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 Subject: changes in hospital finance 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 Subject: changes in hospital finance 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 Subject: changes in hospital finance 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 Subject: changes in hospital finance 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 Subject: changes in hospital finance 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 ProviderInsurer

Datum: 24 mei 2005 Subject: changes in hospital finance Summarised: Main goals of hospital finance reforms Transparancy Performance based payment Competition

Datum: 24 mei 2005 Subject: changes in hospital finance 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 Subject: changes in hospital finance Health Insurance Companies Insured person can choose and switch - premium - quality - content of contracts * NEED FOR INFORMATION * PATIENT EMPOWERMENT

Datum: 24 mei 2005 Subject: changes in hospital finance * Need for transparency in performance * Instruments to determine the value for money * Negotiations on volume, price and quality Health Insurance Company To compete health insurers have to contract sufficient care of good quality for a reasonable price.

Datum: 24 mei 2005 Subject: changes in hospital finance 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 Subject: changes in hospital finance DBCs Patient classification system DBC: Diagnosis Treatment Combination Uniform defined health product/ process description Description of the total health path

Datum: 24 mei 2005 Subject: changes in hospital finance Example of a DBC: Knee surgery Hospital Information System Start DBC End DBC Poli bezoeken kliniek diagnostische aktiviteiten Operatieve verrichtingen Radiologie Over. therapeutische verr. CTG arthroscopie knie icm heelkundige ingreep CTG kruisbandplastiek met transplantatie CTG knieen/ofonderbeen CTG fysiotherapeutische behandeling CTG herhaalbezoeken Onderdelen zorgtraject Specialist CTG eerste polikliniekbezoek CTG verpleegdag klasse3A

Datum: 24 mei 2005 Subject: changes in hospital finance 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 Subject: changes in hospital finance 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 Subject: changes in hospital finance 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 Subject: changes in hospital finance Phases DBC implementation Phase 1: DBC experiment Phase 2: DBC implementation Phase 3: Full introduction of market principles

Datum: 24 mei 2005 Subject: changes in hospital finance Phase 1 DBC Experiment ( ) 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 Subject: changes in hospital finance Phase 2 DBC implementation ( ) 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 Subject: changes in hospital finance Phase 3 Full introduction of market principles ( ) Budgeting = Financing Local/individual DBC agreements Free negotiations Reallocation between hospitals

Datum: 24 mei 2005 Subject: changes in hospital finance 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 Subject: changes in hospital finance 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 Subject: changes in hospital finance 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)