IHPA and the National Efficient Price (NEP) Independent Hospital Pricing Authority
Jan 11, 2016
IHPA and the National Efficient Price(NEP)
Independent Hospital Pricing Authority
Outline of IHPA Update
IHPA is the Independent Hospital Pricing
Authority
Why does IHPA exist?
What does IHPA do?
How will ABF make a difference?
What next?2
Primary Function of the IHPA
IHPA is being created to determine the national efficient price.
The national efficient price is the core product of IHPA.
To determine a reasonable, acceptable national efficient price.
Most importantly, the NEP is independent and transparent.
3
Why a National Efficient Price?
To deliver on key objectives of the National Health Reforms,
namely:
Improve patient access to services
Improve hospital efficiency
Ensure the sustainability of hospital funding
Improve transparency and accountability of hospital funding
4
How will it achieve these improvements?
Two key components based on the national
efficient price:
Activity based funding (ABF) which will be
introduced across Australia
The Commonwealth will fund 45% then 50% of
the increases in the national efficient price from
2014-15.
So the Commonwealth share of hospital funding
is geared to increase to nearly 50% in long
term.
5
How will the NEP be used?
Basis of Commonwealth’s funding
contributions
To local hospital networks
Relevant price signal to States and hospital
networks
6
What is the NEP?
ABF funds activity which is the treatment of a
patient
NEP is cost incurred at an efficient hospital
NEP is being set at about mean cost of treating a
patient
NEP is the national price paid per weighted
separation
NEP is one price plus a set of price weights per DRG
7
What is an NWAU?
NWAU is an National Weighted Activity Unit
An NWAU is a normalised separation at the
NEP
Each DRG has a # separations at a price
weight
Put simply, they are summed across all
DRGs as:
# NWAUs = ∑ {(price weight)i x (#
separations)i}
8
General Model
Pricing (red)
Days in Hospital
Low Inlier Boundary
Total $ Cost (green)
High Inlier Boundary Same day rates
Inlier mean price
Outliers
9
Who will be affected?
All public hospitals
Smaller country hospitals will get block funding
Some activities to be block funded – eg direct
teaching & research
All public and private patients
except those funded by self or a third party
10
Impact on Hospital Budgets Funding Local Hospital Networks (LHNs)
Commonwealth funds to LHNs rather than to states
State funding to LHNs also through new funding body
Commonwealth funding based on NEP Total funding to States is fixed for first two years Commonwealth’s share of funding to particular
hospitals will change because now determined by NEP
After first 2 years, Commonwealth will fund 45%, then 50%, of activity growth achieved by hospitals
11
Impacts on Jurisdictions
For the states currently using ABF (eg Vic, SA,
WA)
Reference NEP rather than state efficient price
Fund hospital networks rather than hospitals
Other jurisdictions are well prepared for ABF
Been preparing for this for about 20 years
National ABF approach agreed by COAG in
March 2008
12
Primary categories for NEP funding
To begin in 2012-13
Admitted acute care patients
All emergency department patients
Non-admitted outpatients
To begin in 2013-14
Sub-acute care patients
Mental health care patients
13
Cost by care category – 2009-10 prelim
14
NSW VIC QLD SA WA Tas NT ACT National0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
AdmittedAcute EmergencyCare Outpatient care Subacute Other
Jurisdiction
%T
ota
l C
ost
Considerations in setting the NEP
Reflect actual cost of delivery
Ensure reasonable access
Support clinical safety and quality
Foster efficiency and effectiveness
Ensure financial sustainability
15
Essential ingredients of the NEP
Reasonable and acceptable pricing framework
Robust accurate activity and cost data
Sound analysis of trends
Prices, wages, technology and clinical processes
Lessons from existing ABF systems
Australian and international
Effective stakeholder consultation16
Trend of Costs by care category
17
2004-05 2005-06 2006-07 2007-08 2008-09 2009-100%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Note: Round 14 NHCDC Preliminary Data
AdmittedAcute EmergencyCare Outpatient care Subacute Other
Jurisdiction
% T
ota
l C
ost
by
Wo
rkst
ream
ABF Analysis Toolbox
Analyse actual costs for 2009-10 and earlier
Calculate actual costs and cost weights
Total cost and Commonwealth contribution
Then transform them into prices for 2012-13
Use a toolbox of many analytic perspectives
18
Growth Trends
Pricing Framework
Price trends Technology trends Price Loadings
Compare to private rates
Particular cases
Budget Trends
Productivity
Analysis
E
Efficiency analysis
Other ABF
systems
Pricing Outliers
Same day
rates
Patie
nts in
scope
Internatio
nal
Experienc
e19
Where are we at?
A draft NEP for 2012-13 has been developed
NEP Determination circulated to Health
Ministers
Details of the NEP, ABF Policy Framework and
pricing model also provided
Jurisdictions have 45 days to May 16 to
comment20
Consultative Structure
IPHA board of 9 people
Jurisdictional Advisory Committee
Clinical Advisory Committee
Stakeholder Advisory Committee
Technical Advisory Committee
Associated working groups
Public submissions and ongoing consultation
21
Still to come
Final NEP Determination issued by June
Legislation to establish National Payment
Authority
Establishment of Payment Authority by 30
June 2012
Payment by activity to begin by 1 July 201322