- All private hospitals and clinics must now supply de-identified
data, using AN-DRG classification, on all admitted patients to the
Private Hospitals Data Bureau.
- Contracts between health funds and hospitals must also be described
on the basis of AN-DRGs, which will enable funds to undertake hospital
variance analysis.
- These data provide the foundation for nationally developed
clinical pathways and utilisation reviews which could modify
clinical practice, improve standards and reduce health costs.
- Clinicians must understand and participate in these changes, and adequate safeguards are needed to protect them against loss of their clinical integrity, and against inappropriate discretionary control by private hospitals, healthcare corporations and health insurers.
Introduction From February 1998, the Health Legislation (Private Health Insurance Reform) Amendment Act 1995 (Cwlth) requires all private hospitals to supply to the Private Hospitals Data Bureau de-identified data on all admitted patients. The data must include hospital charges and use the AN-DRG classification as part of the Hospital Casemix Protocol.1 Because of the impact this could have on clinicians and the delivery of healthcare in the private sector, it is essential that doctors understand and participate in decisions about use of AN-DRGs by private hospitals and health insurers, particularly in regard to healthcare finance and assessment of variance from predetermined healthcare protocols.
Healthcare finance Public hospital costing differs from that in the private sector, mainly because of the medical salaries component, making direct comparison impossible. Current Australian private hospital financing includes a profit margin, but remuneration for medical services comes from the government, health insurance funds and patients.
Casemix funding in the private sector would affect payment of doctors if the Commonwealth Medicare Benefits Schedule was altered to describe rebated services as casemix-based episodes of care (including pre- and postadmission care as described in expanded DRGs).2 Payment of doctors would also be affected if the government legislated for health funds to receive Medicare rebates for members' medical services and to incorporate these in AN-DRG-based payments to hospitals. The hospitals would accordingly be allowed to pay clinicians, perhaps under the terms of Hospital-Practitioner Agreements or other employment contracts. These are contracts required by legislation if a private hospital is to receive payments from a health benefit organisation and then pay the practitioner for services rendered to a member of that organisation.
Increasing public health sector privatisation is attracting the interest of large healthcare corporations.3 They are looking to build, own and operate institutions, or to provide healthcare contracted out from established public hospitals. Use of the AN-DRG classification would facilitate comparison and allow comparable payments to be made by government for services between the two sectors.
Public hospital AN-DRG funding is supplemented by other government budgetary allocations, but private sector institutions are dependent on health funds, which pay only for hospital services rendered to fund members -- they receive no other subsidies. Even the most efficient of these private institutions would be vulnerable if public AN-DRG costings were applied, or if any new costing methods were inaccurate or inadequate. These factors are beyond their control and are potential faults of casemix funding. This vulnerability would be compounded if a health insurer arbitrarily reduced either the prospectively determined price or the accepted length of stay of a given DRG in an effort to reduce fund expenditure. Clinical pathways could provide protection against such funding decisions and justify the clinical necessity of the length of stay or the hospital charge, and would thus force funds to provide supporting data.
Assessment of variance from predetermined healthcare standards Of increasing interest to health insurers are methods of measuring and ensuring adherence to quality standards. If standards are inadequate, length of stay and readmissions may increase. This would mean rises in fund outlays and premiums, which in turn would have adverse effects on fund viability and membership.
To establish comparable standards and clinical protocol guidelines, uniform case classification is required, enabling comparison between clinicians, hospitals and regions. This is now facilitated nationally by reporting of all admissions according to AN-DRGs. The two recognised ways of measuring standards and quality are the use of clinical pathways and utilisation reviews.
Clinical pathways Clinical pathways are standardised protocols for given episodes of care, rather than compulsory recipes for clinical management. They improve efficiency of patient management by avoiding delays caused by lack of coordination and communication, and reduce average length of stay and costs without compromising quality.4 With innovations in care, clinical pathways provide a basis for proper comparison with current treatments. Clinical pathways are becoming widespread, not only because of quality issues but because of the profession's increasing awareness of the need for cost effective allocation of finite health resources.
Clinicians have acknowledged concerns about clinical pathways:
- They are concerned that inappropriate
protocols may be developed by clinicians with inadequate insight
into practice or by health managers who favour cost control over
quality;
- They question standardisation of care because of the inherent
variability of patients, their diseases and their responses to
treatment; and
- As responsible clinicians they must often make individual judgements, and they are concerned that lack of adherence to clinical pathways may expose them to litigation if their management results in an adverse outcome.
The Health Legislation Act also requires contracts between health funds and hospitals to be described on the basis of AN-DRGs. This will enable fund managers to undertake hospital variance analysis. They can then ask hospital managers to investigate cost variability of particular AN-DRGs. Clinical pathways can provide reasons for variance and empower management to redress the system. Analysis of individual clinician variance could possibly result in suggestions for changes in care, economic punitive action (such as withdrawal of accreditation), or demands that a clinical pathway be adhered to as a condition of future accreditation or agreement between clinician and hospital.
With accurate knowledge of hospital costs for AN-DRGs and reasons for interhospital variance, purchasers (health insurers) and providers (hospitals) can undertake properly based negotiations and establish appropriate payments. Hospital use and utilisation review of clinical pathways will be increasingly relevant in the negotiations for Hospital Purchaser-Provider Agreements, which a health benefit organisation may choose to enter into with a hospital for the provision of services to its members. The financial viability of private hospitals is dependent on these agreements.
Utilisation review Utilisation review is defined as "A set of information activities which support, monitor and evaluate decisions concerning the allocation of healthcare resources to previous and current patients and potential recipients. The aim is to ensure that resultant allocations are cost-effective and equitable."5 It can be prospective (checking, then approving, modifying or rejecting a proposed management), concurrent (assessing and modifying current care) or retrospective (assessing previous decisions, considering their appropriateness, then acting by providing educational resources, denying payment, threatening or undertaking withdrawal of business). Utilisation review can be used to develop clinical pathways, assess resource allocation, or assess compliance with a stated clinical pathway. It allows comparison of hospitals and practitioners, particularly with regard to resource use (particularly bed-days) in the management of individual AN-DRGs.
In managed care in the United States, utilisation review addressed overservicing and cost-cutting. Compulsory management protocols had to be fulfilled to enable prospective fund approval; non-compliant management led to retrospective denial of payments.5 The Australian health insurance industry is concerned about an increase in private hospital utilisation in spite of a decrease in insurance numbers. The industry is also concerned that the growth in day surgery has not decreased overall costs or services in the private sector (Mr R Schneider, Australian Health Insurance Association, paper presented to a Health Summit organised by Australian Investment Conferences, Sydney, 24 March 1997). Health insurers could establish compulsory protocols they regard as being within the scope of accepted clinical practice by AN-DRGs and as a condition of Medical Purchaser-Provider Agreements. These are contracts a health benefit organisation may enter into with medical practitioners to address the provision of services and the legally rebatable fees that can be paid by the organisation to the practitioners.
Current and potential funding pathways for applying AN-DRG casemix in the private sector are shown in the Box.
Implications for clinicians The two most relevant aspects of casemix for clinicians in the private sector are funding and assessment of adherence to quality criteria. The latter has significant ramifications for resource allocation and control of clinicians' practice and independence.
It is unlikely that the medical component of private health costs will be incorporated into AN-DRG funding, but the hospital component could be based on finite bed-day allocation for each DRG (instead of the current open per diem payment) or as a case-based payment. Clinicians should be involved in these decisions.
The collection and reporting of admission data based on AN-DRGs by private hospitals (as required by the Health Legislation Act) provide the foundation for nationally developed clinical pathways and utilisation reviews to modify clinical practice, improve standards and reduce health costs.
The use of AN-DRG data could result in loss of clinicians' professional independence and make them vulnerable to punitive economic measures by hospitals and funds. These institutions could become de facto arbiters of which doctors are suitable to practise in the private sector. Until now the professional freedom of medical practitioners has been decided by ethics, the law, and standards of clinical care, as judged by the community and the profession itself. Economic management could become the new criterion upon which doctors will be judged by health insurers and private hospitals, regardless of practice standards. This must be fully appreciated and carefully considered by all sectors of the Australian community.
The practical application of casemix could have a positive impact on the viability of the private health sector and a beneficial effect on clinical management of patients, but its degree of success will depend on the trust and involvement of clinicians. Health insurance funds are currently in fiscal crisis and one method of addressing this is to reduce fund outlays. The private sector relies on a viable health insurance industry and clinicians need to be aware of the cost implications of their management decisions. However, adequate safeguards are needed to protect clinicians against loss of their clinical integrity and inappropriate discretionary control by hospital owners, healthcare corporations and health insurers.
References
- Commonwealth Department of Health and Family Services. Private Hospitals Bureau -- data flow requirements. 3 December 1997. (Circular HBF No. 513 and PH No. 288.)
- Health Solutions International. Expanded DRGs. An episode approach. Prepared for the Classification and Payments Branch, Department of Health and Family Services. 1997. (Available from Health Solutions International, East Melbourne, VIC.)
- Hurst J. Year of health carve up. The Australian Financial Review 1998; 2 Jan: 36.
- Private Sector Casemix Unit. Clinical pathways: a background for private hospitals and private insurers. 1997. (Available from the Private Sector Casemix Unit, Canberra.)
- Hindle D. Utilisation review. A discussion paper. Private Sector Casemix Unit. 1997. (Available from Private Sector Casemix Unit, Canberra.)
Authors' details Australian Casemix Clinical Committee, Melbourne, VIC.
Chris N Maxwell, FRCOG, FRACOG, Senior Obstetrician and Gynaecologist, and Director of Clinical Services Obstetrics, Gynaecology and Paediatrics, The Northern Hospital, Melbourne, VIC.
Reprints will not be available from the author.
Correspondence: Dr C N
Maxwell, Northpark Medical Centre, PO Box 1080, Bundoora, VIC 3083.
E-mail: cmaxwellATtnh.vic.gov.au