National Efficient Price (NEP) for Public Hospital Services Activity Based Funding (ABF)

The IMPACT for PUBLIC Hospital Administrators

The National Health Reform Model provides incentives for public hospitals to deliver quality health care for the lowest cost, thereby providing a relative ‘surplus’ if they can outperform the NEP. The extent to which ABF (Activity Based Funding) will influence decision making at the public hospital and clinician levels will depend on the extent to which budgets are devolved, and accountability and KPIs are established around budget setting and management.

The National Efficient Price (NEP) represents the average cost of an average patient episode delivered in a public hospital. The costs of different services is accounted for using the Diagnostic Related Groups classification, which classifies patients on the basis of the diagnosis associated with the service they received and any procedures that were carried out. Adjustments to the NEP are made for any unavoidable costs associated with the episode of care.

The NEP consists of all costs associated with the services the patient received, including clinical and support staff salaries, accommodation costs and prosthesis costs. In the national ABF system, there are no separate reimbursements made for prostheses for public patients.

ABF provides a tremendous resource in that a benchmark is available against which actual costs can be compared. To make the most of this benchmark, reporting and analysis systems must be made available to hospital managers, and clinicians, so that they can better understand their costs, how they compare to the ABF prices, how they compare to each other, and what they can do to improve efficiency while maintaining or improving patient outcomes. There has been a significant level of activity relating to data collection, budget setting and accountability, governance processes, reporting, and the establishment of national and state working groups.

An ABF model, as with any funding model, comes with the risks of gaming and up-coding. Gaming risks exist when two different prices exist for a similar service, providing an incentive to code and service the activity in the setting that provides the highest price. Perfect pricing harmony can be difficult to achieve if the systems that are used to classify and fund health services are different. The Pricing Authority is aware of this risk and seeks to minimise these differences where possible. A number of health providers will now place greater focus on coding accuracy and it is likely that the average complexity of patients will increase, relative to that recorded in prior periods, in order to maximise revenue. Over time, these coding changes should eventually be reflected in the price weights. The Pricing Authority is also aware of the up-coding/gaming risk and has stated that monitoring is being performed to identify this.

NWAU calculation for inpatients

13 variables required

• Establishment ID
• Age at admission
• Indigenous status
• Postcode of usual residence
• Area of usual residence (SLA)
• Care type
• Funding source for hospital patient
• Admitted patient election status
• AR-DRG v6.x
• Same day patient flag
• No. qualified days for newborns
• Length of stay (minus leave days)
• Eligible ICU hours

calculate base NWAU

• NWAU Base is the weight adjusted for patient LOS for a given DRG (from Price Weight table)
• Same day NWAU
• Short stay outlier MWAU base
• total short stay outlier base NWAU = Short stay outlier MWAU base + Short stay outlier NWAU per diem x LOS
• Inlier NWAU
• Long stay outlier per diem
• NWAU base = Inlier NWAU + excess LOS x Long stay outlier per diem

Apply Adjustments

paediatric NWAU 2

• age < 16yrs in designated hospitals and DRG not in neonatal section

indigenous and remoteness area NWAU 3

• 5-24.4% adjustment factor depending upon combination

Intensive Care Unit NWAU 4

• if DRG not in neonatal section, and not identified as “bundled ICU” in DRG, and patient spent time in a desgnated ICU
• LOS in ICU is removed from the episode LOS
• adjustment is 0.0394 NWAU per hour in specified ICU

private patient service

• based on Price Weight table eg. may apply a 73% factor to reduce the NWAU

private patient accommodation adjustment

• this is around 0.05 NWAU for same day and 0.07 NWAU per night which are subtracted from the NWAU value

identify episodes in-scope for ABF

• identified by patient election or funding source

funding amount

• NWAU x NEP (currently the NEP = $4808 per NWAU)