Health funding principles and guidelines

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1 Health funding principles and guidelines

2 Contributors A special thanks goes to all who contributed to the development of this document and in particular to all members of the Hospital and Health Service Costing and Funding Network with representatives from the Department of Health, and Hospital and Health Services (HHSs). Document overview This document is presented in three parts: Part 1 provides an overview of how healthcare services are funded in Queensland and includes key inputs into the final budget allocations for each HHS. Part 2 provides the operational guidelines for activity based funding (ABF) in Queensland, including technical information and funding tables. Part 3 contains detailed information on non-abf or block funded services. Health funding principles and guidelines Published by the State of Queensland (Queensland Health), December 2014 This document is licensed under a Creative Commons Attribution 3.0 Australia licence. To view a copy of this licence, visit creativecommons.org/licenses/by/3.0/au State of Queensland (Queensland Health) 2014 You are free to copy, communicate and adapt the work, as long as you attribute the State of Queensland (Queensland Health). For more information contact: HHS Funding, Costing and Performance Management Unit, Provider Engagement and Contract Delivery Branch, Health Commissioning Queensland, Department of Health, GPO Box 48, Brisbane QLD 4001, QABFM@health.qld.gov.au Phone: An electronic version of this document is available on QHEPS. Disclaimer: The content presented in this publication is distributed by the Queensland Government as an information source only. The State of Queensland makes no statements, representations or warranties about the accuracy, completeness or reliability of any information contained in this publication. The State of Queensland disclaims all responsibility and all liability (including without limitation for liability in negligence) for all expenses, losses, damages and costs you might incur as a result of the information being inaccurate or incomplete in any way, and for any reason reliance was placed on such information. Health Funding Principles And Guidelines i -

3 Contents 1. Overview of health service funding Principles for health service funding The National Health Reform Agreement health portfolio budget Own source revenue Service agreements Annual process for determining Hospital and Health Service funding Healthcare purchasing initiatives Operational guidelines for activity based funding in Queensland Activity based funding an overview National approach to activity based funding Activity based funding hospitals Data collection systems Acute admitted inpatients Sub-acute and non-acute patients Mental health inpatients Emergency departments and services Non-admitted patients (outpatients) Renal dialysis Private and ineligible patients Funding model loadings Grants for activity based funding facilities Facilities and services not funded through activity based funding Block funding for small rural hospitals Specialist block funded hospitals Other block funded services Output based funded services Governance, audit and compliance Appendix 1 Acute admitted patients AR-DRG v 7.0 Queensland Appendix 2 Acute admitted patients AR-DRG v7.0 national Appendix 3 Mental health per diem rates for designated wards Appendix 4 Sub and non-acute patient admitted AN-SNAP v Appendix 5 Non sub and non-acute care type per diem rates Appendix 6 Tier 2 non-admitted services v Appendix 7 Emergency departments URG v Appendix 8 Emergency services UDG v Appendix 9 Adjustments Appendix 10 Intensive care units eligible to receive adjustments Appendix 11 Radiotherapy procedure codes eligible for adjustments ii -

4 Appendix site specific grants Appendix clinical education and training grants Appendix 14 Block funded hospitals Appendix 15 Activity based funding and non-activity based funding budgeted services iii -

5 1. Overview of health service funding 1.1 Principles for health service funding To increase transparency and better allocate funding to where resources are required, the Queensland healthcare funding model aims to: increase the level of hospital activity for a given level of inputs through technical efficiency ensure hospital resources are allocated to those activities which maximise health outcomes through allocative efficiency provide incentives for technological and clinical innovations that lead to better health outcomes through dynamic efficiency ensure that hospitals are funded on a comparable basis for the activity they provide, and that unavoidable differences in costs between hospitals are taken into account through equitable funds distribution provide incentives to support continuous improvement in patient safety and quality provide the public with information on hospital performance and accountability. 1.2 The National Health Reform Agreement The National Health Reform Agreement (NHRA) of August 2011 sets out the intention of the Australian Government, and state and territory governments to work in partnership to improve health outcomes for all Australians. This included: the states being recognised as system managers of the public hospital system the establishment of local hospital networks (known in Queensland as HHSs) funding public hospitals using ABF based on a national efficient price where practicable, and block funding in other cases the Commonwealth Government increasing its contribution to efficient growth funding for public hospital services to 45 per cent from 1 July Under the NHRA, the Commonwealth was to also increase its funding share to 50 per cent from 1 July However, as part of its budget announcements, the Commonwealth announced it would no longer fund on an activity basis from 1 July 2017 hospital funding being provided through a single national health funding pool. Payments will be made from this funding pool directly to HHSs, using a nationally consistent approach to ABF the Independent Hospital Pricing Authority (IHPA) setting the efficient price of delivering hospital services

6 1.2.1 Purchasing health services Service agreements between the Department of Health (the department) and each HHS are based on the department s funding and purchasing models. In broad terms, the funding model determines the price at which the department purchases services from HHSs, and the purchasing model determines the volume of services that are purchased. In terms of the funding model: 34 of the largest public hospitals are funded through the Queensland ABF model, which sets prices at a disaggregated level for each type of public hospital service. The Queensland ABF model is based largely on the national ABF model, but includes a number of modifications to reflect Queensland priorities or more suitable pricing models. 89 public hospitals are funded through block funding arrangements, 86 predominantly small regional and rural hospitals, and three specialist mental health hospitals. Given the high fixed costs facing smaller hospitals, and economies of scale, these facilities would not be financially viable in an ABF model. Most non-hospital services (e.g. preventive health, primary and community health) are funded based on historical funding levels. However, some services, such as oral health and breast screening are funded based on a price per unit of output. The purchasing model determines the volume of services that the department agrees to purchase from each HHS through the service agreement. The level of purchasing is informed by the key priorities for investment as identified in the publication Health Priorities and in negotiation with the HHSs health portfolio budget The Queensland Health portfolio operating budget is $ billion, an increase of $914 million or 7.2 per cent on the estimated actual. In , $ billion (or 80.8 per cent of the total budget) will be allocated to HHSs and other organisations, including Mater Health Services through service agreements to provide public hospital and non-hospital based services. In , the State Government will continue to provide the majority (61.31 per cent) of funding for Queensland s public hospital and health system at $7.549 billion. The Commonwealth Government s funding towards Queensland s Health portfolio is $3.242 billion (27.6 per cent). Along with state and federal government funding, revenue from user charges is expected to total $1.045 billion (8.5 per cent), while other revenue will comprise $ million (1.4 per cent) Hospital and Health Service funding HHS funding is provided from the Purchasing Pool that holds funding for the following purposes: ABF for HHSs via the state pool account block funding via the state managed fund

7 locally receipted grants locally receipted own source revenue department grants. This pool of funds is used to fund enterprise bargaining and non-labour escalation, specific initiatives, such as service delivery growth. 1.4 Own source revenue Own source revenue (OSR) is a key component of the department s funding source. Section G3 of the NHRA states that private patients, compensable patients and ineligible patients can be charged for public hospital services. Funding obtained via this method is referred to as OSR. The types of patients and flow of revenue is outlined in the following list. Revenue generated, managed and retained by Hospital and Health Services/commercial business units: private inpatients private outpatients Medicare ineligible patients: overseas visitors (not covered by a reciprocal health care agreement), asylum seekers workers compensation other than WorkCover Qld patient motor vehicle accident outside the Queensland compulsory third party scheme personal injury insurers Department of Defence Department of Veterans Affairs (ward medical, imaging, pathology) non-patient revenue (retail proceeds, pharmaceutical recoveries, prosthetic recoveries, non-government organisation (NGO) research grants). Revenue centrally negotiated and Hospital and Health Services reimbursed for activity: compensable patients: WorkCover Qld Queensland compulsory third party scheme Motor Accident Insurance Commission Department of Veterans Affairs (hospital inpatient service and non-admitted public service fees) interstate (cross border residents) The department and individual HHSs agree OSR targets as part of the service agreement negotiations.this includes estimates for:

8 the use of private health insurance for admitted patients who hold valid health insurance improvements to the rate of bulk billed outpatient consultation and diagnostic services provided by medical officers. 1.5 Service agreements The Hospital and Health Boards Act 2011 stipulates that a service agreement must be in place between the department and each HHS for the provision of public health services. Service agreements formalise the hospital, health and other services to be provided by the HHS, and includes the detail of the funding provided to the HHS for the provision of these services (both ABF and non-abf services), the volume of purchased activity and key performance indicators. The service agreement framework is in place for two years in order to provide HHSs with a level of guidance regarding funding and purchased activity for the years and However, finance and activity schedules within the agreement (Schedule 2 and 7) are subject to change via an agreed amendment process. Further information on service agreements is available on QHEPS or the Queensland Health website. The figure below summarises the processes behind the development of service agreements with the HHSs. DoH Strategic Priorities HHS Strategic Plans/priorities ABF plus SSGs, Educational Grants Budget Estimated Future Activity HHS Service Agreements Healthcare service delivery Non-ABF Budget Existing service utilisation Health Portfolio Budget (state and federal funding)

9 1.6 Annual process for determining Hospital and Health Service funding Funding for each successive financial year is determined in advance to allow sufficient time for HHS planning. The starting point for the funding for each HHS is the previous years Service Level Agreement. HHS funding will consist of allocations for ABF services as well as non-abf services. Funding is then built via allocations/deductions based on the following: wage increases as a result of enterprise bargaining non-labour escalation additional purchased activity for services identified by the Health Priorities paper highlighting key priorities for investment in in relation to: commonwealth and state directions population projections burden of disease estimated future activity current system constraints. A number of other factors may also influence budget determination, such as: election commitments national partnership agreements regional cancer care funding up-front adjustments for purchasing initiatives efficiency dividends savings requirements, such as employee related savings, specified saving targets for contractors, consultants, travel and advertising. 1.7 Healthcare purchasing initiatives As well as defining activity targets, the purchasing framework comprises a range of purchasing intentions which apply financial levers to drive the delivery of efficient and effective care. Purchasing intentions are targeted in three main areas: improving access to services (e.g. pay for outcomes specialist outpatients) more care closer to home (e.g. incentives for local service provision and telehealth) improving patient safety and quality (e.g. reducing adverse events and quality improvement payments). Purchasing initiatives can take the form of:

10 volume adjustments purchase more or less of certain activity from HHS e.g. additional activity in targeted areas (more care in rural hospitals and increased telehealth activity). price adjustments incentive payments, such as quality improvement payments (QIP) and pay for outcomes (PfO) financial disincentives, such as nil payment for never events. Table 1 summarises the new purchasing initiatives for , and Table 2 and 3 outline the prior year initiatives applicable in Further information on the complete suite of purchasing initiatives. Summary of new healthcare purchasing initiatives Initiative PfO specialist outpatient access PfO chronic disease readmissions QIP Rural care activity volume Nurse endoscopist Telehealth Description Incentive payments for the increase in the percentage of people being seen within the clinically recommended time for their urgency category for an initial specialist outpatient appointment. Incentive payments for a reduction in patients with chronic conditions being readmitted as an emergency with a chronic condition within 28 days. Smoking cessation payment for reaching target for inpatients offered a smoking cessation clinical pathway. Childhood immunisation payments for reaching targets on child immunisation. Palliative care payment for initiating communication with patient on advance care planning. Non-admitted data payment for reaching targets in the quality of nonadmitted patient level data for national reporting requirements. Additional payment to block funded NEC category F&G facilities for additional activity in targeted areas. Same payment for the provision of endoscopy services whether undertaken by doctor or nurse endoscopist. Incentivise uptake of telehealth activity by paying for additional outpatient activity volume or provision of telehealth consultancy for inpatients (Note: Queensland modification of reimbursing both outpatient provider and recipient maintained in ABF pricing model). Table 1 Summary of changed healthcare purchasing initiatives, applicable in Initiative Description Change in High cost/low volume activity Fractured neck of femur timely surgical access Additional payments for unforeseen variations in high cost, low volume activity and high cost individual patients. DRG payment discounted by 20 per cent if surgical treatment of fractured neck of femur (#NoF) is not within two days. Change in scope Diagnosis Related Groups (DRG) Change from QIP to disincentive

11 Table 2 Initiative Summary of unchanged healthcare purchasing initiatives, applicable in Description Adverse events blood stream infections (BSI) Adverse events pressure injury Adverse events psychotropic medication Mental health frequent re-admissions Healthcare innovation fund Emergency department did not wait (DNW) Pre-operative elective bed days Outpatients Out-of-scope activity Never events Hospital in the home (HITH) Disincentives to minimise hospital acquired BSIs. Disincentives to minimise hospital acquired Stage 3 and 4 pressure injuries. Disincentives to minimise hospital acquired injury associated with administration of psychotropic medication for mental health inpatients. No payment for more than 10 admissions to acute mental health inpatient units within 12 months. Still to be confirmed for Commitment to honour existing schemes in (and where applicable). No payment for DNWs. For elective surgery, reduction in the payment of long day stays is applied where there is a pre-operative admission and the Length Of Stay (LOS) is greater than the trim point. Retain Queensland price differential between new and review outpatient price weight. No payment for activity identified as out-of-scope i.e. vasectomies, reversal of vasectomies and laser refraction. Zero payment for six never events. HITH price of 85 per cent and applied to three specific noncomplex DRGs (pulmonary embolus, venous thrombosis and cellulitis)

12 2. Operational guidelines for activity based funding in Queensland 2.1 Activity based funding an overview ABF is a way of funding hospitals, whereby they are reimbursed based on the mix and volume of patients treated. ABF is based on three key elements: classification of patient activity (i.e. the classification system used) counting the activity (i.e. the counting unit) costing the activity (determining a cost per counting unit). The different types of activity funded by ABF are identified and counted in a standardised manner. Used effectively, these elements result in pricing and funding transparency of the public hospital system. Table 4 shows the classification systems used for various activity types and the counting unit. Table 3 Activty based funding classification and information systems for Activity type Counting unit Classification Information needed to classify episode Acute inpatients Intensive care patients Subacute inpatients Emergency department (Level 3b and above) Emergency service (small or rural EDs) Patient episode and per diem for short or long stay outliers Patient episode and time spent in an intensive care unit (ICU) and per diem for short or long stay outliers Mixed model using patient episode and/or per diem Presentation Presentation Australian refined diagnosis related groups (AR-DRGs) classification V 7.0. Specific DRGS within the australian refined diagnosis related groups (AR-DRGs) classification V 7.0. Australian national subacute and non-acute patient (AN-SNAP) V3 Urgency related group (URG) V1.4.2 Urgency disposition groups (UDG) V1.3 Outpatients Service event IHPA Tier 2 non admitted services classification (V3) and OoS modality (new or review) ICD-10-AM (diagnosis and procedures codes) Hours in ICU Care type, impairment type (rehabilitation), age, phase (for palliative care), activity of daily living assessment score (i.e. RUG, FIM, HoNOS) Principal diagnosis, triage category and departure disposition Triage category and departure disposition Clinic type (specialty and provider), clinic mode (new or review)

13 Note: costing patient activity is not covered in this document, but is available in the costing guidelines. The basis of the ABF payment model is outlined in the diagram below. The overall funding for a service is determined using a combination of a standard or base price and a unit of activity that is weighted according to resource requirements, called a weighted activity unit or WAU. The principle behind applying a weighting to each of the service activities is to reflect the more resource intensive a procedure or treatment is, the greater the weight will be. Price (1.0 WAU) Activity weighting Funding ($) Queensland efficient price (QEP) = $4676 Represents the relative resource consumption for the patient treatment. Educational and training resources on ABF are available on a number of HHS QHEPS sites as well as the department s activity based funding educational resource site. Within Queensland, 34 public hospitals are funded via ABF in , including the Mater Adult s, Mater Mother s and Mater Children s Hospitals. The NHRA states that ABF should be used wherever practicable. If ABF is not possible, Independent Hospital Pricing Authority (IHPA) have developed criteria to determine which public hospital services are better funded through block grants. The main criteria are: the technical requirements for applying ABF are unable to be met there is an absence of economies of scale that mean some services would not be financially viable under ABF. The intent is, where technical requirements can be met, to move to ABF funding over time. However, other services may need to be funded using only block grants or a combination of block grants and activity based funding on an ongoing basis. This includes screening programs, community allied health services, oral health and postnatal care. Eighty-six small rural hospitals will be block funded as well as three specialist mental health facilities (Baillie Henderson, The Park and Kirwan Rehabilitation Unit). Part three of this document provides further information on block funded services. 2.2 National approach to activity based funding Under the 2011 NHRA, the Commonwealth will fund 45 per cent of efficient growth in public hospital services between and

14 2.2.1 National efficient price and national efficient cost The IHPA was also established under the NHRA and is an independent statutory authority to oversee the phased implementation of a nationally consistent approach to ABF. The IHPA calculates and determines: 1. National efficient price (NEP) which is based on the average cost of providing acute admitted services across Australia, but also applies to emergency and nonadmitted services. All price weights are expressed as a single unit of measure being the national weighted activity unit (NWAU). It provides a scale that identifies the relative measure of resource use of each public hospital service and guides the commonwealth contribution for ABF services NEP per NWAU NEP $5007 = 1 NWAU 2. National efficient cost (NEC) determines the commonwealth contribution to block funded hospitals for services that do not meet the criteria for ABF (e.g. small rural hospitals). Individual funding levels are weighted relative to the NEC based on their size and location (e.g. very remote locations). Refer to part three for information on block funded services. The IHPA releases a pricing framework along with NEP and NEC determinations annually that includes: NEP price weights technical details of the national funding model scope of services basis for price setting, and block funding criteria. Further information on how the NEP is calculated and applied Indexation of the national effiecient price Because of the three year time lag in data collection to the year the NEP is being calculated, costs are indexed to the relevant model year to determine each NEP. That is, the NEP applied to is based on costing data from and therefore the costs are indexed to account for costs growth over this three year period. A back-casting methodology is used to ensure changes in the model do not affect the level of funding to be provided by the commonwealth National efficient price vs the Queensland efficient price The NEP is a single national price based on costing information from all states and territories. It is developed by IHPA and is intended to provide a consistent and transparent method to determine commonwealth funding to states and territories for health services provided by ABF facilities

15 The Queensland ABF model uses the QEP as the base price for ABF services in Queensland. The QEP is based on the NEP with adjustments applied to reflect the differences between the management of costs in Queensland and model variances for localisations. Examples include clinical education and training (CET), corporate overheads and the mental health localised model. This is a fairer way to fund HHSs as it is a truer reflection of the cost of services QEP per Queensland WAU QEP $4676 = 1 QWAU The derivation of the QEP involves the following steps: Step 1 Using the NEP as a baseline and adding costs that were excluded in determining the NEP, but which are borne by HHSs.This includes items, such as specialised services for blood transfusions and unlinked diagnostic activity. Step 2 Remove costs that are included in the NEP, but in Queensland are paid to HHSs as block grants, such as site specific grants (SSGs) and CET or those costs not borne by HHSs, such as overheads borne by the department rather than HHSs. Step 3 Specific discounts are then applied to reflect the localisations to the Queensland ABF model relating to mental health admitted patients in designated wards and clinical measurement. Table 5 summarises the calculation of the QEP

16 Table 4 Calculation of the Queensland ffficient price National efficient price $5007 Plus Queensland specific adjustments to price * Blood costs devolved to HHSs $31 Unlinked diagnostics $56 Subtotal +$87 Less Queensland specific adjustment to price Site specific grants -$83 CET -$161 Corporate overheads -$103 Mental health inpatient localisation -$51 Clinical measurement localisation -$19 Subtotal -$418 Queensland eficient price $4676 *High cost pharmaceuticals are now incorporated into the NEP rather than being administered via block grants National weighted activity units vs Queensland weighted activity units The unit of measure for the Queensland ABF model is the Queensland weighted activity unit (QWAU). Where the national model has been directly applied, the NWAUs and QWAUS will be equal. In a limited number of areas, NWAUs have been adjusted (or localised) to better support service delivery in Queensland and ensure financial levers appropriately reflect Queensland strategic directions and purchasing policy. Therefore, where localisations have occurred there will be variations between NWAUs and QWAUs. The department is required to report on the number of NWAUs for the purposes of the National Health Funding Body (NHFB). However, the state funding model will be based on QWAUs, not NWAUs Localisations to the Queensland activity based funding model from the national model In and now in , Queensland s approach is to apply the national ABF model where practical and minimise the number of localisations. Table 5 identifies where localisations have been applied from the national ABF model

17 Table 5 Queensland localisations from the national activity based funding model Service/funding National model Queensland localisation Efficient price NEP QEP. Emergency presentations Never event Pre-operative bed days Inpatients: HITH Inpatients:mental health wards All inpatients Out of scope activity (including vasectomies, Minimal payment in model No delineation in model for adverse patient outcomes No delineation in model No delineation for HITH episodes No delineation in payment for patients in designated mental health wards No delineated payment for telehealth activity for admitted patients Payment incorporated into model No payment for emergency department patients who did not wait. No payment for an episode of care that involves the following never events: death or likely permanent harm as a result of haemolytic blood transfusion reaction resulting from blood incompatibility death or likely permanent harm as a result of bed rail entrapment or entrapment in other bed accessories (no exclusions) infants discharged to the wrong family (no exclusions) death or neurological damage as a result of intravascular gas embolism procedures involving the retention of instruments or other material after surgery. procedures involving the wrong patient or body part resulting in death or major permanent loss of function. Elective episodes with surgical DRGs that have both pre-operative days and long stay days (above trim point) will have the number of paid long day stays reduced by the number of preoperative bed days, up to a maximum of three days. Episodes with the following DRGs will be funded at 85 per cent of DRG price weights. E61B non-complex pulmonary embolism J64B non-complex cellulitis F63B non-complex venous thrombosis. Funding for all other episodes with a HITH component will be funded as follows: episodes that do not exceed the DRG inlier period will be paid at 100 per cent of DRG price weights. That is, if patient is receiving care via HITH and the episode in within the inlier period, 100 per cent of the DRG payment will apply episodes with a length of stay exceeding the DRG inlier period will have the long stay component paid at 85 per cent of the long stay per diem rate. Per diems for admitted mental health patients in designated wards. Payment for a provider of a telehealth consultation to a patient at another facility. No payment

18 Service/funding National model Queensland localisation reversal of vasectomies and laser refraction) Private patients Outpatients Inpatients sub and non-acute Partial funding for private and ineligible patients Same WAU for new or review outpatients Zero payment for Tier 2 clinical measurement outpatient service event (30.08) No delineation for telehealth activity and only fund the provider As per national model Full funding for private and ineligible patients. Variation in WAUs for new and review outpatients. Payment for clinical measurement (30.08). Telehealth activity funded at both provider and recipient sites. Private and ineligible outpatients attract the same funding as public patients. Private and ineligible outpatients in scope for payment (paid at discounted rate in national model). Telephone consultation occasions of service that meet the service event criteria 1 will be paid at the relevant Tier 2 clinic rate. Excluding mental health patients in designated wards. 2.3 Activity based funding hospitals As was the case in , there will be 34 public hospitals funded in using the Queensland ABF model. These are listed in Table 6. Table activity based funding hospitals* Hospital and Health Service Cairns and Hinterland Central Queensland Children s Health Queensland Darling Downs Gold Coast Mackay Mater Health Services Activity based funding hospital Atherton Hospital Cairns Base Hospital Innisfail Hospital Mareeba Hospital Gladstone Hospital Rockhampton Hospital Royal Children's Hospital Kingaroy Hospital Toowoomba Hospital Warwick Hospital Gold Coast University Hospital Robina Hospital Mackay Base Hospital Proserpine Hospital Mater Adult Hospital 1 See the MAC Manual for detailed definitions and counting rules for non-admitted services (which reflect the IHPA Tier 2 definitions)

19 Mater Children s Hospital Mater Mothers Hospital Caboolture Hospital Metro North Metro South North West Sunshine Coast Townsville West Moreton Wide Bay Redcliffe Hospital Royal Brisbane & Women's Hospital Prince Charles (The) Hospital Logan Hospital Princess Alexandra Hospital Queen Elizabeth II Jubilee Hospital Redland Hospital Mount Isa Base Hospital Caloundra Hospital Gympie Hospital Nambour General Hospital The Townsville Hospital Ipswich Hospital Bundaberg Base Hospital Hervey Bay Hospital Maryborough Hospital *Lady Cilento Children s Hospital opened 29 November 2014, with services transferring from Royal Children s and Mater Children s Hospitals. 2.4 Data collection systems The following table summarises the information systems used across HHSs to capture activity for various ABF services. Table 7 Information systems used across HHSs Activity type Acute inpatients Intensive care patients Subacute inpatients Mental health inpatients Emergency department (ED) Emergency service (small or rural EDs) Outpatients Administration system for patient activity data Hospital based corporate information system (HBCIS) Emergency department information system (EDIS) HBCIS or EDIS Monthly activity collection (MAC) online form For further information, including the datasets collected via these systems, refer to the QHAPDC Manual and/or the MAC Manual

20 2.5 Acute admitted inpatients Classification and counting unit Acute episodes of care are grouped into clinically similar and resource homogenous groups on the basis of the principal reason for admission using the Australian refined diagnosis related groups (AR-DRGs) classification version 7.0. The counting unit is an admitted patient episode Changes from previous year s model Item Classification AR-DRG V6.0X AR-DRG V7.0. Same day payment list Long stay outlier per diems Long stay patients (>200 days) 136 DRGs Reduced to 88 DRGs in same day payment list, however additional DRGs with lower and upper boundaries limited to one day. n/a n/a Outlier per diems adjusted to reduce gap between short day outliers and inliers. This is to ensure there is no incentive to keep patients that would otherwise be short stay outliers, in hospital longer. Patients with a LOS of more than 200 days at 30 June each year will be assigned a provisional NWAU rate. On discharge, the provisional NWAU value assigned to the patient in previous year would be subtracted from the actual NWAU value calculated at the time of discharge. While this has been included in the national model, Qlueensland is yet to determine an technical solution for in year management of long stay patients spanning financial years. If a technical solution can be resolved, a proposal will be provided to the HHS funding committee, in year Payment based on inlier and outlier modelling Funding for acute admitted patients is based on payment for each episode of care, which is a phase of treatment that ends when the clinical intent of care changes or the patient is formally discharged from hospital. To establish an appropriate funding level, episodes within an AR-DRG are partitioned into four categories as shown in Figure 3 (i.e. same day, short stay outliers, inliers and long stay outliers) and costs are analysed to determine the relevant parameters. The resulting funding model is reflected by the pricing line

21 Figure 3 Trim point parameters for the assignment of price weights The Queensland model adopts the national L3H3 trimming method where: the low trim point is a third of the national mean length of stay for each AR-DRG, and the high trim point is three times the average length of stay. This (1/3, 3) boundary setting aims to balance financial incentives to drive inpatient throughput, but also incorporates financial disincentives to keep patients in hospital Payment methodology for acute admitted patients The payment model for acute admitted care is based on episodic payments plus per diem payments for outlier days, and includes adjustments for ICU, paediatric, Indigenous, psychiatric and remote areas. See section 2.12 for further information on adjustments available for acute admitted patients Same day Australian refined diagnosis related groups A number of AR-DRGs are set as same day AR-DRGs and price weights are based on the patient being admitted and discharged on the same day (i.e. the upper and lower boundaries are set at one day) Same day payment list As opposed to the same day AR-DRGs, a number of other AR-DRGs have been designated under a same day payment list. The AR-DRGs identified on this list are those that show significant variation in length of stay, such as E62C respiratory infection/inflammation CC and the intent is to encourage selected overnight procedures to be undertaken as a same day procedure

22 Having a same-day price avoids over-paying hospitals that are presented with a higher proportion of patients that can be safely admitted and discharged on the same day, while underpaying hospitals that are presented with patients requiring over night or lengthy stays. The number of same day payment list DRGs identified by IHPA has significantly reduced from 136 in to 88 in As has been the case in previous years, payment is based on a: same day price weight for episode that are day only, or short stay base price weight + short stay per diem price weight for episodes that are overnight but not in lower boundary, or inlier price weight (for episodes within the lower and upper boundaries) + long stay per diem price weight (for episodes exceeding the upper boundary). AR-DRGs designated for a separate same day payment are identified with a yes in the column same-day payment list in the acute admitted patients AR-DRG v 7.0 table (see Appendix 1) Example of payments for acute care patients Example: DRG N11Z, other female reproductive system OR procedure DRG payment list Lower bound Upper Bound Same day Sameday Shortstay outlier base Shortstay outlier per diem Inlier Long stay per diem N11Z Yes If the DRG was performed as a same-day episode, it will attract a price of $1397 (WAU * $ base price of $4676) as this DRG is on the same day payment list. 2. If the episode was one day (overnight), it will attract a price of ( short stay outlier base ) * $ base price. 3. If the episode was 12 days (i.e. within the lower and upper boundaries and termed an inlier), the episode will attract a price of inlier weight * $ base price. 4. If the episode was 29 days (i.e. 6 days beyond the upper boundary), the episode will attract a price of [ inlier weight + (0.2918* 6 long stay outlier days)] * $ base price. Note: Adjustments applied where applicable (e.g. radiotherapy or Indigenous persons) Critical care delivered via intensive care units Critical care is an area that requires significant resources to the treatment of patients which an AR-DRG alone does not reflect. Therefore additional funding over and above the acute inpatient payment, may be available for patients admitted to an ICU Changes from previous year s model In , IHPA have made changes to the funding model in relation to units eligible to receive ICU adjustments and additional bundled AR-DRGs. These are summarised in Table 8. Table 8 Changes to funding model for ICU adjustments Item

23 Eligibility for ICU adjustment ANZICS Level 3 or Queensland ICU Level 6 as defined in the Clinical Services Capability Framework Number of bundled AR-DRGs Payment types Peer groups Bundled AR-DRGs Non-bundled DRGs Not applicable, largely bundled with acute inpatients Eligible units are those reporting more than 24,000 ICU hours and more than 20% of those hours used mechanical ventilation** No change No change ** Seven additional units in Queensland as a result of revised eligibility (see Appendix 10 for list of eligible facilities) Adjustment for critical care Adjustments to cover costs for critical care are provided via two mechanisms: 1. Bundled critical care weigthed activity unit AR-DRGs with a yes in the bundled ICU field in the table of cost weights and prices for acute patients (Appendix 1), will have the ICU component bundled within the inlier weight as most patients within those AR-DRGs receive ICU care. As such, the DRG inlier price weight is high compared to other AR-DRGs to incorporate ICU costs. These DRGs are not eligible for an ICU adjustment (see section for more detail). 2. Intensive care unit adjustment For those AR-DRGs not on the ICU bundled list, but delivered to a patient in an eligible ICU/PICU, an ICU adjustment of QWAUs will apply for each hour spent in the ICU. The ICU adjustment (based on number of hours spent in the ICU) is in addition to the inlier episodic WAU and a long stay per diem WAU (see Example 2) Examples of intensie care unit calculation Example 1: Calculation for an episode with a bundled ICU AR-DRG F05A Coronary bypass and invasive investigations + re-opening + CCC DRG payment list Bundled ICU Lower bound Upper Bound Sameday Shortstay outlier base Shortstay outlier per diem Inlier Long stay per diem F05A Yes If the episode was 42 days (including 2 days in ICU), the episode will attract a inlier weight * $ base price. As ICU is bundled into the inlier price weight for this DRG it is therefore not eligible for the ICU adjustment. Example 2: Calculation for an episode where the AR-DRG was not a bundled ICU DRG and the ICU was determined as eligible to receive the ICU adjustment (i.e. on the eligibility list as determined by IHPA (see Appendix 10). F18A Other pacemaker procedures + CC DRG Same-day payment Bundled ICU Lower bound Upper Bound Shortstay outlier Shortstay outlier Inlier Long stay per

24 list base per diem diem F18A If the episode was 10 days and the patient was also in an ICU for 20 hours, the episode calculated as inlier weight * 20 ICU hours 2.6 Sub-acute and non-acute patients Sub-acute care is defined as specialised multidisciplinary care in which the primary need for care is optimisation of the patient s functioning and quality of life. A person s functioning may relate to their: whole body or a body part the whole person, or the whole person in a social context impairment of a body function or structure, activity limitation and/or participation restriction. Non-acute care refers to care which provides support for patients with a severe level of impairment, activity limitation or participation restriction due to a health condition. Following assessment or treatment, the patient does not require further complex assessment or stabilisation. There are no changes to the funding model from the previous year Classification and counting unit Sub and non-acute patients differ from patients under an acute care type in that their need for healthcare is predicted by their functional status, rather than their principal medical diagnosis, therefore an AR-DRG is not a good indicator of their resource requirements. As such, the Australian national sub and non-acute patient (AN-SNAP v 3) classification system is used to categorise patients into similar resource groupings based on the following care types. rehabilitation care (includes overnight and same day classes) palliative care (overnight and ambulatory classes) geriatric evaluation and management (GEM) (overnight and same day classes) psychogeriatric care (overnight and ambulatory classes) maintenance care non-acute care (overnight and ambulatory classes). It is important to note that a patient cannot be in an acute and sub-acute care type at the same time (i.e. a change in care type is a change in episode). These are mutually exclusive classification systems. The counting unit for admitted sub and non-acute care is a combination of patient episode and number of days in care. This will vary with the AN-SNAP class assigned (and if no AN-SNAP class is assigned the default counting unit is daily or per diem). All sub and non-acute inpatient information is collected via the Queensland Health Admitted Patient Data Collection (QHAPDC). Definitions for each of the care types and further detail on information requirements are available in the QHAPDC Manual

25 Assignment to an AN-SNAP class relies on information, such as, care type, impairment type (for rehabilitation), age and phase (for palliative care) to assign a relevant class within the classification. In addition, a functional assessment score, using the relevant activity of daily living (ADL) tool for each care type must be provided for classification. Table 9 lists the ADL tools for assessment under each care type. Table 9 Care types and applicable assessment tools to determine activity of daily living scores Care type Rehabilitation OR GEM Psychogeriatric care Palliative care OR maintenance care ADL assessment tool Functional independence measure (FIM) with motor and cognitive subscales HoNOS (health of the nation outcome scales) Resource utilisation group (RUG) Where there is insufficient data to assign an AN-SNAP classification, within each care type the episode is classified by care type alone. As per all admitted episodes, sub and non-acute episodes are also grouped to an AR- DRG based on diagnoses and the procedures, however the patient is classified as sub or non-acute and funding is determined by the sub-acute care type Paediatric sub-acute care Sub-acute services such as rehabilitation and palliative care provided to paediatric patients use the same ADL assessment tools as adult patients. Work is being undertaken at the national level to determine what is specifically required for the paediatric subacute component of AN-SNAP Sub and non-acute patients Queensland weighted activity unit Episodes classified into an AN-SNAP class are allocated a QWAU, including episodic with inlier and outlier per diem WAU. Specific loading adjustments are also applicable for Indigenous, paediatric and remote patients receiving sub and non-acute care. Price weights vary across classes depending on factors, such as age, type of impairment and functional capacity of the patient (refer to Appendix 4). There are no episode price weights for overnight GEM, psychogeriatric care and maintenance care. These episode types are calculated using an outlier per diem weight (except for assessment only classes). Please see Example 2 for further information. Where AN-SNAP data is not available and, as such the episode is unable to be assigned to an AN-SNAP class, a per diem weight by care type will be the default (see Appendix 5) Adjustments for patients receiving sub and non-acute care See section 2.12 for detailed information adjustments available to patients in various categories

26 2.6.5 Examples of weighted activity unit calculations for subacute services Example 1: The calculation for a rehabilitation episode for a stroke patient that had undergone an ADL assessment using the FIM Overnight rehabilitation stroke, FIM motor 47-62, FIM cognition 5-15 AN-SNAP v3.0 class Lower bound Upper bound Price weight episode Price weight inlier per diem Price weight outlier per diem A patient is admitted after suffering a stroke. After an episode of acute treatment, the patient is then transferred to a rehabilitation care type. AN-SNAP data, including a FIM motor score and a FIM cognition score, was entered into HBCIS. If the episode was 10 days, the episode will attract a price weight of outlier per diem weight * 10). If the episode was 29 days, the episode will attract a price weight of episode + ( inlier per diem weight * 29). If the episode was 45 days, the episode will attract a price weight of episode + ( inlier per diem weight * 38) + (0.2041* 7 outlier per diem). Example 2: The calculation for a GEM episode for an 86 year old patient that had undergone an ADL assessment using the FIM Overnight GEM aged 86, FIM motor 44-91, FIM cognition <=15 AN-SNAP v3.0 class Lower bound Upper bound Price weight episode Price weight inlier per diem Price weight outlier per diem A patient is admitted after suffering experiencing a period of disorientation at home. AN-SNAP data, including a FIM motor score and a FIM cognition score, was entered into HBCIS If the episode was 4 days, the episode will attract a price weight of outlier per diem weight * 4) (Noting that the operating tables for this class only include a per diem price weight, as per the national model). Example 3: GEM patient without sufficient data to classify the episode into an AN- SNAP class GEM patient with no FIM ADL score entered into HBCIS A patient is admitted under the GEM care type. A FIM ADL assessment was not undertaken (therefore AN-SNAP classification not possible) The patient stays for 15 days and is then discharged back home. The episode will attract a price weight of GEM care type per diem * 15 admitted days). 2.7 Mental health inpatients Queensland Health is the major provider for mental health services and offers specialised care in a variety of settings to a broad range of age groups

27 2.7.1 Classification and counting unit The IHPA is developing a new national mental health patient classification system to better explain resource consumption for mental health consumers across all service settings, as well as improving the relevance to clinical services. It is envisaged the new model will be available post June The counting unit in for patients in designated mental health wards is the number of days in care (per diem). The patient AR-DRG episode is used for acute admissions to non-mental health wards Weighted activity unit calculation A composite model that considers the setting, hospital type (ABF hospital or public psychiatric hospital) and the ward designation is used in Queensland. QWAU calculations are based on the following criteria: 1. Mental healthcare delivered in the following designated mental health wards within ABF hospitals receive a per diem price weight which vary depending on the type of ward (as per Appendix 3). 2. Admitted mental healthcare delivered in the following public psychiatric hospitals is block funded: The Park Centre for Mental Health Baillie Henderson Hospital Kirwan Rehabilitation Unit. 3. Acute inpatients receiving mental healthcare outside a designated mental health ward will receive price weights via the relevant AR-DRG assigned for the episode of care (as per other acute inpatients, see Appendix 1). These patients will be eligible for psychiatric age adjustments (see section below). 4. Sub and non-acute mental health patients receiving care outside of a designated mental health ward will receive a price weight via the relevant AN-SNAP category (as per the national model, see Appendix 4 and 5). All non-admitted mental health services will continue to be block funded. Refer to Table 10 for a summary of funding according to acuity and/or setting. Table 10 Summary of mental health funding Admitted care Non-designated mental health ward (ABF hospital) Designated mental health ward (ABF hospital) Designated mental health ward (public psychiatric hospital) Specialised community/ambulatory mental Funding model according to patient acuity Acute patient AR-DRG assigned for the episode of care, as per other acute inpatients (see Appendix 1) *Per diem payment depending on type of ward (see Appendix 7) Non-acute patient AN-SNAP *Per diem payment depending on type of ward (see Appendix 7) Block funded (see Appendix 3) Block funded (see Appendix 3) Block funded

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