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Getting the numbers right

Establishing an efficient price for hospital services is a very complex issue which will take time, warns experts.

Health professionals are urging the government to go slowly in its introduction of activity-based funding for public hospitals, with concerns raised that the 16-month timeframe is too rushed.
Under the new agreement, from July 1, 2012, federal funding for hospitals will be paid on the basis of an efficient price for each service the hospital is projected to provide, as determined by a new pricing authority.

“That pricing of hospital services will help us identify under-performing hospitals, it will help us identify best-performing hospitals,” Prime Minister Julia Gillard said.

And while there is no one that doesn’t agree Australia must move forward with health reform, all want it to be a long-term solution and not a “band-aid solution” as has happened in the past. And for this to be achieved, all bases need to be covered. Particularly when it comes to funding.
Establishing an ‘efficient price’ for hospital services is a very complex issue which will take time and high level expertise to get right, said Prue Power, executive director of the Australian Healthcare and Hospital Association.

“It is crucial that new funding arrangements do not have unintended effects of undermining key public hospital functions, such as innovation, research and teaching. A narrow definition of efficiency, which excludes the considerable community benefits arising from these functions, would not result in the high performing public hospital sector that Australians expect,” she said.
“Getting these details right is the key to ensuring the COAG agreement will deliver lasting gains to our public hospital system.”

And this can’t be achieved by mid next year, said John Dwyer, the founding president of the Australian Healthcare Reform Alliance. Dwyer told the Australian that activity-based funding has lots of problems.

“The reason is that at the major hospitals, so many of the patients are elderly and have complex medical needs, when we know DRG funding works best and is fairer when you are dealing with more straightforward cases,” Dwyer said.

“I think the instruments are too blunt to do the things suggested in the Council of Australian Governments agreement, certainly by July 2012. We need to continue for a few more years doing the research.”

Meanwhile, Australia’s peak nursing body fears nursing services are going to be lost in the rhetoric.
Any future activity based funding for hospitals must reflect true activity, said RCNA CEO Debra Cerasa.

“Current models of activity based funding do not capture the unit price and characteristics of nursing services, and casemix classifications that are predominantly medically based fail to reflect nursing sensitive information,” Cerasa said in a statement.

“To ensure appropriate funding, the cost of nursing services provided around-the-clock in hospitals must be factored into any formulas used to ensure that nursing staff numbers and levels of experience match patient need and that finances are appropriately directed to support nursing services.”

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