Casemix Funding In Australia IAAH 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 urgical urgical 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 urgical urgical 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 ector 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 ophistication of Private ector 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 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 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 chedule (MBB) item number that was used for the indicative service.
Example of Contract Per Diem Benefits INPATIENT ACCOMMODATION Benefits Private hared Days Advanced urgery tep 1 $177 $16 1 to 10 Advanced urgery tep 2 $127 $112 11 General urgery tep 1 $169 $155 1 to 7 General urgery tep 2 $127 $112 8 Medical tep 1 $152 $17 1 to 10 Medical tep 2 $127 $112 11 Vaginal Delivery tep 1 $159 $145 1 to 5 Vaginal Delivery tep 2 $118 $104 6 Caesarean Delivery tep 1 $159 $145 1 to 7 Caesarean Delivery tep 2 $118 $104 8 AME DAY ACCOMMODATION Benefit ame day Band 1 $7 ame day Band 2 $84 ame day Band $9 ame day Band 4 $104 Example of pecial Unit Per Diem Benefits PECIAL UNIT ACCOMMODATION Category A ICU Category B ICU Category CC (CCU) Note: certification of diagnosis, treatment & category must accompany claim. Days Benefits $62 $477 $254 Neonatal pecial Care Nursery Category 1 Neonatal pecial Care Nursery Category 1 Neonatal pecial Care Nursery Category 1 Neonatal pecial Care Nursery Category 2 Neonatal pecial Care Nursery Category 2 Neonatal pecial Care Nursery Category 2 Neonatal pecial Care Nursery Category Neonatal pecial Care Nursery Category 1 to 4 5 to 14 15 1 to 4 5 to 14 15 1 to 4 5 $229 $10 $8 $14 $97 $72 $99 $72 4
Example of Theatre Fee Benefits THEATRE FEE BENEFIT Band 1A Band 1 Band 2 Band Band 4 Band 5 Band 6 Band 7 Band 8 Band 9A Band 9 Band 10 Band 11 Band 12 Band 1 Labour Ward Caesarean ection Benefit $40 $75 $125 $15 $209 $01 $69 $495 $688 $64 $869 $1,026 $1,218 $1,59 $1,644 $245 $270 Example of Episodic Benefits Related to MBB MBB Description Benefit 047 Oesophagoscopy/Panendoscopy $17 0475 Endoscopy Dil. Gastric tric. $17 0476 Panendoscopy/Gastroscopy $14 0478 Panendoscopy/Gastroscopy $17 2075 igmoidoscopy Exam GA $167 2078 igmoidoscopy Exam with Dx/Bx <or= 45min $182 2081 igmoidoscopy Exam with Dx/Bx >45 min $129 2084 igmoidoscopy/colonoscopy $17 5
Example of DRG Based Benefits DRG4 Description Pat Cat Payment Days basis hort Days Long Days Long Outlier Private Add D06Z inus, mastd&cmplx mddl ear pr $166 1.10 4 D11Z Tonsillectomy, adenoidectomy $151 1.00 F05A Corony bypassinva inve prccc A $2,22 14.00 20 F05B Corony bypassinva inve pr-ccc A $1,651 10.40 5 16 F06A Corony bypas-inva inve prcscc A $1,49 8.50 4 15 F06B Corony bypas-inva inve pr-cscc A $1,191 7.50 14 F10Z Percutan corny angioplastyami $679 4.50 11 F12Z Cardiac pacemaker implantation $679 4.50 11 F15Z Perc crny angioplsty-amistent $45.00 9 F16Z Perc crny angioplsty-ami-stent $62 2.40 8 N04Z Hysterectomy for Non-Malignancy $876 5.80 1 10 N06Z Female Repro ystem Reconstructive Procs $679 4.50 11 O01B Caesarean delivery w severe $1,27 7.00 1 O01C Caesarean delivery w moderate $1,27 7.00 2 1 O01D Caesarean delivery w/o comp $1,176 6.00 1 11 O60C Vaginal delivery w moderate $1,045 5.0 2 9 O60D Vaginal delivery w/o comp $1,000 5.00 2 9 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 ingle room add-ons. Claiming procedures Auditing procedures Definitions used in rules A lot more detail in the paper 6
Public ector Casemix Introduced in Victoria first in July 199 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 tate 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. eparation of allogenic and other mainly autologous bone marrow transplants. The payment unit is the Weighted Inlier Equivalent eparation (WIE). Inlier cases are those with a length of stay within trim points set as 1/rd (low trim point) and times (high trim point) the average length of stay for the DRG. This is known as LH policy. 7
More Details of Victoria Casemix High Outliers get extra per diem payment based on 70% (surgical) to 80% (medical) of WEI cost weight trimmed of theatre and other one-off costs. Inliers paid on various bases dependent on DRG. ome same day inliers are paid ½ the WEI cost weight. Per annum hospital funding capped by setting WEI targets. WEI targets vary from hospital to hospital. Other Public ector 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
Conclusions hort term efficiency gains can be obtained from episodic Casemix funding using DRGs. Long term problems can develop as funders and providers learn new gaming rules. Any system which groups average resource usage for funding arrangements will cause changes in gaming rules. The best system (author s view) is one which balances incentives for the improvement in efficacy and the long term improvement in system capabilities but is continuously able to adapt to changes in medical technology. Casemix payment systems similar to the Private Hospital system developed in Australia come much closer to meeting this best system criteria than the pure Episodic Casemix systems such as that used in the public sector in Australia. What improvements could be made to Australia s Private ector Casemix benefit structures? 9