NORTHERN TERRITORY VIEWS ON CGC STAFF DISCUSSION PAPER 2007/17-S ASSESSMENT OF ADMITTED PATIENT SERVICES FOR THE 2010 REVIEW

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1 NORTHERN TERRITORY VIEWS ON CGC STAFF DISCUSSION PAPER 2007/17-S ASSESSMENT OF ADMITTED PATIENT SERVICES FOR THE 2010 REVIEW OCTOBER 2007

2 ADMITTED PATIENT SERVICES Key Points: The Territory supports the Commission s proposal to measure the socio-demographic composition factor using a weighted population approach for Indigeneity, age and location based on actual utilisation rates. The Territory believes that different age bands should be applied to the Indigenous and non-indigenous population recognising the on-set of ageing related illnesses at an earlier age in the Indigenous population. The Territory proposes the following age bands: -Indigenous: 0, 1-39, and 50 years and over; -non-indigenous: 0, 1-59, and 70 years and over; The Territory does not support the proposal to aggregate remote and very remote. There are significant differences in hospital utilisations between these population groups. Furthermore, reliable data is readily available on separation rates and population size for each region to undertake a separate assessment for remote and very remote. The Territory supports the assessment of an Indigenous cost weight to measure the additional costs associated with the complexity and higher co-morbidities associated with Indigenous presentation, and the higher number of bed days per Indigenous client. The Territory supports the application of a hospital cost factor to measure differences in costs of providing a hospital in different regions. INTRODUCTION This submission provides the Northern Territory s views on issues raised in the Commonwealth Grants Commission s (the Commission) staff discussion paper, Assessment of Admitted Patient Services for the 2010 Review, and the subsequent workshop in August It should be noted that the Territory s views on common factors for the health categories are contained in separate submissions

3 CATEGORY EXPENSES Patient transport The Territory believes that patient transport expenses should be included in the Admitted Patients category. Patients evacuated for medical reasons are transported to hospitals not community health clinics. As such, these patients influence the utilisation rates for inpatient services. Therefore, the drivers of patient transport costs are more closely related to admitted patients than community and other health services. The Territory considers its patient transport expenses at the four digit government purpose classification level to be reliable. As a reality check, the Commission could ask states, through a data request, to identify their expenditure on patient transport. Hospital user charges The Territory does not support the Commission s proposal to offset hospital user charges (including private patient fees) against the Admitted Patient Services category. In the Territory, hospital user charges comprise mainly of private patient fees, and service fees from motor vehicle compensation (under the Territory s Motor Accident Compensation Act) and patients from overseas. It is clear that the drivers of hospital user charges are distinct from the factors that influence admitted patient expenses. Therefore, the Territory believes that the Commission should include these user charges in the Other User Charges category. SOCIO-DEMOGRAPHIC COMPOSITION States responses to the Commission s paper, Initial Views on Assessment Structure and Approaches, indicated broad support for a socio-demographic composition factor based on weighted population. This approach captures the different utilisation rates for hospital services for each sub-population group. The Territory supports a weighted population assessment of inpatient services based on actual hospital utilisation rates. The Territory believes that the socio-demographic composition factor for the 2010 Review Admitted Patient Services category should closely mirror the current assessment in the 2004 Review Inpatient Services category. The 2004 Review methodology reflects how states provide hospital services, is robust, simple, detailed, and is based on reliable data from the Australian Institute of Health and Welfare (AIHW). Furthermore, it should be noted that the ABS review of AIHW separations data, the base - 3 -

4 data for the socio-demographic composition factor in the Inpatient Services category, found the AIHW data fit for the Commission s purposes. Simplification can be achieved through a reduction in the number of population groups assessed. However, reducing the number of population groups should not come at the expense of improved equalisation outcomes. If there is a strong conceptual case for further disaggregation, and data is readily available, then the preference should be to disaggregate the population groups. The main population characteristics that impact on admitted hospital services are: Indigeneity; Location; and income. An analysis of each of the socio-demographic composition drivers of admitted patient expenses follow. Indigeneity It is widely acknowledged, and supported by data, that Indigenous people have significantly poorer health outcomes than the non-indigenous population. The poor Indigenous health status has significant ramifications for the delivery of government services that extend beyond the health system, including education, welfare, housing and law and order. The Australian Government s Aboriginal and Torres Strait Islander Health Performance Framework report stated: As identified in many other reports, this report finds significant disparities in health status between Aboriginal and Torres Strait Islander peoples and other Australians. These disparities are evident across the life cycle: from lower birthweight, much higher occurrence of a wide range of illnesses, higher prevalence of many stressors impacting on social and emotional well-being, higher death rates and lower life expectancy. The underlying factors that impact on Indigenous health are complex and multidimensional. Figure 1 provides a graphical representation of the determinants of Indigenous health. Across - 4 -

5 virtually all health measures, Indigenous people face significantly higher disadvantage than the non-indigenous population. Figure 1: Interactions of social and physiological determinants of health Source: Australian Government, 2003, National Strategic Framework for Aboriginal and Torres Strait Islander Health. The implication of Indigenous disadvantage across virtually all health determinant measures is the significantly higher need for health services, both acute and non-acute services. This is evident in the higher rates of hospitalisation in the Indigenous population. Figure 2 shows the hospitalisation rate ratios between the Indigenous and non-indigenous population by principal diagnosis

6 Figure 2: Hospitalisation rate ratios (Indigenous and other) by principal diagnosis in Qld, WA, SA and NT, to Source: AIHW, National Hospital Morbidity Database Figure 3 charts the hospitalisation rates by Indigenous status, age and sex. For all age groups, Indigenous hospitalisation rates are higher than the corresponding rate for the non-indigenous population. Importantly, the utilisation rates for Indigenous people aged 20 years and over are equivalent to, or higher than, the separation rates for non-indigenous people aged 75 years and over, the highest rate amongst the non-indigenous population

7 Figure 3: Separation rates (per 1000 population) by Indigenous status, age and sex. Separations per 1,000 population 2,000 1,500 Other males Indigenous males Other females Indigenous females 1, Age group (years) There is a strong conceptual case and supported by data, that the Indigenous population has a significant influence on each state s admitted patient expenses. The Territory believes the Commission should recognise the impact of Indigenous people on state expenditure on hospital services using actual separation rates. Age AIHW data on hospital separations show that there are large differences in use patterns for hospital services for each age group. For the 2010 Review, the Commission has proposed to reduce the number of age bands from 13 to five. The five age bands proposed by the Commission are: 0, 1-59, 60-74, and 80 years and over. The intent of five age bands is to capture the need for hospital services at a very early age and the older age groups. However, the Territory contends that the proposed age bands are not appropriate for the Indigenous population, and in relation to the non-indigenous population, it is unclear whether three separate age bands adequately capture the use rates of non-indigenous people aged 60 years and over. The AIHW data on separation rates (refer to figure 3) show that there are large variation in use rates for the Indigenous population that are not reflected in the Commission s proposed age bands. For example, the Indigenous female use rates for year olds (1456 per 1000 Indigenous females aged years) is nearly four times higher than the rate for - 7 -

8 Indigenous females aged (378 per 1000 relevant population). Similarly, Indigenous males aged are 11 times more likely to be hospitalised than Indigenous males aged years. It should be noted that the non-indigenous rates for 75 years and older are only 1.16 times and 2 times greater than non-indigenous people aged years and years respectively, which is used as the basis for the age bands proposed. In 2004, the Australian Medical Journal of Australia published an article on the burden of disease and injury in the Indigenous population of the Northern Territory. The journal article used disability adjusted life years (DALYs) to identify the health priorities in the Territory. DALY combines years of life lost due to premature mortality and years lost due to disability. Figure 4 shows the DALYs per 1000 population by age and Indigenous status. The analysis show that Indigenous people bear a higher burden of disease and injury rates than the non-indigenous people in the Territory for all age groups. For the Indigenous population the DALY rates start increasing at an earlier age than the non-indigenous population. Figure 4: DALY s per 1000 population by age and Indigenous status, Northern Territory Source: Zhao, Y, Gutheride,S, Magnus, A & Voss, T 2004, Burden of disease and injury in Aboriginal and non-aboriginal populations in the Northern Territory, Australian Medical Journal of Australia. The DALY rates for the Indigenous population lends support to the argument that there are large differences in the need for hospital services within the Indigenous 1-59 years age group and that further disaggregation of this age group is required to adequately reflect the different utilisation rates within the Indigenous population

9 The earlier onset of chronic disease and shorter life expectancy means Indigenous people require health services at a younger age. AIHW found 75 per cent of Indigenous males and 65 per cent of Indigenous females died before the age of 65 in comparison to 26 per cent of non-indigenous males and 16 per cent of non-indigenous females. Furthermore, the 20 year gap in life expectancy between the Indigenous and non-indigenous population, as shown in Figure 5, is due to illness commonly associated with ageing often occurring considerably earlier with Indigenous than the non-indigenous population. In referring to the difference in life expectancy between Indigenous and non-indigenous people, Garry Banks, Chairman of the Productivity Commission, noted that twenty years is just short of the standard measure of a generation. 1 In addition, the Australian Government recognises the different ageing characteristics in the Indigenous population. In developing its aged care planning, the Australian Government includes the non-indigenous population over the age of 70 years and the comparable population for the Indigenous population is 50 years. Figure 5: Life expectancy by Indigenous status and sex Male Female Indigenous Non-Indigenous Source: AIHW, Mortality The Territory believes that it would be inappropriate to apply the same age bands for the non-indigenous and Indigenous population. Rather the age bands need to reflect the premature ageing in the Indigenous population, and subsequently there greater need for health services at an earlier age. There is a clear case for differential age bands for the 1 Garry Banks, Productivity Commission,

10 Indigenous and non-indigenous population. For the Indigenous population, the Commission should assess age bands of: 0, 1-39, and 50+ years. For the non-indigenous population the age bands assessed should be: 0, 1-59, and 70+ years. Location In general, people living in remote and very remote locations have poorer health status then people in urban and regional settings. People in remote areas tend to have higher levels of health risk factors. For example, they are more likely to be smokers, drink alcohol in hazardous quantities, be overweight or obese, have lower levels of education, poorer access to work and less access to specialist medical services and a range of other health services. 2 Subsequently, people living outside urban areas have greater need for hospital services. This is reflected in the direct relationship between hospital separation rates and location. The Territory supports the Commission s proposal to assess the impact of location on the need for hospital services. However, the Territory does not support the Commission s proposal to measure location using three groups: major cities, regional and remote. Specifically, the Territory believes that remote should be disaggregated into remote and very remote. Figure 6 shows that the hospital separation rates for remote people are about 33 per cent higher than remote people. On the other hand the difference in use rates for people in major cities versus inner regional is less about 10 per cent. 2 AIHW, Australia s Health

11 Figure 1: Separation rates by region, ' Private Public Major cities Inner regional Outer regional Remote Very remote Source: AIHW Australian Hospital Statistics , Chapter 8. Aggregating remote and very remote will materially disadvantage the Territory because of the relatively high proportion of the population living in remote areas. Given that there is reliable data on separation rates and state populations in each region, and there are differences in separation rates for each location, the Commission should retain the five location group. The only aggregation that is considered plausible is major cities and inner regional. Other population characteristics In general, the Territory believes that further evidence is required to warrant a separate adjustment for other population characteristics. Factors such as country of birth and socio-economic status may have an impact on admitted patient expenses, but to a lesser extent than Indigeneity, age and location. The Territory believes that further analysis is required, in particular the materiality of these influences

12 Cost weighted separations The Territory strongly supports the inclusion of an Indigenous cost weighted adjustment. This factor is based on the premise that an Indigenous person will consume more health resources than a non-indigenous person with the same clinical diagnosis. The costs of treating an Indigenous person is considerably more expensive due to a range of actors including severity of disease at presentation, co-morbidities, and social factors relating to culture, education and location. In an article in the Medical Journal of Australia titled The Aboriginal and Torres Strait Islander Casemix Study found that the casemix-adjusted costs per episode for an Indigenous person as 39 per cent higher on average than a non-indigenous person. 3 Table 12 in the Commission s paper shows that the average costs per separation for Indigenous patient is higher than a non-indigenous patient for most major diagnostic categories. The Territory strongly supports the Commission proposal to continue with this assessment. Outlier adjustment The outlier adjustment recognises the additional length of stay per Indigenous clients and is a material factor for the Territory. The Territory believes the Commission should recognise the additional bed days associated with treating Indigenous patients, at a minimum this should be captured by removing the discount from the cost weighted adjustment. Hospital cost factor The Territory supports the Commission s proposal to assess the impact of location on hospital costs. The Territory supports the Commission undertaking further work on whether a general location factor could be used to measure these differences, if one can be identified, or maintaining the current approach. 3 Fisher, DA, Murray, J, Cleary, MI, Brewerton RE, 1998, The Aboriginal and Torres Strait Islander casemix study, Medical Journal of Australia