A new hospital care financing system based on health care products – the health insurer perspective.

A new hospital care financing system

based on health care products – the health

insurer perspective

Datum: 24 mei 2005

Subject: changes in hospital finance

Agenda

• Motivation reforms• Starting points• Development• Implementation• Related issues

Datum: 24 mei 2005


Hospital finance reforms, motive 1:Problems with current financing system

• Supply driven: doesn’t motivate production• Too much bureaucracy, obstruction of initiatives • Undesired incentives in the current financing

system • No transparency: value for money?• No incentive for efficiency• Only weak relation between actual costs and

budget• Unfunded differences in income medical doctors

Datum: 24 mei 2005


Hospital finance reforms motive 2: Changing roles and responsibilities

• Withdrawing government• Change from supply to demand driven health care• Performance based payment• Competition between suppliers• Competition between insurers• Transparency• Realistic price development

Datum: 24 mei 2005


Point of interest new financing system

1. Demand driven, control focused on content of health care

2. Contracts concerning content of health care (no roughly defined parameters as number of outpatient clinics)

3. Costs of care are directly linked to the expenditures of care

4. Transparency and responsibility are essential

Datum: 24 mei 2005


Cause for change

•System was successful in terms of macro cost containment•But: waiting lists and low innovation and micro efficiency•More money went into the current system…..•Health expenditure: 14% BBP in 2040 •(22% labour force working in health care in 2025

Datum: 24 mei 2005


Necessary shift of responsibilities• Less price and capacity regulation• More incentives for insured and insurers to control costs• More instruments for insured and insurers to demand

better value for money• More competition between insurers and providers• Improved market regulation

Insured

Provider Insurer

Datum: 24 mei 2005


Summarised: Main goals of hospital finance reforms

• Transparancy• Performance based payment• Competition

Datum: 24 mei 2005


Dutch health insurance system

• Dual system: Publicly funded and private health insurances

• Health insurance budgeting based on characteristics insurer population

• Health insurer specific nominal premium (competition)• Increasing responsibility, ‘health care director’,

translated in e.g. more financial risks• Coming reforms for 2006: merge public and private

health insurance

Datum: 24 mei 2005


Health Insurance Companies

Insured person can choose and switch

- premium- quality- content of contracts

* NEED FOR INFORMATION* PATIENT EMPOWERMENT

Datum: 24 mei 2005


* Need for transparency in performance* Instruments to determine the value for money* Negotiations on volume, price and quality

Health InsuranceCompany

To compete health insurers have to contract sufficient care of good quality for a reasonable price.

Datum: 24 mei 2005


Former and current functional Budget

Based on:

• fixed parameters (e.g. buildings)

• semi-variable parameters (e.g. number of beds, medical doctors)

• variable parameters (e.g. number of outpatient clinics, number of day care treatments, hospital days)

Datum: 24 mei 2005


DBCs

• Patient classification system• DBC: Diagnosis Treatment Combination• Uniform defined health product/ process

description• Description of the total health path

Datum: 24 mei 2005


Example of a DBC: Knee surgery

Hospital Information System

StartDBC

EndDBC

Poli bezoeken

kliniek

diagnostische aktiviteiten

Operatieve verrichtingen

RadiologieOver. therapeutische verr.

CTG 039411 arthroscopie knie icm heelkundige ingreep

CTG 038642 kruisbandplastiek met transplantatie

CTG 089402 knie en/of onderbeen

CTG 193001 fysiotherapeutische behandeling

CTG 411000 herhaalbezoeken

Onderdelen zorgtraject

Specialist

CTG 190011 eerste polikliniekbezoek

CTG 190204 verpleegdag klasse 3A

Datum: 24 mei 2005


Summary of unique aspects DBCs

• Episode management / medical process description • DBCs are applicable for all hospital activities (including

outpatient and daycare)• DBCs include the remuneration of medical specialists• Registration during the health care process

Datum: 24 mei 2005


Spin Off DBCs

• Incentive for improvement of efficiency

• Vehicle for benchmarking

• Starting point for quality policy development

• Provide insight in capacity requirements

• Provide new control information

• Starting point for financing of integrated care

• Enabler for the Electronic Patient File

Datum: 24 mei 2005


DBC development in the Netherlands

• Started slowly in mid 90’s

• Initiated by providers and insurers

• Adopted by government in 2000

• Steering committee with all relevant parties

• ICT development financially stimulated

Datum: 24 mei 2005


Phases DBC implementation

• Phase 1: DBC experiment• Phase 2: DBC implementation• Phase 3: Full introduction of market

principles

Datum: 24 mei 2005


Phase 1DBC Experiment (2003 - 2004)

• Implementation of a limited set of DBC’s• Characteristics: simple, waiting list and labour

related• Free negotiations on price, volume and quality• Voluntary participation• Objectives:

• Incentives for production?• Ability of insurers to realise good contracts (good

care/sharp prices)?• Lessons for market parties?

Datum: 24 mei 2005


Phase 2 DBC implementation (2005-2006)

• Two segments:• Segment A: 90% fixed DBC prices• Segment B: 10% free DBC prices

• Budgeting based on existing parameters• Financing based on DBCs• Including remuneration medical specialists

Datum: 24 mei 2005


Phase 3 Full introduction of market principles(2007 - )

• Budgeting = Financing• Local/individual DBC agreements• Free negotiations• Reallocation between hospitals

Datum: 24 mei 2005


Preconditions phase 3

• All hospital costs integral part of the DBC prices or incorporated in separate budgets

• Sector specific market authority• Proper relation with the insurer budgeting model• Full risk for insurers • Sufficient competition between providers• Free entry to the market• Market transparency• Level playing field

Datum: 24 mei 2005


DBC related issues

• Academic care, acute care, education, patient medication, capital costs (interest, depreciation)

• Privacy• Fraud: validation module, administrative

procedures• DIS: DBC information system• Control of total hospital care expenditures

Datum: 24 mei 2005


DBC impact health insurer

• Enormous administrative operation• Rebuilding benchmark information• Delay in declaration (structural and non-structural)• New fraud possibilities• Relatively low market power (scarcity Dutch market)• Guiding possibilities (soft versus hard)

A new hospital care financing system based on health care products – the health insurer perspective.

Documents

health insurers

content of health care

hospital finance cause

hospital finance point

health care products

health care director

health expenditure

private health insurance