UNDERSTANDING HEALTHCARE FUNDING
AHSPO Conference, 6 August 2015
Andrew Collins
Chief Financial Officer, Bendigo Health
Health Expenditure as Proportion of GDP selected OECD countries 2011
Source: AIHW, Australia’s Health System 2014
Health Expenditure to GDP Ratio - Australia
Source: AIHW, Australia’s Health System 2014
Health Spending as Percentage of Total
Spend - Victoria
35.0%
30.0%
25.0%
20.0%
15.0%
10.0%
FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24
Source: Department of Treasury and Finance : Statement of Finances
National Health Reform Agreement Summary
•
The National Health Reform Agreement was entered into by all states, territories and the
Commonwealth in August 2011. It sets out the shared intention of the Commonwealth, and state and
territory governments to work in partnership to improve health outcomes for all Australians and
ensure the sustainability of the Australian health system.
•
These arrangements aim to deliver a nationally unified and locally controlled health system through:
•
Introducing a number of
territories in partnership
financial arrangements
for the Commonwealth and states and
•
Confirming state and
public hospital services
territories' lead role in public health and as system managers for
•
Improving patient access to services and public hospital
based funding (ABF) based on a national efficient price
•
Ensuring the sustainability of funding for public hospitals by the Commonwealth providing a
share of the efficient growth in public hospital services
•
Improving the transparency of public hospital funding through a National Health Funding Pool
efficiency
through the use of activity
•
Improving local accountability and responsiveness to the needs of communities through the
establishment of local hospital networks (LHNs) and Medicare locals
•
New national performance standards and better outcomes for hospital patients.
Source: The Office of the Administrator of the National Health Funding
Pool
National Health Reform Funding Flows
•
Under the National Health Reform Agreement, National Health Reform (NHR) funding from
Commonwealth and state and territory governments is provided to each local hospital network
as nationally consistent activity based funding (ABF) for most services provided by public
hospitals to acute admitted patients, non-admitted patients, and those presenting to
emergency departments.
•
As part of this, Commonwealth NHR funding for public hospitals is paid monthly into a National
Health Funding Pool which consists of eight state and territory bank accounts with the Reserve
Bank of Australia, known as state pool accounts.
•
Each state and territory also has a separate fund (known as its state managed fund) for
receiving Commonwealth NHR block funding via the National Health Funding Pool, receiving
block funding directly from the state or territory itself, and for making payments of block
funding by the state or territory to local hospital networks.
•
NHR funding happens when the Commonwealth or state or territory government pays
National Health Reform funding into a state pool account or state managed fund.
•
NHR payments occur when the funding deposited into a state pool account or state managed
fund is paid out of the state pool account by the Administrator, or is paid out of the state
managed fund by the state or territory.
•
The following diagram illustrates how this funding flows.
Source: The Office of the Administrator of the National Health Funding
Pool
National Health Reform Funding
Flows
Source: The Office of the Administrator of the National Health Funding
Pool
Cashflow Report (Inflows)
• Each month Health Agency cashflowed & provided
with a Cashflow report comprising:
• Activity Based Funding (Commonwealth)
• State Managed Fund – Block Funding (State)
• Out of Scope (State)
Cashflow Report (Inflows)
Identifies from each Source following elements:
• Acute Health
• Mental Health
• Sub Acute Health
• Drugs
• Home & Aged Care
• Primary & Dental Health
• Public Health
Cashflow Report
Example Cashflow Report
Victorian Model Health - Service Specific
• Statement of Priorities
• Agreed position between Health Service and the Minister for
Health
• Signed by Chair of Health Service board and Minister for
Health
Statement of Priorities
Part A: Strategic overview
•
•
•
Health Service Mission statement
Service profile
Strategic planning
Part B: Performance Priorities
•
•
•
•
•
Patient experience and outcomes performance
Governance, leadership and culture performance
Safety and quality performance
Financial sustainability performance
Access performance
Part C: Activity and funding
Part D: Accountability and funding requirements
Public document - Published on DHHS website
Health Service Funding by Income Category
Categories
Acute Grant Revenue
Sub Acute Grant Revenue
Aged Care Grant Revenue
Mental Health Grant Revenue
Other Programs Revenue
Commonwealth Revenue
Patient Fees - Fee Income
Other Revenue*
Donations and Bequests
Total
* Includes diagnostic fees
Blue highlight – non-government
Annual
147,612,901
33,917,523
18,175,390
37,099,781
36,800,927
25,051,663
17,157,642
26,189,501
395,838
342,401,166
Sources of Funding
Categories
Government
Non-Government
Total
Annual % Total
298,658,185
87%
43,742,981
13%
342,401,166 100%
Acute Funding
Category
Total Funding
Acute
Other
Annual
342,401,166
147,612,901
234,393,683
% of Total
100%
43%
68%
Total Acute
147,612,901
100%
108,007,483
73%
39,605,418
27%
WIES
OTHER
Health Service Funding by Division
Division
Surgical Services
Community & Continuing Care
Medical Services
Psych
Aged Residential Care
Chief Medical Officer
SPF
Capital
Bendigo Hospital Project
Chief Financial Officer
CHERC
Others
Total
Full Year
80,625,341
77,671,060
68,767,020
42,190,756
24,236,204
15,412,522
9,502,412
5,980,834
5,806,282
4,755,773
3,485,090
3,967,872
342,401,166
Surgical Services Division
Categories
Acute Grant Revenue
Sub Acute Grant Revenue
Patient Fees - Fee Income
Other Revenue
Total
Full Year
75,265,024
568,275
2,375,649
2,416,393
80,625,341
Financial Sustainability - Expenditure
Grouping
Annual % of Total
Personnel
245,786,531
72%
Supplies
8,987,867
3%
Prosthesis
6,040,654
2%
Patient Expenses
22,117,208
7%
Drug Supplies
11,870,647
3%
Hotel & Domestic
5,552,598
2%
Repairs/Maint./Contracts
10,296,944
3%
Premises Costs
6,059,125
2%
Administrative Costs
15,835,343
5%
Depreciation/Asset Transfers
6,500,000
2%
Group Charges
234,844
.1%
Total
339,281,761
100%
Financial Sustainability - Margin
Categories
Income
Expenditure
Margin
Annual
342,401,166
339,281,761
3,119,405
Margin as % of turnover
1%
• Finely balanced
• Cost indexation minimum 3%
• Revenue indexation less than 3% - FY16 1.5%, offsetting
insufficient revenue indexation
• Growth funding (WIES and other programs)
• Productivity savings
Productivity Savings - Expenditure
Grouping
Supplies
Prosthesis
Patient Expenses
Drug Supplies
Hotel & Domestic
Premises Costs
Administrative Costs
Total
Full Year *
8,739,495
6,040,654
2,811,506
3,613,183
3,674,054
2,833,979
3,679,314
31,392,185
* Adjusted Expenditure
BHCG Adjusted Expenditure as % of Adjusted
Income Trend
1.85% reduction.
Represents $4.8m pa in FY15
Or 15% of adjusted limit
How Savings Achieved
• Strong focus on achieving best value and savings for all new services,
products and equipment
• Limiting any price increases where there are existing arrangements,
often 0% increase
• Ensure buyer extension options within contracts
• High level of adherence to Purchasing Policies, Procedures and
Instrument of Delegation.
• Central point of contact for all contracts and tendering.
• Robust documentation and procedures
• Fixed Asset purchase approval process and use of EPSIM Committee.
• Good communication between Procurement, Supply, Business
Managers and Executive Directors.
•
ED’s sign a contract/agreement only when Procurement have endorsed.
How Savings Achieved continued
• Supply staff work closely with the Clinical Product Adviser to review
new HPV contracts, obtaining clinical input to change to the most
cost competitive clinically acceptable product on contract.
• Disciplined Clinical Product Evaluation Committee process for the
introduction of new clinical products to the organisation.
• Control of Sales Representative access.
• Review of all items held in Supply Store to ensure contract pricing in
place – regardless of HPV or not.
• Rollout of imprest management through scanning and barcoding.
Benefits include:
– Scanning levels reviewed as a minimum on an annual basis with appropriate clinical staff and
monitored by Supply staff.
– Scanning by Supply staff not clinical staff.
– Removes errors due to poor descriptions in Catalogue or iProcurement free text orders.
– Controls what product used. Cannot obtain substitutes without approval of Supply Manager.
– Streamlined picking process.
Questions