eMJA Casemix Supplement: The surgeon and casemix

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Casemix: moving forward

The surgeon and casemix

John A L Hart and David Wallace

MJA 1998; 169: S51-S52

Synopsis - Introduction - Casemix funding and surgery - Length of stay - Complexity of care - Efficiency versus humanity - Conclusion - References - Authors' details

Synopsis

Casemix funding has markedly increased surgeons' awareness of the economies of the activities they undertake.

Surgery has become a major focus at all large public hospitals, because of its high earning potential, and this pressure to maximise funding could influence surgical practice.

Casemix funding's emphasis on length of hospital stay has encouraged forward planning for earlier discharge after surgical procedures. Patients are now assessed in pre-admission clinics, educated about their condition and their hospital stay, and a plan formulated for their discharge and rehabilitation.

Funding for major surgical procedures of long duration in patients with complex conditions should reflect the higher level of resource utilisation.

Tertiary referral centres, because of their commitment to training and research and their more severely ill patient population, are less cost-effective and require funding to ensure their viability.

The improved information that casemix generates should be used to evaluate outcomes and improve patient care; efficiency must not take precedence over quality of care and compassion.

Introduction
Casemix has been effective in reducing government spending on health and in improving public hospital efficiency.¹ Paying hospitals for current rather than previous practice has proven to be beneficial:² in 1990, acute hospitals in Australia were costing 31.2 cents of every health dollar;³ that figure has now been reduced to 28 cents in the dollar.⁴ Most importantly, productivity has been increased by 20% in some hospitals.⁵
Casemix funding has markedly increased surgeons' awareness of the economies of the activities they undertake, and given greater understanding of where money is being spent and where it is being wasted. It has provided a tool for comparing many widely divergent areas of medical practice within the same institution and between different institutions. We are amassing a vast quantity of valuable information, which will be used to monitor outcomes and improve performance.
Casemix funding and surgery
Under casemix funding, surgical activity has become a major focus at all large public hospitals because of its high earning potential. Regular casemix meetings are held in many surgical units, with the specific aim of maximising reward for work done and hence maximising funding.
There can be drawbacks in such a situation. One criticism has been that hospitals now perform procedures rather than care for the sick.⁶ Furthermore, the recognition that revenue is likely to be higher if a procedure is performed, could potentially influence surgical practice. For example, if a patient were admitted from the emergency department with suspected appendicitis, it is clearly to the hospital's financial advantage for surgery to be performed. For a patient with suspected appendicitis, a condition with significant morbidity and mortality, such a decision is not bad practice. However, casemix funding is not designed to fund specific DRGs, and neither the surgeons performing this work, nor their units, reap the financial rewards directly. The money is used to subsidise less profitable clinical areas.¹
Casemix funding has also stimulated surgical activity in units with forward budget planning where funds are allocated according to a predicted level of specialised surgical activity (eg, complex biliary surgery). However, if a unit's activity exceeds forecast levels and the budget is capped, some operations which cannot be deferred may not be appropriately funded. Capping of budgets destroys incentives, closes beds, increases waiting lists and discourages clinicians and others involved in "coal face" healthcare.^5,7
Length of stay
An interesting benefit of casemix funding, with its emphasis on length of stay in hospital, has been its encouragement of forward planning. Previously, when patients were admitted to hospital for surgery, little thought was given to length of postoperative stay, and an appropriate discharge plan for the patient was not considered until the time of discharge. Now patients are assessed in pre-admission clinics and any special medical and anaesthetic problems are identified. They are educated about their condition and their hospital stay, perhaps given an exercise program, and a plan is formulated for their discharge and rehabilitation. All these measures have the potential to reduce complication rates, and therefore length of stay. Furthermore, the concept of same-day admissions has been considerably advanced by the advent of pre-admission clinics.
To further reduce length of hospital stay, casemix must be extended into areas beyond the acute hospital episode,⁸ such as "hospital-in-the-home" and ambulatory care.
With casemix funding, hospitals are rewarded for patients with clearly defined conditions whose hospital stay is shorter than the average for that disorder and, conversely, penalised for patients whose stay exceeds this average. It has been interesting and illuminating to discover just how early patients may be discharged from hospital after major surgical procedures, but there is the potential for them to be sent home too early. Patients need time to adjust to the physical effects of their procedure and its consequences, and to be educated in management of their condition. At the Sir Charles Gairdner Hospital in Western Australia, the practice of discharging patients with femoral neck fractures to nursing homes three days after surgery had to be discontinued because of an unacceptably high mortality.⁹ Lack of community resources to support early discharge has been a major problem.¹
Complexity of care
Casemix funding, while it rewards uncomplicated care, does provide some increased funding for patients with complications after surgery. However, AN-DRGs do not adequately take into account variations in illness severity and comorbidities. Patients who have complications during their postoperative recovery obviously consume more resources, but it is paradoxical that more funding is available for patients who do badly than for patients who do well.
Tertiary referral centres often treat the most difficult, taxing and hence resource-intensive patients. These patients are referred to these centres because of the complexity of their problem, or because of postoperative complications after one or more procedures elsewhere. Tertiary referral centres are also involved in research, and undergraduate and postgraduate teaching. Because of this commitment to training and research, and their more severely ill patient population, they are less cost-effective and require funding to ensure their viability.
In some areas of surgery, as a consequence of casemix funding, patients who will do well and have few complications are being selected to provide a large turnover of trouble-free patients favourable to fund generation. Careful thought needs to be given to funding formulas for simple, short surgical procedures with very low complication rates, as opposed to major procedures of long duration in patients with complex conditions. One technique may be the introduction into DRG classifications of disease-specific conditions as risk adjusters for disorders with known comorbidities and high complication rates.¹⁰
Efficiency versus humanity
Casemix and budgetary restrictions have created an impersonal atmosphere, in which efficiency has taken precedence over humanity. There has also been a shift from collegiality to contract arrangements.² Moreover, there is a belief among general practitioners that some patients (eg, the elderly) are not welcome in the public hospital system.¹¹ The lack of time and money to deal adequately with all the facets of care in public hospitals has led to a sharp rise in complaints from consumers.⁵ At the Alfred Hospital in Melbourne, attempts are being made to monitor patient complaints, and a complaint officer has been appointed.
Other measures to counteract this impersonal atmosphere include direct involvement of general practitioners in hospital activities (eg, in outpatient clinics), and there are future plans for general practitioners to be involved with surgical patients before and after operation.
Conclusion
Although casemix has made us more aware of the need for efficiency, budgetary constraints, including the capping of activity, are likely to adversely affect important aspects of healthcare, such as quality of care and compassion. We must make use of the information that casemix is generating to fully evaluate outcomes and improve patient care, as well as work towards extending the benefits of casemix to total patient care. We need centres of excellence to set and maintain high standards of patient care.
References

Phelan PD. Casemix funding in Australia. Time to move on. Med J Aust 1998; 168: 560-561.
Braithwaite J, Hindle D. Casemix funding in Australia. Time for a rethink? Med J Aust 1998; 168: 558-560.
Commonwealth Department of Health and Family Service/South Australian Health Commission. An evaluation of casemix funding in South Australia, 1994-95. Casemix Development Program. Adelaide: Commonwealth Department of Health and Family Services and the South Australian Health Commission, 1997.
Australian Institute of Health and Welfare. Health services expenditure by type of expenditure 1989-90 to 1994-95. Health Expenditure Bull 1997; 13: 3-5.
Kennedy JT. Perspectives in casemix based funding in Victoria. Good for governments. Med J Aust 1995; 162: 665-666.
Tonti-Fillipini N. Negatives of casemix. Australian College of Midwives Inc. Ninth Biennial Conference Proceedings. Melbourne: Australian College of Midwives, 1995: 456-466.
Phillips PA. Perspectives in casemix-based funding in Victoria. Med J Aust 1995; 162: 655.
Hanson R. Casemix funding in Australia. Have we come full circle? Med J Aust 1998; 168: 561-562.
Sikorski JM, Senior JM. Factors affecting mortality in patients suffering a fracture of the proximal femur. J Bone Joint Surg Br 1998; 79 Suppl IV: 410.
Andrews JS, Anderson GF, Han C, Neff JM. Pediatric carve outs. The use of disease-specific conditions as risk adjusters in capitated payment systems. Arch Pediatr Adolesc Med 1997; 151: 236-242.
Segal GR. Perspectives in casemix-based funding in Victoria. Some patients are not welcome. Med J Aust 1995; 162: 656.

Authors' details
Monash University, Alfred Hospital, Melbourne, VIC.
John A L Hart, MB BS, FRACS, Clinical Associate Professor of Surgery, and Senior Orthopaedic Surgeon.
Royal Children's Hospital and Royal Melbourne Hospital, Melbourne, VIC.
David Wallace, MB BS, FRACS, Neurosurgeon.
Reprints will not be available from the authors.
Correspondence: Professor J A L Hart, Clinical Associate Professor of Surgery, Monash University, Alfred Hospital, Prahran, VIC 3181.
E-mail: johnhartATmelb.alexia.net.au

Go to the next article . . .
Readers may print a single copy for personal use. No further reproduction or distribution of the articles should proceed without the permission of the publisher. For permission, contact the Australasian Medical Publishing Company.
Journalists are welcome to write news stories based on what they read here, but should acknowledge their source as "an article published on the Internet by The Medical Journal of Australia <http://www.mja.com.au>".
<URL: http://www.mja.com.au/> © 1998 Medical Journal of Australia.

Synopsis
	Casemix funding has markedly increased surgeons' awareness of the economies of the activities they undertake. Surgery has become a major focus at all large public hospitals, because of its high earning potential, and this pressure to maximise funding could influence surgical practice. Casemix funding's emphasis on length of hospital stay has encouraged forward planning for earlier discharge after surgical procedures. Patients are now assessed in pre-admission clinics, educated about their condition and their hospital stay, and a plan formulated for their discharge and rehabilitation. Funding for major surgical procedures of long duration in patients with complex conditions should reflect the higher level of resource utilisation. Tertiary referral centres, because of their commitment to training and research and their more severely ill patient population, are less cost-effective and require funding to ensure their viability. The improved information that casemix generates should be used to evaluate outcomes and improve patient care; efficiency must not take precedence over quality of care and compassion.
Introduction
	Casemix has been effective in reducing government spending on health and in improving public hospital efficiency.¹ Paying hospitals for current rather than previous practice has proven to be beneficial:² in 1990, acute hospitals in Australia were costing 31.2 cents of every health dollar;³ that figure has now been reduced to 28 cents in the dollar.⁴ Most importantly, productivity has been increased by 20% in some hospitals.⁵ Casemix funding has markedly increased surgeons' awareness of the economies of the activities they undertake, and given greater understanding of where money is being spent and where it is being wasted. It has provided a tool for comparing many widely divergent areas of medical practice within the same institution and between different institutions. We are amassing a vast quantity of valuable information, which will be used to monitor outcomes and improve performance.
Casemix funding and surgery
	Under casemix funding, surgical activity has become a major focus at all large public hospitals because of its high earning potential. Regular casemix meetings are held in many surgical units, with the specific aim of maximising reward for work done and hence maximising funding. There can be drawbacks in such a situation. One criticism has been that hospitals now perform procedures rather than care for the sick.⁶ Furthermore, the recognition that revenue is likely to be higher if a procedure is performed, could potentially influence surgical practice. For example, if a patient were admitted from the emergency department with suspected appendicitis, it is clearly to the hospital's financial advantage for surgery to be performed. For a patient with suspected appendicitis, a condition with significant morbidity and mortality, such a decision is not bad practice. However, casemix funding is not designed to fund specific DRGs, and neither the surgeons performing this work, nor their units, reap the financial rewards directly. The money is used to subsidise less profitable clinical areas.¹ Casemix funding has also stimulated surgical activity in units with forward budget planning where funds are allocated according to a predicted level of specialised surgical activity (eg, complex biliary surgery). However, if a unit's activity exceeds forecast levels and the budget is capped, some operations which cannot be deferred may not be appropriately funded. Capping of budgets destroys incentives, closes beds, increases waiting lists and discourages clinicians and others involved in "coal face" healthcare.^5,7
Length of stay
	An interesting benefit of casemix funding, with its emphasis on length of stay in hospital, has been its encouragement of forward planning. Previously, when patients were admitted to hospital for surgery, little thought was given to length of postoperative stay, and an appropriate discharge plan for the patient was not considered until the time of discharge. Now patients are assessed in pre-admission clinics and any special medical and anaesthetic problems are identified. They are educated about their condition and their hospital stay, perhaps given an exercise program, and a plan is formulated for their discharge and rehabilitation. All these measures have the potential to reduce complication rates, and therefore length of stay. Furthermore, the concept of same-day admissions has been considerably advanced by the advent of pre-admission clinics. To further reduce length of hospital stay, casemix must be extended into areas beyond the acute hospital episode,⁸ such as "hospital-in-the-home" and ambulatory care. With casemix funding, hospitals are rewarded for patients with clearly defined conditions whose hospital stay is shorter than the average for that disorder and, conversely, penalised for patients whose stay exceeds this average. It has been interesting and illuminating to discover just how early patients may be discharged from hospital after major surgical procedures, but there is the potential for them to be sent home too early. Patients need time to adjust to the physical effects of their procedure and its consequences, and to be educated in management of their condition. At the Sir Charles Gairdner Hospital in Western Australia, the practice of discharging patients with femoral neck fractures to nursing homes three days after surgery had to be discontinued because of an unacceptably high mortality.⁹ Lack of community resources to support early discharge has been a major problem.¹
Complexity of care
	Casemix funding, while it rewards uncomplicated care, does provide some increased funding for patients with complications after surgery. However, AN-DRGs do not adequately take into account variations in illness severity and comorbidities. Patients who have complications during their postoperative recovery obviously consume more resources, but it is paradoxical that more funding is available for patients who do badly than for patients who do well. Tertiary referral centres often treat the most difficult, taxing and hence resource-intensive patients. These patients are referred to these centres because of the complexity of their problem, or because of postoperative complications after one or more procedures elsewhere. Tertiary referral centres are also involved in research, and undergraduate and postgraduate teaching. Because of this commitment to training and research, and their more severely ill patient population, they are less cost-effective and require funding to ensure their viability. In some areas of surgery, as a consequence of casemix funding, patients who will do well and have few complications are being selected to provide a large turnover of trouble-free patients favourable to fund generation. Careful thought needs to be given to funding formulas for simple, short surgical procedures with very low complication rates, as opposed to major procedures of long duration in patients with complex conditions. One technique may be the introduction into DRG classifications of disease-specific conditions as risk adjusters for disorders with known comorbidities and high complication rates.¹⁰
Efficiency versus humanity
	Casemix and budgetary restrictions have created an impersonal atmosphere, in which efficiency has taken precedence over humanity. There has also been a shift from collegiality to contract arrangements.² Moreover, there is a belief among general practitioners that some patients (eg, the elderly) are not welcome in the public hospital system.¹¹ The lack of time and money to deal adequately with all the facets of care in public hospitals has led to a sharp rise in complaints from consumers.⁵ At the Alfred Hospital in Melbourne, attempts are being made to monitor patient complaints, and a complaint officer has been appointed. Other measures to counteract this impersonal atmosphere include direct involvement of general practitioners in hospital activities (eg, in outpatient clinics), and there are future plans for general practitioners to be involved with surgical patients before and after operation.
Conclusion
	Although casemix has made us more aware of the need for efficiency, budgetary constraints, including the capping of activity, are likely to adversely affect important aspects of healthcare, such as quality of care and compassion. We must make use of the information that casemix is generating to fully evaluate outcomes and improve patient care, as well as work towards extending the benefits of casemix to total patient care. We need centres of excellence to set and maintain high standards of patient care.
References
	Phelan PD. Casemix funding in Australia. Time to move on. Med J Aust 1998; 168: 560-561. Braithwaite J, Hindle D. Casemix funding in Australia. Time for a rethink? Med J Aust 1998; 168: 558-560. Commonwealth Department of Health and Family Service/South Australian Health Commission. An evaluation of casemix funding in South Australia, 1994-95. Casemix Development Program. Adelaide: Commonwealth Department of Health and Family Services and the South Australian Health Commission, 1997. Australian Institute of Health and Welfare. Health services expenditure by type of expenditure 1989-90 to 1994-95. Health Expenditure Bull 1997; 13: 3-5. Kennedy JT. Perspectives in casemix based funding in Victoria. Good for governments. Med J Aust 1995; 162: 665-666. Tonti-Fillipini N. Negatives of casemix. Australian College of Midwives Inc. Ninth Biennial Conference Proceedings. Melbourne: Australian College of Midwives, 1995: 456-466. Phillips PA. Perspectives in casemix-based funding in Victoria. Med J Aust 1995; 162: 655. Hanson R. Casemix funding in Australia. Have we come full circle? Med J Aust 1998; 168: 561-562. Sikorski JM, Senior JM. Factors affecting mortality in patients suffering a fracture of the proximal femur. J Bone Joint Surg Br 1998; 79 Suppl IV: 410. Andrews JS, Anderson GF, Han C, Neff JM. Pediatric carve outs. The use of disease-specific conditions as risk adjusters in capitated payment systems. Arch Pediatr Adolesc Med 1997; 151: 236-242. Segal GR. Perspectives in casemix-based funding in Victoria. Some patients are not welcome. Med J Aust 1995; 162: 656.
Authors' details
	Monash University, Alfred Hospital, Melbourne, VIC. John A L Hart, MB BS, FRACS, Clinical Associate Professor of Surgery, and Senior Orthopaedic Surgeon. Royal Children's Hospital and Royal Melbourne Hospital, Melbourne, VIC. David Wallace, MB BS, FRACS, Neurosurgeon. Reprints will not be available from the authors. Correspondence: Professor J A L Hart, Clinical Associate Professor of Surgery, Monash University, Alfred Hospital, Prahran, VIC 3181. E-mail: johnhartATmelb.alexia.net.au

	Go to the next article . . . Readers may print a single copy for personal use. No further reproduction or distribution of the articles should proceed without the permission of the publisher. For permission, contact the Australasian Medical Publishing Company. Journalists are welcome to write news stories based on what they read here, but should acknowledge their source as "an article published on the Internet by The Medical Journal of Australia <http://www.mja.com.au>". <URL: http://www.mja.com.au/> © 1998 Medical Journal of Australia.