Health System Funding Forum The Road Ahead Edmonton, Alberta November 25 th -26 th 2010 Jason Sutherland UBC Centre for Health Services and Policy Research

Big picture issues that have been used to drive health system reform and ABF Stimulating productivity and efficiency Reducing lengths of stay Reducing hospital waiting lists Increasing competition between hospitals to improve quality Encouraging monitoring and benchmarking Reducing excess capacity, increasing transparency in hospital funding Facilitating patient choice Harmonizing payment mechanisms between public and private provider Health System Funding Forum Ettelt, S., Thomson, S., Nolte, E. and Mays, N. Reimbursing highly specialised hospital services: the experience of activity-based funding in eight countries. London : London School of Hygiene and Tropical Medicine, 2006.

Over $50 billion per year What isnt working with current system? Possible provincial issues? –Perceived inefficiencies –Unexplained variation –Transparency –Bending the cost curve Health System Funding Forum

Why are you here? –Knowledge exchange –Learn more about activity based funding What are your big picture issues? –Foster transparency in hospital funding –Increase value for money for hospital spending –Specific quality outcomes –Improve timeliness of access Health System Funding Forum

Hospital funding reform: –Some of the key levers to induce changes in hospital behavior ABF, P4P –How would these funding policies fit with existing provincial funding programs and strategies? Whos reportedly in favor of activity based funding? –CMA, BCMA, OHA, Kirby Commission (v.6) Health System Funding Forum

What is attractive about activity-based funding? –Using funding as a lever to increase technical efficiency Economic incentives Political incentives –Many problems are known: No incentive to coordinate care, fragmented care Over-provide profitable services Upcoding …. Health System Funding Forum

Activity-based funding, the evidence: Tends to shorten lengths of stay Tends to increase the volume of hospitalizations Little evidence of effect on hospital quality –Mixed effects: Efficiency Total spending –Other potential impacts: Geographic access Equity of access Health System Funding Forum

No evidence: Improves evidence-based care Improves effectiveness or appropriateness Impact on other sectors Provider engagement Health System Funding Forum

What do the stakeholders think? –Health human resource implications –Waiting times –Quality –Access Geographic access Equity of access –Patient satisfaction –Hospital financial performance Health System Funding Forum

How does one get to activity-based funding? –Mutually agreed upon hospital products –Deriving a value for hospital products Health System Funding Forum

Defining the Product Setting the Value/Price CMG / DRGPayment Health System Funding Forum

Generally, the payer defines the product groups it is willing to pay for Medicare (DRG) Department of Health, UK (HRG) Department of Health and Ageing, Australia (AR-DRG) Defining the Product CMG / DRG Health System Funding Forum

Cost data is used to set the value (price) Ontario Case Costing Initiative, Alberta costing Charge data (DRG) Micro-costing studies, Australia (AR-DRG) Hospital financial data (UK, HRG) Whats components are in? Setting the Value/Price Payment Health System Funding Forum

Methods of Case Costing: Top Down –Expenditure divided by activity Bottom Up –Individually costing all activities and resources associated with activity Health System Funding Forum

Costing Methods: Health System Funding Forum

How is the price set? Aggregating patient cost data according to clinical characteristics Clinical Data Patient Cost Average Cost per hospital product group Health System Funding Forum

What happens when the price is not right? Health System Funding Forum

Can activity-based funding be credibly executed in Canada? Some of the key issues –Data availability Clinical Financial Patient level costing –Coding quality Framework for non-adherence to standards –Increased demands for timeliness Health System Funding Forum

Key lessons learned from partners? –Framework which needs continuous attention –One tool in the toolkit –Remove some components Capital, teaching, rural, EDs –Setting the payment amount is really hard to balance incentives best practice price, fair and achievable or average MH, geriatric, palliative, rehabilitation –Funding for growth –Watch for changes in settings of care, Episode splitting Health System Funding Forum

What are additional key issues from the literature? –Prepare for change within hospitals Activity Hospital financial performance Management changes –Prepare for change in other sectors –Increase the volume of the most profitable patients rather than those most in need Health System Funding Forum

What are some of key implementation issues? –Determining service contracts between funder and hospitals Setting desirable levels of activity –Spending caps to limit growth of activity –Long-term commitment needed for hospitals to respond to incentives –Phased implementation How quickly and to what level –Adjust payment amounts away from average –Quality? Health System Funding Forum

What are some additional important risk factors? –What are the critical success factors Vision and Leadership –Political issues related to changing hospital capacity –Understanding the effects of natural geographic monopolies –Threshhold for applicability in less-populated provinces and territories –Understanding demand and supply on post-hospital services Health System Funding Forum

What dont we know? Improve evidence-based care Improve effectiveness Improve safe, coordinated care between sectors What are the key issues of P4P? –Few hospital measures of quality Lack of process measures in Canada – silos of data –Formal evaluations of P4Ps effectiveness and efficacy are few –Integration of P4P with activity based funding in Medicare Health System Funding Forum

What are you describing as your barriers to changing funding policies? –High quality and accessible data –Expertise to guide implementation –Stakeholder resistance or support Health System Funding Forum

Where are you able to obtain information? –Provincial governments –CIHI –Universities, literature review How are you building capacity? –Attend workshops and conferences –Participate in provincial initiatives and working groups –Internally-generated Sharing successes –Understanding of methods –Benefits Health System Funding Forum

What expertise do you feel is lacking? –Intestinal fortitude –Education of funding policies affect on: Overall spending Quality Case mix –Cross-training between finance and clinical areas National Network of Experts –Yes/No, more knowledge translation Health System Funding Forum

What else is present in the environment? –Medical Home, Accounting Care Organizations –Bundling care into Episodes Breaking the silos Opportunities for outcome quality measures Engaging physicians – transforms incentives –gain-sharing accompanies risk sharing –Widespread discussion of incorporating quality measures into hospital/episode funding Health System Funding Forum