Shifting the Dial - Preventative Health Funding Model

This week the Productivity Commission announced the Shifting the Dial Report. The report will be produced every five years, with the scope broadly to make recommendations that enable governments to implement productivity enhancing reforms. One of the areas of focus in the report is health.

I heard Shifting the Dial was a dry document – but actually, it’s a great read, and if you have time to digest the health sections I recommend it. I hope to share a few other snippets with you in the coming weeks, because there are a lot of big ideas worth talking about. In the meanwhile, here’s the high level summary:

Challenges

The report identifies five key challenges that if solved, might yield productivity improvements of an estimated $8.5b over 5 years:

1. Integrated care (connecting primary and hospital care, resolving funding challenges and improving information flows)
2. Patient centred care (low levels of choice, low patient literacy, frequently weak patient-clinician partnerships, and insufficient focus on patient reported measures/outcomes)
3. Funding (funding rewards activity, not innovation or outcomes and the Commonwealth/State funding split exacerbates the integration challenge across service boundaries)
4. Quality of health (providing services that are outdated or not supported by evidence, high rates of hospital-acquired complications)
5. Using information effectively (data and information flows frustrate integrated care initiatives and innovation is not disseminated quickly enough)

You will likely be familiar with all of these topics, because they’re recurrent themes in the health sector.

Recommendations

The report also makes six recommendations - and whilst they may be challenging initiatives to implement, I do think they would be good for the system:

1. Implement nimble funding arrangements at the regional level
2. Eliminate low value health interventions
3. Make the patient the centre of care
4. Use information better
5. Embrace technology to change the pharmacy model
6. Amend alcohol taxation requirements

The funding topic is interesting – the ideas feel like an extension of A Healthier Future For All Australians report from over half a decade ago. In a nutshell: there are a mix of funding mechanisms driving the health system in Australia, and they can be problematic because many of them drive activity rather than the outcomes we’re after. Those key funding mechanisms are:

1. Medical Benefit Scheme. The Productivity Commission’s report notes that fee for service is the dominant funding model in primary care. This is good – because it supports throughput – and not so good – because outcomes like preventing chronic conditions, or hospital avoidance don’t directly link to payments. (There are MBS items for preventative health and chronic disease management, however these pay for services rather than directly relating to the population health outcomes we might really be seeking).
2. Activity Based Funding. ABF – which notably has improved the efficiency of public hospital services – is not perfect. For example, preventative initiatives may not fit into the ABF model, and therefore are not funded by the Commonwealth. As far as errors such as hospital-acquired complications are concerned - the work on a safety and quality dimension to pricing is much needed and I hope we continue to see progress in this area in the years to come.

3.    Private health insurance.

Ideas for Funding Reform

What is great about this report – is that while it outlines the challenges, it also gives some genuine solutions for discussion and debate. It’s so rare to see reports actually point out what is wrong and then make make suggestions for improvement, and I commend the Productivity Commission for doing this. Here’s one suggestion for a reform to the funding model for health to improve our productivity in the sector.

The paraphrased version is: let’s set up a preventative health funding model, called the Preventative and Chronic Condition Management Fund aligned for each local health service. The Commonwealth and the relevant State or Territory government might fund 2-3% of the ABF funding level (how that level might be determined would be interesting… Perhaps it could be determined on a population health/needs basis instead?) The service would have assurance of funding for the medium term (5 years), have the autonomy to invest in local initiatives which are preventative and aligned to the needs of the local population. Services would be bound to reduce future (public hospital?) activity to provide a reduction in future activity based funding commitments (but what time frame might be reasonable?) Any gains in excess of the agreed targets are kept by the service for investment in other areas.

I don’t think this is a bad starting point for a debate. But I wonder if instead it might be easier to build a preventative population health classification using existing ABF principles?

Fortunately I’ll be at the HIMAA Conference next week to discuss this at length with my HIM colleagues who may have a different point of view. I’d love to know what you think about a preventative health funding reform. Let me know!