Casemix Funding In Australia IAAHS Dresden Conference April 2004 - PDF document

Casemix Funding In Australia IAAHS Dresden Conference April 2004 Brent Walker Historical Perspective • Pre 1975 – Hospitals paid per diem benefits only. • 1975 - introduction of Medibank the national health insurance scheme. • First insurer began paying private hospitals on simple “cost centre” basis. – Per diem benefits for accommodation, nursing etc – Benefits for operating theatre and labour ward usage – Benefits for use of ICU/CCU – Other costs reimbursed on item basis. • Within 2 years the hospitals were demanding the new payment arrangements become more sophisticated. 1

Hospital Classification • It quickly became clear that hospitals that provided more complex services needed additional benefits so 4 categories of hospital was introduced for per diem benefits. • Advanced Surgical • Surgical • Medical • Other (psychiatric and rehabilitation) • Also hospitals that were accredited by an independent accrediting body were paid an additional per diem benefit. Patient Classification • The Federal Government adopted the private sector hospital classification program and quickly ruined it. • In 1986 patient classification was introduced by the Government for private insurer reimbursement of private hospital per diem charges. – Advanced Surgical – Surgical – Medical – Obstetric – Psychiatric – Rehabilitation. • Per Diem benefits were also stratified into levels. – $x for first n1 days, $y for next n2 days, etc. 2

1995 Reforms • Private sector encouraged to contact with private hospitals using Casemix and within a few years all health insurance benefit structures for private hospital treatment were paid either directly or indirectly through contractual arrangements. • Private sector Casemix unit set up to examine the various types of Casemix that could be used. • The conclusion was that current mixture of per diem and cost centre based benefits were a form of Casemix but that the structure was continually evolving and that for some well defined services episodic payments were appropriate. For many in-hospital services the existing structure was more appropriate as it was more flexible and hence provided better certainty for hospitals. • To illustrate the gaming possibilities of a pure DRG based episodic benefit structure the Private Sector Casemix Unit provided many examples of DRGs that covered a wide range of possible resource utilisations. • One DRG covered operative services of such a diverse nature that 8 out of the then 12 operating theatre benefits were payable under the current system with theatre fee benefits ranging from around $200 to well over $2000. Increased Sophistication of Private Sector Hospital Benefits - 2004 • Per diem benefits highly differentiated by patient classification and length of inpatient treatment. • Theatre fee benefits now at 14 levels • Labour ward benefits at 2 or 3 levels • ICU and CCU benefits differentiated and often at different levels depending on stay and complexity of care • Prosthesis appliance list of benefits grew from 3 pages in 1987 to currently about 80 pages. (Cost has increased by around 25% per annum since inception) • Episodic payments used for some DRGs but more often defined by the Medicare Medical Benefit Schedule (MBBS) item number that was used for the indicative service. 3

Example of Contract Per Diem Benefits INPATIENT ACCOMMODATION Benefits Private Shared Days Advanced Surgery Step 1 $177 $163 1 to 10 Advanced Surgery Step 2 $127 $112 11+ General Surgery Step 1 $169 $155 1 to 7 General Surgery Step 2 $127 $112 8+ Medical Step 1 $152 $137 1 to 10 Medical Step 2 $127 $112 11+ Vaginal Delivery Step 1 $159 $145 1 to 5 Vaginal Delivery Step 2 $118 $104 6+ Caesarean Delivery Step 1 $159 $145 1 to 7 Caesarean Delivery Step 2 $118 $104 8+ SAME DAY ACCOMMODATION Benefit Same day Band 1 $73 Same day Band 2 $84 Same day Band 3 $93 Same day Band 4 $104 Example of Special Unit Per Diem Benefits SPECIAL UNIT ACCOMMODATION Days Benefits Category A ICU $623 Category B ICU $477 Category CC (CCU) $254 Note: certification of diagnosis, treatment & category must accompany claim. Neonatal Special Care Nursery Category 1 1 to 4 $229 Neonatal Special Care Nursery Category 1 5 to 14 $103 Neonatal Special Care Nursery Category 1 15+ $83 Neonatal Special Care Nursery Category 2 1 to 4 $134 Neonatal Special Care Nursery Category 2 5 to 14 $97 Neonatal Special Care Nursery Category 2 15+ $72 Neonatal Special Care Nursery Category 3 1 to 4 $99 Neonatal Special Care Nursery Category 3 5+ $72 4

Example of Theatre Fee Benefits THEATRE FEES BENEFITS Benefit Band 1A $40 Band 1 $75 Band 2 $125 Band 3 $153 Band 4 $209 Band 5 $301 Band 6 $369 Band 7 $495 Band 8 $688 Band 9A $643 Band 9 $869 Band 10 $1,026 Band 11 $1,218 Band 12 $1,359 Band 13 $1,644 Labour Ward $245 Caesarean Section $270 Example of Episodic Benefits Related to MBBS MBBS Description Benefit 30473 Oesophagoscopy/Panendoscopy $137 30475 Endoscopy Dil. Gastric Stric. $137 30476 Panendoscopy/Gastroscopy $143 30478 Panendoscopy/Gastroscopy $137 32075 Sigmoidoscopy Exam GA $167 32078 Sigmoidoscopy Exam with Dx/Bx <or= 45min $182 32081 Sigmoidoscopy Exam with Dx/Bx >45 min $129 32084 Sigmoidoscopy/Colonoscopy $137 5

Example of DRG Based Benefits DRG4 Description Pat Cat Payment Days basis Short Days Long Days Long Outlier Private Add D06Z Sinus, mastd&cmplx mddl ear pr S $166 1.10 4 + $ 68 $ 14 D11Z Tonsillectomy, adenoidectomy S $151 1.00 3 + $ 68 $ 14 F05A Corony bypass+inva inve pr+ccc AS $2,223 14.00 1 - 3 20 + $ 68 $ 14 F05B Corony bypass+inva inve pr-ccc AS $1,651 10.40 1 - 5 16 + $ 68 $ 14 F06A Corony bypas-inva inve pr+cscc AS $1,349 8.50 1 - 4 15 + $ 68 $ 14 Corony bypas-inva inve pr-cscc AS $1,191 7.50 1 - 3 14 + $ 68 $ 14 F06B F10Z Percutan corny angioplasty+ami S $679 4.50 11 + $ 68 $ 14 Cardiac pacemaker implantation S $679 4.50 11 + $ 68 $ 14 F12Z F15Z Perc crny angioplsty-ami+stent S $453 3.00 9 + $ 68 $ 14 F16Z Perc crny angioplsty-ami-stent S $362 2.40 8 + $ 68 $ 14 N04Z Hysterectomy for Non-Malignancy S $876 5.80 1 - 1 10 + $ 68 $ 14 N06Z Female Repro System Reconstructive Procs S $679 4.50 11 + $ 68 $ 14 O01B Caesarean delivery w severe S $1,327 7.00 1 - 3 13 + $ 68 $ 14 O01C Caesarean delivery w moderate S $1,327 7.00 1 - 2 13 + $ 68 $ 14 Caesarean delivery w/o comp S $1,176 6.00 1 - 1 11 + $ 68 $ 14 O01D O60C Vaginal delivery w moderate S $1,045 5.30 1 - 2 9 + $ 68 $ 14 O60D Vaginal delivery w/o comp S $1,000 5.00 1 - 2 9 + $ 68 $ 14 Casemix Rules • There is a long list of rules in a contract. There are rules about: – Median Days used for DRG – Inliers – Outliers – Extra payments for CCU and ICU days – Extra Payments for Operating Theatre usage – Single room add-ons. – Claiming procedures – Auditing procedures – Definitions used in rules – A lot more detail in the paper 6

Public Sector Casemix • Introduced in Victoria first in July 1993 – Covered marginal costs of public hospitals – About 75% of public hospital funding came from area/population based formula. • The concept was that the Casemix payments would cover the variable costs of hospitals and the fixed population based area funding would cover the fixed costs. Thus there isno incentive to increase hospital capacity but to utilise existing capacity to the limit. – This concept was later abandoned • Most other states followed in next few years. • Model now mainly used (including by Victoria) is 100% of public hospital costs met by Casemix. This is called the Integrated Casemix model and theoretically provides funding for fixed and variable costs. However State Governments tend to keep control of hospital major capital works programs. Details Of Current Model in Victoria • Coding is from ICD-10 Australian Modification. • DRG version AR-DRG4.1 but modified to Vic-DRG4. – Discriminates between peritoneal and haemodialysis. – Regrouping non-same day principal diagnoses into those requiring and not requiring radiotherapy. – Separation of allogenic and other mainly autologous bone marrow transplants. • The payment unit is the Weighted Inlier Equivalent Separation (WIES). • Inlier cases are those with a length of stay within “trim points” set as 1/3rd (low trim point) and 3 times (high trim point) the average length of stay for the DRG. This is known as “L3H3” policy. 7

More Details of Victoria Casemix • High Outliers get extra per diem payment based on 70% (surgical) to 80% (medical) of WEIS cost weight trimmed of theatre and other “one-off” costs. • Inliers paid on various bases dependent on DRG. Some same day inliers are paid ½ the WEIS cost weight. • Per annum hospital funding capped by setting WEIS targets. • WEIS targets vary from hospital to hospital. Other Public Sector Casemix Issues • Casemix funding is supposed to put hospital funding above politics. • In reality shifts political interference to new levels. • Casemix payments for same DRG often vary from one hospital to another. • In reality, introduction of integrated Casemix funding just introduces new gaming rules for funders and hospitals! 8