68 Journal of Pain and Symptom Management Vol. 38 No. 1 July 2009

Special Article

Current Funding and Financing Issues in theAustralian Hospice and Palliative Care SectorRobert Gordon, MSc, Kathy Eagar, MA, PhD, FAFRM (Hon),David Currow, MPH, FRACP, and Janette Green, MStatCentre for Health Service Development (R.G., K.E., J.G.), University of Wollongong, Wollongong,

New South Wales; and Department of Palliative and Supportive Services (D.C.), Flinders University,

Daw Park, South Australia, Australia

Abstract

This article overviews current funding and financing issues in the Australian hospice andpalliative care sector. Within Australia, the major responsibilities for managing the healthcare system are shared between two levels of government. Funding arrangements varyaccording to the type of care. The delivery of palliative care services is a State/Territoryresponsibility. Recently, almost all States/Territories have developed overarching frameworksto guide the development of palliative care policies, including funding and service deliverystructures. Palliative care services in Australia comprise a mix of specialist providers,generalist providers, and support services in the public, nongovernment, and private sectors.The National Palliative Care Strategy is a joint strategy of the Commonwealth and Statesthat commenced in 2002 and includes a number of major issues. Following a national studyin 1996, the Australian National Subacute and Nonacute Patient (AN-SNAP) system wasendorsed as the national casemix classification for subacute and nonacute care. Funding forpalliative care services varies depending on the type of service and the setting in which it isprovided. There is no national model for funding inpatient or community services, which isa State/Territory responsibility. A summary of funding arrangements is provided in thisarticle. Palliative care continues to evolve at a rapid rate in Australia. Increasinglyflexible evidence-based models of care delivery are emerging. This article argues that it will becritical for equally flexible funding and financing models to be developed. Furthermore, it iscritical that palliative care patients can be identified, classified, and costed. Casemixclassifications such as AN-SNAP represent an important starting point but further work isrequired. J Pain Symptom Manage 2009;38:68e74. � 2009 U.S. Cancer Pain ReliefCommittee. Published by Elsevier Inc. All rights reserved.

Key Words

Casemix, AN-SNAP, palliative care funding, classification

Address correspondence to: Robert Gordon, MSc, Cen-tre for Health Service Development, University ofWollongong, Wollongong NSW 2522, Australia.E-mail: robg@uow.edu.au

Accepted for publication: April 23, 2009.

� 2009 U.S. Cancer Pain Relief CommitteePublished by Elsevier Inc. All rights reserved.

IntroductionThis article overviews current funding and fi-

nancing issues in the Australian hospice andpalliative care sector. In context, Australia hasa total population of 22,000,000 people and ap-proximately 134,000 deaths annually of which

0885-3924/09/$esee front matterdoi:10.1016/j.jpainsymman.2009.04.002

Vol. 38 No. 1 July 2009 69Palliative Care Funding in Australia

approximately one-half will be expected. Can-cer is the most frequently encountered causefor expected deaths, with almost 40,000 deathsfrom the disease this year. Overall, more than80% of people referred to specialist hospiceand palliative care services will have cancer asthe diagnosis, and more than 60% of all peoplewith cancer will have such a referral.

Organization and Financing of HealthCare in Australia

Within Australia, the major responsibilities formanaging the health care system are shared be-tween two levels of government.1 The AustralianGovernment, known as the Commonwealth, isresponsible for overall policy and funds a rangeof national programs. The Commonwealth’s ma-jor responsibility is Medicare, Australia’s univer-sal health insurance scheme, under whichaccess to medical services, including primaryand specialist care, inpatient private services,and pharmaceuticals are subsidized.2 The Com-monwealth is also responsible for the fundingof residential aged care facilities and a limitednumber of community programs for peoplewith chronic complex needs and the frail aged.

The eight State/Territory governments playa dominant role in health delivery throughAustralia’s 750 public hospital services and itsmultiple community health centers.1 This sec-tor is the most dominant in the perceptionsof the health system in public debate. TheCommonwealth holds primary revenue raisingpowers through the taxation system, which in-cludes a specific Medicare levy.3 Since 1988,a series of five-year ‘‘Australian Health CareAgreements’’ (ACHAs) have been negotiatedbetween the two levels of government as themechanism by which States/Territories receivemost of the funding to deliver health services.Under these agreements, States/Territorieshave primary responsibility to determine howservices will be structured and delivered. How-ever, these agreements also include targetedfunding for national policy initiatives. For ex-ample, the 1988 agreements included specificfunding to allow the establishment of commu-nity-based palliative care services across thecountry for the first time, and special provi-sions for palliative care have been includedin each subsequent quinquennial agreement.

There are also approximately 250 privatehospitals in Australia. These comprise reli-gious not-for-profit, community not-for-profit,and for-profit facilities. Funding for privatehospital services is derived from individualswho hold supplementary private health insur-ance, the Commonwealth Department ofVeterans’ Affairs, third-party payers, and a per-son’s own out-of-pocket contributions.3

Given the place of palliative care in theCommonwealth/State/Territory agreements,there has been a concerted effort to ensurethat hospice and palliative care services areavailable across the health systemdinpatient,outpatient, and community care. Such popula-tion coverage that has been built over the last20 years will see more than 24,000 Australiansprovided with specialist hospice and palliativecare service input.

Funding of Health Care in AustraliaFunding arrangements vary according to the

type of care. Private hospital and private com-munity care are funded under various fee-for-service arrangements. Residential aged care isfunded at different per diem rates based onthe dependency level of the resident. In addi-tion, a wide range of public and nongovern-ment community and home care services arefunded under annual block grants.

Although there are variations between theStates/Territories, public hospital fundinggenerally makes a distinction between acuteand subacute care. Acute care is defined astreatment-driven primarily by the patient’smedical diagnosis and is classified by diagnosis-related groups (DRGs). Subacute care is definedas treatment driven primarily by the patient’sfunctional status and quality of life and not theunderlying medical diagnosis. All palliative careis classified as subacute, as are services such as re-habilitation. As such, they are not classified orfunded by DRGs but are still funded throughacute care formulae in most States/Territories.

Organization and Delivery of PalliativeCare Services in Australia

The planning and delivery of palliative careservices in Australia is a State/Territory

70 Vol. 38 No. 1 July 2009Gordon et al.

responsibility. During the last 10 years, almostall States/Territories have developed an over-arching strategic plan or framework to guidethe development of palliative care policies, in-cluding funding and service delivery structures.A key feature of these documents has been a rec-ognition of the importance of comprehensiveand integrated systems that offer patientschoices about the type, location, and way inwhich palliative care services are delivered,while seeking to optimize continuity in care.

Today, palliative care services in Australiacomprise a mix of specialist providers, general-ist providers, and support services in the pub-lic, nongovernment, and private sectors.Palliative care services are delivered througha combination of delivery modes. These aresummarized in Table 1.

The National Palliative Care StrategyThe National Palliative Care Strategy is

a joint strategy of the Commonwealth andthe States/Territories that commenced in2002. It was developed in conjunction with pal-liative care stakeholder groups, with the goalof developing palliative care policies and ser-vices consistently across Australia.4

A key component of the strategy was a com-mitment of AU$188 million that was provided

Table 1Profile of Palliative Care S

Type

Designated hospice services Mainsiz

Designated palliative care units in acute hospitals Mainbe

Designated palliative care units in subacute hospitals Mostthser

Nondesignated inpatient palliative care services in acuteor subacute hospitals

In mreofhoonpa

Ambulatory palliative care hospital services Thespainmeinfam

Specialist palliative care community services Openu

Primary care community-based services Opegeles

to State/Territory governments for palliativecare services through the ACHAs (2003e2008). An additional AU$55 million was in-jected from the 2002 federal budget throughthe National Palliative Care Program.

This major initiative funded a range of activ-ities, including palliative care research, the de-velopment of resource materials, communityaccess to subsidized medications consideredcrucial to symptom control (the first patient-defined section of the national PharmaceuticalBenefits Schedule5), respite care, and projectsto improve understanding of palliative care inthe community more broadly. This programalso saw the establishment of the PalliativeCare Outcomes Collaboration (PCOC), a na-tional collaboration between four universitiesthat has developed and is supporting a nationalbenchmarking system that will contribute toimproved and more uniform palliative careoutcomes and quality of care.6

Palliative Care Casemix ClassificationDevelopments in Australia

The Australian Refined DRG (AR-DRG) clas-sification has been used by all Australian Statesand Territories to classify acute episodes ofcare since the mid-1990s. Several States also

ervices in Australia

Description

ly located in larger capital cities and typically ranging ine from 20 to 80 beds.ly located in capital and larger regional cities and typicallytween 6 and 20 beds.capital cities operate at least one major subacute hospital

at provides a significant palliative care role. Typically, thesevices operate between 30 and 50 palliative care beds.any rural and remote parts of Australia, these services

present the only hospital-based palliative care service andten have visiting specialist palliative care services. But manyspitals in urban areas also care for palliative care patientsacute wards, with most large hospitals having a designated

lliative care consultation liaison team.e are provided in most states as part of a wider program oflliative care services. Patients may be referred frompatient units or from the community. They typically providedical, nursing, and some allied health therapies. Some also

clude bereavement counseling and support services forily and carers.

rate in all States and Territories with services provided byrsing, medical, and allied health staff.

rate in all States and Territories with services provided byneral practitioners, generalist community nurses and, to aser extent, allied health staff.

Vol. 38 No. 1 July 2009 71Palliative Care Funding in Australia

use the AR-DRG system as the primary mecha-nism for allocating funds for acute public hos-pital activity.

In 1994, it was recognized nationally thatDRGs were not appropriate for classifying sub-acute care. For this reason, the Common-wealth commissioned a study to developa casemix classification that could be used toclassify resource utilization and, therefore,provide funding models for subacute care.The outcome of this study was the AustralianNational Subacute and Nonacute Patient(AN-SNAP) classification. In 1996, AN-SNAPwas endorsed as the national casemix classifica-tion for subacute and nonacute care.7e10

The AN-SNAP classification was based ona study of 30,057 episodes of care (4530 pallia-tive care) in 104 services in Australia and NewZealand. It comprises five case types, one ofwhich is palliative care. The palliative casetype contains 11 inpatient and 32 ambulatorypalliative care classes. An average weightingfor each class, broken down by various costdrivers, was calculated. Palliative care episodesare allocated to AN-SNAP classes based on‘‘palliative care phase,’’11 ‘‘Resource UtilizationGroupsdActivities of Daily Living’’12 scores,‘‘palliative care problem severity score,’’11 andage. Version 2 of AN-SNAP was developed in200613 and is now in use.

As with other decisions about fundingmodels for public hospitals and communityhealth centers, decisions about the use ofAN-SNAP rest with the eight State/Territorygovernments. Currently, five of the eight haveroutine data collection processes in placethat enable inpatient palliative care episodesto be assigned to AN-SNAP casemix class butless have systems in place for community ser-vices. This information is used for clinical man-agement, planning and, in some cases,funding of palliative care services.

Costing of Palliative Care in AustraliaMost efforts to understand palliative care

cost patterns in Australia occur through hospi-tal and community health service casemix cost-ing activities. In Australia, two types of casemixcosting are routinely undertaken.3 Cost model-ing refers to a top-down process where cost es-timates are produced at the level of the

casemix class. In contrast, clinical or patientcosting refers to a process where the cost ofeach patient episode of care is individually cal-culated.14 Clinical costing systems are consid-erably more expensive as they requirea significant investment in information tech-nology and data collection.

In recent years, several States have investedconsiderable resources in clinical costing sys-tems across major metropolitan hospital net-works. One outcome of this has been thecapacity to produce patient level costs for palli-ative care patients treated in these facilities.For example, Queensland recently reportedthat its current per diem palliative care fundingmodel has been derived from robust costingdata that are responsive to changes in patternsof care, and it is easily adjusted if the currentAN-SNAP classification system is changed.15

The availability of this type of cost data repre-sents a major advance in the overall capacity ofthe sector to cost palliative care services. For ex-ample, it provides an opportunity to update thecost relativities (weightings) between AN-SNAPclasses. National work in this area is in progress.

Funding of Palliative Care Servicesin Australia

Responsibility for the funding of palliativecare services in Australia varies depending onthe type of service and the setting in which itis provided. Table 2 summarizes funding/pay-ment arrangements for services typically usedby palliative care patients.

Funding for out-of-hospital medical (includ-ing primary care/family practitioners) andpharmaceutical services is covered under thenational Medicare system. As such, they areaccessed in a largely consistent manner acrossthe country. Estimates on expenditure levelsassociated exclusively with palliative care ser-vices funded under Medicare are not readilyaccessible, as the Medicare Program’s Medi-care Benefits Scheme and PharmaceuticalBenefits Scheme do not separately identify pay-ments associated with these services.

There is no national model for the fundingfor inpatient hospital services. Funding forthese services is a State/Territory responsibil-ity. Table 3 provides a summary of the modelsused to fund inpatient services in each State/

Table 2Funding Arrangements for Palliative Care Services in Australia

Service Who Pays Method of Payment/Subsidy

General practitionerconsultations, pathology,& radiology

Patient Most, if not all, of the cost reimbursed by Commonwealthunder the Medicare Program’s Medicare BenefitsScheme on a fee-for-service basis

Over-the-counter medicines(for patient at home)

Patient None

Prescription medicines(for patient at home)

Commonwealth, with smallpatient copayment

In most cases, cost to patient capped under theCommonwealth Medicare Program under thePharmaceutical Benefits Scheme subsidy

Hospital-based services Varies State/Territory governments (public hospitals), healthinsurance (private hospitals). Department of VeteransAffairs pays for veterans and war widows. Methodsvarydsome use casemix funding

Community nursing andother support services

State/Territory governmentsand some Commonwealth

Salaried employees of State government

Special initiatives Mostly Commonwealth Australian Health Care Agreements, National PalliativeCare Strategy, and National Palliative Care Program

72 Vol. 38 No. 1 July 2009Gordon et al.

Territory. Additionally, the Department of Vet-erans Affairs (DVA) and private insurers nego-tiate directly with private hospitals. Cliniciansworking in the private sector set their ownfees, although contractual relationships withinsurers may limit out-of-pocket expenses.

As Table 3 illustrates, there is considerablevariability in how inpatient services are funded.This, therefore, applies to acute symptom as-sessment units, palliative care units, and inpa-tient hospice units. The New South Walesand Queensland models are the most sophisti-cated as they incorporate separate subpay-ments that reflect differences in thedependency and complexity of care for pallia-tive care patients in each unit.

Funding for community-based palliative careservices also varies between States/Territories.Statewide policy frameworks form the basis ofa combination of grants and population-basedplanning models that are used to allocate avail-able funds. For example, the State of Victoriaallocates funds to regions using a weightedpopulation model, where adjustments aremade for the proportion of people aged over70, socioeconomic status and rural/remotefactors, to determine an adjusted populationproportion of overall funding.16 The State ofNew South Wales uses a similar approach inits Resource Distribution Formula, which isused to distribute all of its palliative care fund-ing (approximately AU$145 million per an-num) among its geographic regions. TheNew South Wales formula adjusts for age,sex, premature cancer rates, and the availabil-ity of private sector services.17

Other states have been developing creativefunding models designed to encourage flexiblepractices. For example, South Australia re-cently implemented an ‘‘out-of-hospital fund-ing’’ strategy that aimed to improve thebalance between primary/community-basedservices and inpatient care. Under this pro-gram, community-based palliative care servicesare able to compete for funds that would previ-ously have been allocated to the hospital sector.

DiscussionPalliative care has evolved and continues to

evolve at a rapid rate in Australia. Increasingly,sophisticated and flexible evidence-basedmodels of care delivery are emerging. As thisoccurs, it is critical that equally flexible fund-ing and financing models are developed thatpromote a seamless interface between hospi-tal- and community-based care for hospiceand palliative patients. This challenges thepractice of separating hospital and communityfunding and financing systems.

Within the hospital system, it is also criticalthat palliative care patients can be identified,classified, and costed. Casemix classificationsystems, such as AN-SNAP, that measure clini-cal and cost differentials at each stage of illnessare demonstrably more appropriate forfunding palliative care than diagnosis-basedsystems, such as AR-DRGs. Nevertheless, con-sultation liaison services are still not well ac-commodated within current costing andclassification systems.

Table 3Summary of Inpatient Palliative Care Funding Models in Australiad2007e2008

State/Territory Funding Model Payment Rate 2007e2008

New South Wales ‘‘Blended Payment Model’’ that comprisesepisode component for case complexity,per diem component for hotel costs andoutlier component where required. Modelbased on AN-SNAP casemix classes andcost weights.

Equivalent bed-day rate ranges from $A647to $A1465 per day depending on theAN-SNAP class

Victoria Flat bed-day payment for patients classifiedas palliative care regardless of whether indesignated palliative care unit.

Metropolitan bed-day rated$A485, rural/regional bed-day rated$A489

Queensland Bed-day payment differentiated by AN-SNAPclass for palliative care patients indesignated units. Bed-day benchmarkpayments for palliative care patients innondesignated units.

Bed-day rate range from $A700 to $A1170per day for designated units. Standard perdiem rate for nondesignated units

South Australia Combination of negotiated per diem ratesand DRG-based episode based payments.

Bed-day rate not applicable

Western Australia Indexed historical budgets used to negotiatecontracts with palliative care providers.

Bed-day rate not applicable

Tasmania Funding levels based on indexed historicalbudgets.

Bed-day rate not applicable

Northern Territory Funding levels based on indexed historicalbudgets.

Bed-day rate not applicable

Australian Capital Territory Funding levels based on indexed historicalbudgets.

Bed-day rate not applicable

Vol. 38 No. 1 July 2009 73Palliative Care Funding in Australia

The injection of AU$243m into the Austra-lian palliative care sector by the Common-wealth since 2002 represents a relativelymodest injection of funding relative to the re-current expenditure on palliative care by theStates/Territories. Nevertheless, it has alloweda significant increase in the capacity of the sec-tor to provide access to high-quality palliativecare services. This has occurred through keyinitiatives, such as PCOC, the CaresearchdPalliative Care Knowledge Network,18 anda clinical trials program that is conductingrandomized trials of pharmaceuticals for theirpotential use in palliative care.19

Investments in recent years by all govern-ments have increased the range and capacityof palliative care services in Australia andhave positioned Australian palliative care ser-vices for the challenges that lie ahead.

Although the development and use of AN-SNAP have been a significant advance, the de-velopment and implementation of fundingmodels for palliative care that promote inte-gration across the care continuum and encour-age service substitution among settings are anevolving agenda. These developments will be-come critical as resource pressures increasewithin the hospital sector. Likewise, PCOChas commenced benchmarking of palliativecare services in terms of their quality and their

outcomes for both patients and carers. Thebuilding blocks are being put into place butAustralia is still some distance away from beingable to routinely link costs to outcomes and toroutinely assess value for money in palliativecare.

References1. Palmer GR, Short SD. Health care and public

policy, 3rd ed. Melbourne, Australia: Macmillan,2000.

2. Eagar K, Cromwell D, Owen A, et al. Health ser-vices research and development in practice: an Aus-tralian experience. J Health Serv Res Policy 2003;8(Suppl 2):7e13.

3. Courtney M, Briggs D. Health care financialmanagement. Sydney, Australia: Elsevier, 2004.

4. Australian Government Department of Healthand Ageing. The National Palliative Care Program.Canberra, Australia: Department of Health andAgeing, 2000.

5. Rowett D, Ravenscroft PJ, Hardy J, Currow D.Using national health policies to improve access topalliative care medications in the community.J Pain Symptom Manage 2009;37(3):395e402.

6. Currow DC, Eagar K, Aoun S, et al. Is it feasibleand desirable to collect voluntarily quality and out-come data nationally in palliative oncology care?J Clin Oncol 2008;26(23):3853e3859.

74 Vol. 38 No. 1 July 2009Gordon et al.

7. Lee L, Eagar K, Smith M. Sub-acute and non-acutecasemix in Australia. Med J Aust 1998;169(8):S22eS25.

8. Eagar K. The Australian National Sub-Acute andNon-Acute Patient (AN-SNAP) casemix classifica-tion. Aust Health Rev 1999;22(3):180e195.

9. Eagar K, Green J, Gordon R. An Australian case-mix classification for palliative care: technical devel-opment and results. Palliat Med 2004;18(3):217e226.

10. Eagar K, Gordon R, Green J, Smith M. An Aus-tralian casemix classification for palliative care: les-sons and policy implications of a national study.Palliat Med 2004;18(3):227e233.

11. Smith M, Firns P. Palliative care casemix Classi-fication/testing a model in a variety of palliativecare settingsdpreliminary results. In: ConferenceProceedings from the 6th National Casemix Confer-ence. Canberra, Australia: Commonwealth Depart-ment of Human Services and Health, 1994.

12. Fries BE, Scheider DP, Foley WJ, et al. Refininga case-mix measure for nursing homes: ResourceUtilisation Groups (RUG-III). Med Care 1994;32(7):668e685.

13. Green J, Gordon R. The development of Ver-sion 2 of the AN-SNAP casemix classification system.Aust Health Rev 2007;31(Suppl 1):S68eS78.

14. Hindle D. The costing bridge: data issues inproduct costing. Canberra, Australia: Common-wealth Department of Health and Human Services,1994.

15. QueenslandGovernment. Development of theCFM, sub and non-acute inpatient funding. Bris-bane, Australia: Queensland Government, 2007.

16. Victorian Government Department of HumanServices. Strengthening palliative care: A policy forhealth and community care providers 2004e09.Melbourne, Australia: Department of Human Ser-vices, Victoria, 2004.

17. NSWHealth. Resource distribution formulatechnical paper (revision). Sydney, Australia: NSWHealth, 2005.

18. Tieman J, Abernethy AP, Fazekas BS, Currow D.CareSearch: finding and evaluating Australia’s miss-ing palliative care literature. BMC Palliat Care 2005;4:4.

19. Currow D, Agar M, Tieman J, Abernethy AP.Multi-site research allows adequately powered palli-ative care trials: web-based data management makesit achievable today. Palliat Med 2008;22(1):91e92.