1. Purchasing Sustainable Care for Patients across the Care Continuum (Health Partners)

2. Purchasing services in and out of hospital: Lessons and principles 19 June 2014 Purchasing Across the Continuum for Sustainability NSW Health Symposium – Caring Now and for the Future

3. Today Brief:  Discuss experience and lessons learned as a purchaser across primary & community and specialist & hospital services This is not a literature review or an academic primer It’s personal reflections on:  What do we mean by purchasing?  Evolution of the purchasing function in the NZ health system  Adding value as purchaser  Some conclusions

4. What do we mean by ‘purchasing’?

5. What do we mean by ‘purchasing’ of health services? Various terms used:  Purchasing  Planning & funding  Commissioning  Procurement Terminology matters – use to reflect policy intent and how the system is functioning:  NSW uses ‘purchasing’  NZ uses ‘planning & funding’, after policy aversion to ‘purchasing’  NHS England uses ‘commissioning’  ‘Procurement’ fits better with the supply chain ‘Planning & funding’ and ‘commissioning’ are similar, but where the role sit in the two systems is very different

6. The planning & funding cycle

7. NZ in the 1990s: arms length purchaser in an explicit ‘purchaser/provider split’ RHAs (regional) and then HFA (national) as purchasing agencies Commercial objectives for public providers (CHEs, and then HHSs) Features:  Access for individual patients (not outcomes or inequalities)  High autonomy, low control from the centre  Appointed boards and private sector ethos  Purchaser-led high specification of price, quantity and standards  Across the whole system  Efficiency and responsiveness through competition  Common counting of inputs and outputs, and costing systems  New funding models for hospitals (case mix; efficient pricing) and general practice (capitation; budget-holding)  Commercial contracts

8. NZ in the 2000s: embedded planning & funding in an integrated model The DHB model:  Integrated the purchasing and provision of services  Three ‘arms’ - Planning & Funding, Provider and Governance  Deliberate shift away from the arms-length purchaser driving efficiency in a siloed, competitive and often adversarial environment  However, many DHBs retained an arms-length between purchaser and provider Features:  DHB accountability for population outcomes and reduced inequalities  Elected boards and public sector ethos  National health and disability strategies and goals  DHB Health Needs Assessments and Strategic Plans  Move away from activity-based payments Primary Health Care and Mental Health strategies brought major new focus and investment

9. Recent developments Increasing emphasis on health system sustainability Two policy-driven changes have impacted on purchasing:  Requirement for DHBs to collaborate regionally, including in planning  Introduction of Alliance agreements between DHBs and PHOs, aimed at ‘joined up’ primary and specialist services Requires new ways of working and shared decision-making processes DHBs have responded in different ways, with a variety of models now used to deliver the core Planning & Funding functions, including:  Splitting some transactional functions out of P&F;  Disestablishing a distinct P&F unit; and  Creating a P&F shared services unit at sub-regional level

10. Where can Planning & Funding add the greatest value? Consensus in the NZ health system today that the greatest value is in the ‘planning’ functions – Stage 2 of the cycle, encompassing needs analysis; strategy development; service planning, design and development; and supporting prioritisation Stakeholders are seeking a step-change in terms of whole-of-system planning, and collaborative development of new models of care The more technical ‘funding’ components – procurement, contract management and monitoring, and evaluation – need to continue, but are increasingly seen as better located in the corporate/finance area This lead role in developing strategic direction and facilitating service change:  Confirms the move away from an arms-length purchaser to an engaged facilitator of service improvement in partnership with clinicians, providers, patients and communities  Focuses on how the DHBs should invest to best meet population needs including service mix, models of care, funding models, and the mix of public/private/NGO provision  Requires robust prioritisation and decision-making in light of competing demands for constrained resources - a focus on value for money  Positions P&F as the champion of the whole-of-system perspective

11. Today’s focus Development and maintenance of a medium to long term whole-of-system strategic plan, linked with national and regional direction, and informing capacity planning Supporting integrated care approaches, through new models of care, acute demand management programmes, new business models, and IT enablers Working with clinical leaders to support both smaller service development initiatives and larger scale service reconfiguration Engagement in annual planning to ensure congruence with strategic direction, including Provider Arm budget and volume setting Supporting investment prioritisation and decision-making Performance monitoring and management across whole system, with evaluation as appropriate

12. Today’s funding and contracting models A variety of mechanisms are available Choice reflects maturity of the system, nature of the service, and particular goals Increasing emphasis on integrated care (including acute demand management) means use of:  Transparent Provider Arm cost budgets and activity targets, rather national prices (still used for inter-district flows and benchmarking)  Capitation or block contracts, rather than fee-for-service  Alliance contracting  Longer term contracts  Outcome-based contracts  Performance-based contracts with incentives/sanctions Some contestability at the margins

13. Conclusions Planning & Funding functions are a core component of a health system The structure they are located in and their approach reflect a health system’s developmental and policy priorities New Zealand is now strongly focused on system sustainability, service integration, acute demand management and performance improvement Embedding of the Planning & Funding role within the DHB structure supports a collaborative, whole-of-system approach The ‘planning’ dimensions are being emphasised – whole system view and direction, and collaborative development of new models of care that shift demand (and resources) away from hospitals into primary & community settings