Bruce Prosser Director, Funding and Information PolicyDepartment of Health

National ABF Implementation Reference Group

13 February 2012

WelcomeWelcomePurpose of meeting A sounding board to test impacts of ABF implementation.DH to provide context on specific topics, pose a series of questions for discussion within the group (hence small group size).Discussions will inform prioritisation of issues to be raised with the IHPA and Commonwealth, policy development, implementation decisions.

Meeting topicsOverview of National Health Reform AgreementKey issues and tasks to be resolved pre 1 July 2012IHPA pricing model high level and technical elementsBlock fundingFunding distribution impact mitigationScope of services

Costing, data collection and reportingDate of next meeting and general questions

Overview of the National Health Reform Agreement

Overview of the National Health Reform AgreementCommonwealth and State Funding ComponentsCommonwealth ComponentIHPA sets National Efficient Price (NEP), national cost weights.Commonwealth pays a percentage of the NEP, back-calculated based on their existing SPP funding pool.Some block funding (composition TBC).

State ComponentPrice element, specified grant element, transitional funding element.Relativity between elements to be determined, depending on outcome of distribution of Commonwealth contribution.

IHPA Pricing Model high level pricing framework

IssueDraft Pricing FrameworkVictoria responseCare Settings Unit of MeasureSingle Multiple PriceMedianBased on mean costs in short termCost of small capitalExcluded from priceShould be included in priceUse of loadingsDetermined by IHPAState responsibility

IHPA Pricing Model high level pricing framework

IssueDraft Pricing FrameworkVictoria responsePrivate PatientsPrice discounted for costs funded from other sourcesAgree with discounting, noting need for incentives and requirement to cover all costs, including administrativeScope of servicesPublic hospital locationShould be driven by type of service rather than locationBlock fundingTechnical requirements for ABF not met, absence of economies of scale.Definition should be expanded to include other legitimate costs

IHPA Pricing Model high level pricing framework

IssueDraft Pricing FrameworkVictoria responseIndexation of costsGFCE Hospital and Nursing home deflatorCPI+ index for three years, then reassess rateOther Victorian IssuesTransitional fundingPolicy role of IHPA

IHPA Pricing Model technical aspects

Technical model specificationDeals with detailed model parameters such as outlier payment methodology, ICU copayments.Stark differences in the ability of service stream pricing models to explain costs, ranging from reasonable for acute admitted, to passable for emergency department, to non-existent for outpatients.Continuous feedback being provided on various model iterations via Technical Advisory Committee.

IHPA Pricing Model

Next steps for the pricing modelThe March 30th deliverables from IHPA to governments are expected to include:the draft NEP determination;the Pricing Model with details of the cost and volume specifications used (this will be an Appendix to the Determination); andthe draft Pricing Framework.45 Days for governments to review.

IHPA Pricing Model

Questions for participants

Which issues are the most significant which ones should Victoria prosecute our position the hardest?

What changes in practice may occur if IHPA adopt the Draft Pricing Framework in totality?

Block Funding

Process and approachIn year 1, the breakdown of the Commonwealth SPP (a fixed pool of money) between ABF and block funding will be determined through a bilateral negotiation. Commonwealth view is that minimal specified grants are justifiable, Victorias proportion of funding for Mental Health and Subacute (block funded in 2012-13) is too high.Proposed approach: develop position on proposed list of specified grants to be retained, ensure they are consistent with IHPAs draft criteria (which will apply from year 2 onwards), and additional criteria proposed by Victoria: Forward-looking costsFinancial risk mitigation transitional block payments

Block Funding

Questions for participantsIs it easier to manage Health Services if a greater proportion of funding is provided as a specified grant rather than funding via price?

Funding distribution impacts

Funding distribution impactsCombined impact of:cost weights calculated using national rather than just Victorian data; modified WIES model for acute admitted;new ABF funding model for ED and outpatients; andreduced number of specified grants will have significant impact on funding distribution across Health Services if Victoria were to strictly replicate IHPA funding model.Modelling is underway to determine impacts at Health Service level, and options to structure state funding contribution to mitigate financial risk to Health Services.

Funding distribution impacts

Funding distribution impacts questions for participantsGiven combined impact of changes, how should the State contribution be structured to mitigate funding distribution impacts?peer pricing?reduced price based on Commonwealth price?separate state-based price?Assuming aggregate LHN budgets are maintained, what issues may be generated as a result of clunky transitional payments, differences in remittance advices.Are there any specific programs that will be particularly disadvantaged e.g. renal, Commonwealth funding unlikely to replicate capitation model, significant rebalancing.

Scope of Services

What does the NHRA say?Clause A10 of NHRA broadly outlines in-scope services to be ABF:Admitted Acute services, including hospital in the home programs. Emergency Department (ED) services.Non-Admitted patient services.Other Outpatient, Mental Health, Subacute services and other services that could reasonably be considered a public hospital service.

Scope of Services

ProcessClause A21 of the NHRA outlines that unless bilateral agreement is reached with the Commonwealth on scope of services by 1May2012, in-scope services will be determined using the following process:Scope will automatically include all of Clause A10 (listed above). States will provide the IHPA with recommendations for other services to be considered not captured under Clause A10.The IHPA will develop criteria for assessing services for inclusion and will consider each States recommendations against these criteria to develop a general list of hospital services eligible for Commonwealth growth funding under the NHRA.

Key issues and tasks to be resolved pre 1 July 2012

Scope of services key boundary issuesAgreement provides sufficient high-level guidance, but disagreements are expected around the margins. Victoria considers: Otherwise in-scope activities such as Mental Health and Subacute services undertaken by non-LHN entities should be included in scope.Alcohol and other Drug (AOD) services should be included in scope (regardless of setting).Community Health Programs should be excluded from scope on the basis that they are analogous to primary health care.Commonwealth considers:Privately referred non-inpatient activity should be out of scope, consistent with clause A6 of NHRA.

Scope of Services

Questions for participantsHow significantly would Health Services be impacted if non-hospital entities (undertaking equivalent hospital services) are excluded from scope?If any part of a service funded though MBS is excluded from scope (not qualifying for a Commonwealth funding contribution for any part of the occasion of service), how will this impact Health Services?

Costing, Data Collection and Reporting

Costing and data collectionThe NHRA introduces significant new data collection requirements, already evidenced though this years collections but expected to escalate into the future as new service streams come online for ABF.A post implementation review of the Victorian Cost Data Collection (VCDC) is proposed. This will inform a gap analysis of Health Service requirements to provide this data, in areas including:assistance with need prioritisation, sequencing;data storage;data processing;personnel.

Costing, Data Collection and Reporting

Questions for participantsCan participants readily identify any obvious gaps in:need prioritisation, sequencing;data storage;data processing; orpersonnel.

Is the VCDC Post Implementation review the best channel for beginning to clearly articulate these gaps?

General

General questions for participantsWhat is the level of concern within Health Services on the impact of the NHRA in relation to:funding levels and breakdown?data burden?other aspects?

Should any other stakeholder groups be represented at this forum, given its purpose?

Next Meeting

Next meetingProposed date 4 weeks time - 12 March 2012Pre release of NEP More concrete options for the likely magnitude and structure of transitional funding arrangements will be available.

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