Post on 31-Dec-2015
description
The National Pricing Model Explained
2013 ABF Conference16 May 2013
1
Trent YeendSenior Advisor, Pricing & Funding
IHPA
Overview of workshop
1. ABF and the National Health Reform Agreement
2. Introduction to the National Pricing Model
3. Introduction to the National Cost Model
4. Transformation of National Cost Model to National Pricing Model
5. National Pricing Model by service category
6. Application of the National Pricing Model
2
§1Activity Based Funding
andthe National Health Reform Agreement
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ABF and the NHRA
Under the National Health Reform Agreement, the role
of the national efficient price is to:
a. form the basis for the calculation of the
Commonwealth funding contribution; and
b. provide a relevant price signal to States and Local
Hospital Networks.
- Clause B114
ABF and the NHRA
Two features of role (a) in ABF:
1. Volumes of (price) weighted activity at the Local Hospital Network (LHN) level are used to proportionally allocate each state/territory’s Commonwealth funding among their LHNs.
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ABF and the NHRA
Two features of role (a) in ABF:
2. Growth in price and activity over time are used to determine growth in Commonwealth funding over time.
• Commonwealth funds 45% of growth from 2013-14 to 2016-17, then 50% of growth from 2016-17 onwards.
CFx – Commonwealth funding in year xPx – Price in year xVx – Volume in year x
CF2 = CF1 + 45% (P2 V2 – P1 V1)
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 . . .45% 45% 45% 50% 50% 50%
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ABF and the NHRA
Other features of the NHRA:
1. Scope of services
2. Private patients
3. Other Commonwealth programs
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§2Introduction to
the National Pricing Model
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The National Pricing Model
The National Pricing Model provides the means by which IHPA prices hospital services. It comprises three parts:
National Pricing Model
National Efficient Price (NEP)
Price Weights Adjustments
Combine to define theNational Weighted Activity Unit (NWAU)
Price of hospital service = NEP × NWAU
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The National Pricing Model
• Define a measure of relative price across all in-scope activity.
• Are used to modify price relativities to account for legitimate and unavoidable variations in the costs of service delivery.• Are defined across the
classification systems within each service category.
Adjustments
Non-Admitted
Emergency
Subacute
Acute
Price Weights
ActivityWeighted Activity(NWAU)
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Price Weights Adjustments
The National Pricing Model
Price Weights
Acute admitted care
Subacute & non-acute admitted care
Emergency care
Non-admitted care
Adjustments
1. Paediatric
2. Specialist Psychiatric
3. Indigenous
4. Remoteness
6. Private Patient Service
7. Private Patient Accommodation
1 2 3 4 5 6 7
5. ICU
Mental health care
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The National Pricing Model
National Efficient Price (NEP)
• Converts NWAU to price
‒ The NEP is the price of 1 NWAU
‒ Price = NEP x NWAU volume
• Measures year on year change in mean price
‒ Based on mean price of in-scope acute admitted activity
‒ Excludes changes in mean price caused by changes in
activity profile (ie. case-mix change).
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Change in NEP and change in Price Weights
The National Pricing Model
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Non-Admitted
Emergency
Subacute
Acute
Price Weights
NEP
YEAR 1
Non-Admitted
Emergency
Subacute
Acute
Price Weights
NEP
YEAR 2
Change in NEP
Change in Price Weights
The National Pricing Model
Example: Change in Price Weights vs Change in PricePrice Weights
change direction2012-13 2013-14I61A 3.3272 3.2545 -2.2% M63Z 0.3789 0.3787 -0.1% E62C 0.7785 0.7915 1.7%
NEP
change2012-13 2013-14
$4,808 $4,993 3.8%
priceschange direction2012-13 2013-14
I61A $15,997 $16,250 1.6% M63Z $1,822 $1,891 3.8% E62C $3,743 $3,952 5.6%
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The National Pricing Model
This relationship extends to NWAU:
For a fixed ‘basket’ of activity, after converting the activity to NWAU using two years’ pricing models, the following can be said:
1. NWAU increases aggregate price has grown at a rate greater than the
growth in NEP
2. NWAU remains constant aggregate price has grown in line with growth in
NEP
3. NWAU decreases aggregate price has grown at a rate less than the
growth in NEP
Property: For fixed activity,
(% change in NWAU) × (% change in NEP) = % change in aggregate price. 15
relative change (eg. 5% growth expressed as 105% change, -2% growth expressed as 98% change)
§3Introduction to
the National Cost Model
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The National Cost Model
• The National Pricing Model is based on cost and activity data from three years prior; eg. the 2013-14 pricing model is based on 2010-11 cost and activity data.
• The cost and activity data for each of the historical years are used derive the National Cost Model for that year.
• The National Cost Model is designed to ensure that the total model costs are equalised with the estimated total actual costs across ABF establishments.
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The National Cost Model• The cost model is made up of cost parameters and adjustments:
– paediatric adjustment,
– specialist psychiatric age adjustment,
– indigenous adjustment,
– remoteness area adjustment,
– and ICU adjustment
• The private patient service and private patient accommodation adjustments do not form part of the cost model.
– They are introduced in the pricing model to remove out of scope costs associated with private patients.
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The National Cost Model
Adjustments
Non-Admitted
Emergency
Subacute
Acute
Cost Parameters
Activity
Modelled cost of activity
($)
The National Cost Model
Cost Parameters Adjustments• Define a measure of cost across
all in-scope activity (cost profiles).• Are used to modify modelled costs
to account for legitimate and unavoidable variations in the costs of service delivery.
• Are defined across the classification systems within each service category
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§4Transformation of
the National Cost Modelto
the National Pricing Model
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Transformation of NCM to NPM
There are three key differences between the National Pricing Model and the National Cost Model:
1. The pricing model comprises an NEP (ie. a reference cost), price weights and adjustments, whereas the cost model comprises cost parameters and adjustments.
2. The cost model is based on costs and activity three years prior to the year of the corresponding pricing model.
3. The pricing model excludes costs offset by revenue from other Commonwealth programs.
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Transformation of NCM to NPM
Cost ModelCost ParametersAdjustments
Cost Weight ModelReference CostCost WeightsAdjustments
Pricing ModelNEPPrice WeightsAdjustments
1. Derivation of a reference cost
2. Conversion of parameters to weights
4. Indexation to reflect costs in the year of the pricing model
3. Removal of out of scope costs
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Transformation of NCM to NPM
Step 1: Derivation of a reference cost
• The reference cost is the precursor to the NEP.
• The change in reference cost over time is ‘standardised’ to ensure it is not influenced by changes in activity profile (ie. case-mix change).
– cf. standardised incidence/prevalence/mortality rates controlling for differences demographic/age profile.
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Transformation of NCM to NPM
Year of activity data2009-10
2010-11
$4,260 (A)
$4,587 (B)
$4,489 (C)
(X)
(Y)
(Z)
A – 2009-10 reference cost (= 2009-10 mean cost)
B – 2010-11 mean cost
C – 2010-11 reference cost
X – crude growth rate of mean cost
Y – standardised growth rate
Z – ‘rebasing’ factor
Step 1: Derivation of a reference cost
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Transformation of NCM to NPM
Step 2: Conversion of parameters to weights
• The parameters of the cost model are divided by the reference cost, converting the parameters to cost weights and transforming the cost model to a cost weight model.
• The selection of reference cost in the previous step ensures that the two consecutive years’ cost weight models give the same total weighted volume when applied to the activity data on which the standardised growth rate is derived.
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Transformation of NCM to NPM
Step 3: Removal of out of scope costs
Out of scope costs can be classified as follows:
1. Costs associated with out of scope activity, (eg. activity delivered to out of scope patient types such as DVA), and activity not regarded as from an in-scope service type (eg. out of scope Tier 2 non-admitted service types).
2. Proportions of costs associated with private patients that are offset by non-government and Commonwealth revenue.
3. Costs associated with other Commonwealth programs(eg. Highly Specialised Drugs program, Pharmacy Reform Agreements).
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Transformation of NCM to NPM
Step 3: Removal of out of scope costs
1. Group 1 costs are excluded by simply restricting the cost model to in-scope activity.
2. Group 2 costs are excluded through the implementation of the private patient service adjustment and private patient accommodation adjustment within the pricing model.
3. Group 3 costs are excluded by deflating them out of the cost model.
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Transformation of NCM to NPM
Step 4: Indexation
• The final step is the indexation of costs to estimate those in the year of the pricing model.
• To derive this indexation rate:
1. the cost model is applied retrospectively to the five years of patient costed acute admitted activity data up to the year of the cost model.
2. Scaling factors are calculated that adjust the cost model so that model costs are equalised with each year’s actual costs.
3. The trend of these scaling factors is then projected forward from the year of cost model to the year of pricing model.
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Transformation of NCM to NPM
Step 4: Indexation
Projected
s4
s5= 1
s
s2
s3
Year 1 Year 4 Year 5 Year 6 Year 7 Year 8
Actual costs
s1 s
4 s
5 s
Model costs derived by applying cost model to costed activity data
Historical
s1
s2 s3
sx Scaling factor required to equalise
model costs with actual costs
Time series Projection of time series
Year ofcost model
Year ofpricing model
Illustration of scaling factors required to equalise model and actual costs
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Transformation of NCM to NPM
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Cost Parameters
Adjustments
Cost Model Cost Weight Model
Reference Cost
Cost Weights
Adjustments
Pricing Model
National Efficient Price
Price Weights
Adjustments
· Derivation of reference cost· Conversion of cost parameters to cost weights
· Deflation to remove costs offset by funding from other Commonwealth programs· Indexation
· Inclusion of private patient adjustments
· Restriction to in-scope activity
§5National Pricing Model
by Service Category
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National Pricing Model by Service Category• Activity is grouped into four streams (service categories)
– Acute Admitted
– Subacute and Non-Acute Admitted
– Emergency
– Non-Admitted
– With mental health spanning all four streams
• Classification systems are defined across all service categories, and the National Pricing Model defines prices over these classification systems.
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National Pricing Model- Acute Admitted -
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NPM – Acute Admitted• Classification: Australian Refined Diagnosis Related Groups
(AR-DRGs)
• DRGs are broken into price categories based on (ICU adjusted) length of stay:
– same-day
– short-stay outlier
– inlier
– long-stay outlier
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NPM – Acute Admitted
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Is the episodesame-day?
Does the DRG have a same-day price
categoryYes
No
Yes
Define ‘ICU-adjusted LOS’ as LOS minus
whole eligible ICU days (ensuring a lower bound of 1 day)
Does the DRG have ICU unbundled? Yes
No
Episode
Define ‘ICU-adjusted LOS’ as LOS
Is ICU-adjusted LOS (strictly) less than DRG inlier lower
bound?
No
Yes
Is ICU-adjusted LOS less than or equal to
DRG inlier upper bound?
No
Yes
No
Price CategorySame-day
Price CategoryShort-Stay
Outlier
Price CategoryInlier
Price CategoryLong-Stay
Outlier
NPM – Acute Admitted• There are seven episode-level adjustments:
– paediatric adjustment
– specialist psychiatric age adjustment
– indigenous adjustment
– remoteness area adjustment
– ICU adjustment
– private patient service adjustment
– private patient accommodation adjustment
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NPM – Acute Admitted
Price Weight Table
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NPM – Acute Admitted
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Price weights
• Same-day price category makes use of same-day price weight
• Short-stay outlier price category makes use of short-stay outlier base and per diem price weights
• Inlier price category makes use of inlier price weight
• Long-stay outlier price category makes use of inlier and long-stay outlier per diem price weights
NPM – Acute Admitted
Basic form of DRG price weight function
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ICU-adjustedLOS
price weight
SD SSO Inlier LSO
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SD/SSO/Inlier/LSO
SD/Inlier/LSO
SSO/Inlier/LSO
Inlier/LSO
Inlier
SD/Inlier
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230
293
1
119
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Price Weight function Price CategoriesDRGs
MDCs 19&20 Remainder
3
0
15
0
1
1
NPM
– A
cute
Adm
itted
Price Weight function forms
NPM – Acute AdmittedExample of cost model DRG profile against actual costs and activity
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NPM – Acute Admitted
Application of adjustments
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PWApply paediatric adjustment
Apply specialist psychiatric age adjustment
Apply indigenous adjustment and remoteness area adjustment
Apply private patient service adjustment and private patient accommodation adjustment
Apply ICU adjustment NWAU
National Pricing Model- Subacute & Non-Acute Admitted -
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NPM – Subacute & Non-Acute Admitted• Classifications:
– The Australian National Subacute and Non-Acute Patient (AN-SNAP) Classification
– Care Type
• AN-SNAP classes are broken into price categories based on length of stay:
– same-day
– entire episode per diem
– short-stay outlier
– inlier
– long-stay outlier44
NPM – Subacute & Non-Acute Admitted
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Are the AN-SNAP class inlier lower
and upper bounds zero?
NoYes
Episode
Is episode LOS (strictly) less than
AN-SNAP class inlier lower bound?
Yes
Is episode LOS less than or equal to
AN-SNAP inlier upper bound?
No
Yes
No
Price CategoryEntire Episode
Per Diem
Price CategoryShort-Stay
Outlier
Price CategoryInlier
Price CategoryLong-Stay
Outlier
Is the AN-SNAP class same-day (referred to as ambulatory in
description)?
No
Yes Price CategorySame-day
NPM – Subacute & Non-Acute Admitted• There are five episode-level adjustments:
– paediatric adjustment
– indigenous adjustment
– remoteness area adjustment
– private patient service adjustment
– private patient accommodation adjustment
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NPM – Subacute & Non-Acute Admitted
Price Weight Table
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NPM – Subacute & Non-Acute Admitted
Price Weights
• Same-day price category makes use of episode price weight
• Episode per diem price category makes use of outlier per diem price weight
• Short-stay outlier price category makes use of outlier per diem price weight
• Inlier price category makes use of episode and inlier per diem price weights
• Long-stay outlier price category makes use of episode and inlier per diem and outlier per diem price weights
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NPM – Subacute & Non-Acute Admitted
Basic form of AN-SNAP price weight function
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EpisodeLOS
price weight
SSO Inlier LSO
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SSO/Inlier/LSO
Inlier/LSO
Same-day
EpiPerDiem
Price Weight function Price categoriesAN-SNAP
classes
45
13
45
24
Price Weight function forms
NPM – Subacute & Non-Acute Admitted
NPM – Subacute & Non-Acute Admitted
Application of adjustments
51
PWApply paediatric adjustment
Apply indigenous adjustment and remoteness area adjustment
Apply private patient service adjustment and private patient accommodation adjustment
NWAU
National Pricing Model- Emergency -
52
NPM – Emergency
• Classifications:
– Urgency Related Groups (URGs)
– Urgency Disposition Groups (UDGs)
• There is one episode-level adjustment:
– indigenous adjustment
• A single price weight is defined for each URG and for each UDG.
53
PW Apply indigenous adjustment NWAU
National Pricing Model- Non-Admitted -
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NPM – Non-Admitted• Classification:
– Tier 2 Non-Admitted Services Classification
• There is one episode-level adjustment:
– indigenous adjustment
• A single price weight is defined for each in-scope Tier 2 Service class.
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PW Apply indigenous adjustment NWAU
§6Application of
the National Pricing Model
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NWAU calculators• Available from the IHPA website
• Microsoft Excel Workbooks
• One for each service category
1. Copy & Paste activity data into appropriate Workbook
– Input variables defined in Workbooks (incl. formatting)
2. Press button Validation Checks on input data
Outputs NWAU value against each record
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NWAU calculators
Excel NWAU calculator – Acute Admitted
Input variables required:
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1. RecordID
2. Hosp_State
3. Hosp_RA06
4. Hosp_Level3ICU_Flag
5. Hosp_Paed_Flag
6. Pat_AgeYears
7. Pat_Indigenous_Flag
8. Pat_Postcode
9. Pat_SLA
10. FundingSource
11. LOS
12. Psych_Days
13. ICUHours
14. SameDay_Flag
15. DRG6x
NWAU calculators
Excel NWAU calculator – Subacute & Non-Acute Admitted
Input variables required:
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1. RecordID
2. Hosp_State
3. Hosp_RA06
4. Pat_AgeYears
5. Pat_Indigenous_Flag
6. Pat_Postcode
7. Pat_SLA
8. FundingSource
9. Phase_LOS
10. SameDay_Flag
11. ANSnapClass_v3
12. CareTypeCode
NWAU calculators
Excel NWAU calculator – Emergency
• Two calculators:
– URG version
– UDG version
• Input variables required:
1. RecordID
2. Pat_Indigenous_Flag
3. URG v1.3 Code / UDG v1.3 Code
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NWAU calculators
Excel NWAU calculator – Non-Admitted
• Input variables required:
1. RecordID
2. Pat_Indigenous_Flag
3. Tier2_Clinic_Code
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