Funding Forum
Setting the
Value/Price
Payment
• Cost data is used to
set the value (price)
• Ontario Case
Costing Initiative,
Alberta costing
• Charge data (DRG)
• Micro-costing
studies, Australia
(AR-DRG)
• Hospital financial
data (UK, HRG)
• What’s components
are in?
Health System Funding Forum
Methods of Case Costing:
• Top Down
– Expenditure divided by activity
• Bottom Up
– Individually costing all activities and resources associated with
activity
Level of detail
Accuracy for each
Proc/Dx
Completeness
Cost
Time
Top Down
Less Detail
Bottom Up
Higher
Less Precise
Comprehensive
Less Expensive
Easy to implement
Higher
May Exclude Elements
More Expensive
Longer
Health System Funding Forum
• Costing
Methods:
Health System Funding Forum
• How is the price set?
• Aggregating patient cost data according to
clinical characteristics
Clinical Data
Patient Cost
Average Cost
per hospital
product group
Health System Funding Forum
• What happens when the price is not right?
Health System Funding Forum
• Can activity-based funding be credibly
executed in Canada?
• Some of the key issues
– Data availability
• Clinical
• Financial
• Patient level costing
– Coding quality
• Framework for non-adherence to standards
– Increased demands for timeliness
Health System Funding Forum
• Key ‘lessons learned’ from partners?
– Framework which needs continuous attention
– One tool in the toolkit
– Remove some components
• Capital, teaching, rural, EDs
– Setting the payment amount is really hard to balance
incentives
• ‘best practice price’, ‘fair and achievable’ or average
• MH, geriatric, palliative, rehabilitation
– Funding for growth
– Watch for changes in settings of care, Episode splitting
Health System Funding Forum
• What are additional key issues from the
literature?
– Prepare for change within hospitals
• Activity
• Hospital financial performance
• Management changes
– Prepare for change in other sectors
– Increase the volume of the most profitable patients
rather than those most in need
Health System Funding Forum
• What are some of key implementation
issues?
– Determining service contracts between funder and
hospitals
• Setting desirable levels of activity
– Spending ‘caps’ to limit growth of activity
– Long-term commitment needed for hospitals to respond
to incentives
– Phased implementation
• How quickly and to what level
– Adjust payment amounts away from ‘average’
– Quality?
Health System Funding Forum
• What are some additional important risk
factors?
– What are the critical success factors
• Vision and Leadership
– Political issues related to changing hospital capacity
– Understanding the effects of natural geographic
monopolies
– Threshhold for applicability in less-populated
provinces and territories
– Understanding demand and supply on post-hospital
services
Health System Funding Forum
• What don’t we know?
• Improve evidence-based care
• Improve effectiveness
• Improve safe, coordinated care between sectors
• What are the key issues of P4P?
– Few hospital measures of quality
• Lack of process measures in Canada – ‘silos’ of data
– Formal evaluations of P4P’s effectiveness and efficacy
are few
– Integration of P4P with activity based funding in
Medicare
Health System Funding Forum
• What are you describing as your barriers
to changing funding policies?
– High quality and accessible data
– Expertise to guide implementation
– Stakeholder resistance or support
Health System Funding Forum
• Where are you able to obtain information?
– Provincial governments
– CIHI
– Universities, literature review
• How are you building capacity?
– Attend workshops and conferences
– Participate in provincial initiatives and working groups
– Internally-generated
• Sharing successes
– Understanding of methods
– Benefits
Health System Funding Forum
• What expertise do you feel is lacking?
– Intestinal fortitude
– Education of funding policies affect on:
• Overall spending
• Quality
• Case mix
– Cross-training between finance and clinical areas
• “National Network of Experts”
– Yes/No, more knowledge translation
Health System Funding Forum
• What else is present in the environment?
– Medical Home, Accounting Care Organizations
– Bundling care into ‘Episodes’
• Breaking the silos
• Opportunities for outcome quality measures
• Engaging physicians – transforms incentives
– ‘gain-sharing’ accompanies risk sharing
– Widespread discussion of incorporating quality
measures into hospital/episode funding
jsutherland@chspr.ubc.ca