Hospital vs Case-Mix Funding Systems - Essay Example

Compare the hospital funding system in Hong Kong P4P with the casemix funding systems of Victoria and NSW. Synopsis This paper compares the hospital funding system in Hong Kong, which is the P4P (pay for performance) system with the casemix funding system of Victoria and New South Wales. It discusses that the Hong Kong P4P system is based on the needs and the circumstances being currently faced by Hong Kong, which relates to its ageing and its growing population. It is based on performance and on the quality of health services being rendered by health service providers. On the other hand, the casemix funding system is based on diagnosis-related groups which are still part of the P4P system, but more specifically focusing on the classification of diseases suffered by the patients. Both of these systems address problems being faced in health care financing. With limited financial resources, the rationalization process which is seen in the casemix and the P4P system largely supports quality health services for as many people and patients as possible. Definition of Key Terms P4P system – The Government of Hong Kong (2008) defines it as a system is an internal resource allocation system for hospital funding. They also discuss that it is about strategic purchasing services most needed by the community (Government of Hong Kong, 2008). Casemix system – Based on the Government of Hong Kong (2008), this system is an activity-based funding system where the provider is paid for each case which is treated, and adjustments are made based on the complexity of the case using pre-set classifications. Diagnosis-related groups – Diagnosis-related groups or DRGs are “based on the principle that diagnosis and other patient characteristics can be categorized in terms of the total quantity of resources used in treating patients” (Government of Hong Kong, 2008, p. 4) Introduction Health care systems for countries differ greatly from each other. The differences often depend on the system of government and social services existing in each country. Some countries are based on a socialist system where the health care system is dependent on the government’s support. In other countries, the citizens themselves have to cover for their health care with hardly any assistance from the government at all. Nevertheless, the point is proven that health care systems are different based on each country’s health applications. This paper shall compare the hospital funding system in Hong Kong known as the P4P system with the casemix funding systems in Victoria and New South Wales, Australia. It shall draw specific examples within the chosen health care system in order to illustrate the specific key benefits and key costs identified by this paper. It shall also make recommendations and/or suggest solutions for the key costs identified in the context of a chosen health care system. Area of Study 1. Definition Hong Kong’s P4P hospital funding system is defined by the Government of Hong Kong (2008, p. 1) as “a new internal resource allocation system for HA [hospital authority]...It is about strategic purchasing of services that are most needed by the community”. The Government of Hong Kong further discusses that the casemix hospital funding strategy is actually but a small part of the P4P system. The P4P system emphasizes on a rationalization process which stresses more on what the hospital and the health care system actually needs, not on what it can afford to purchase, nor on any other process which would dictate acquisition. Figure 1 Service Growth on Target Areas: Pay for Performance System (Government of Hong Kong, 2008, p. 2) The casemix hospital funding system of Australia, since it is in essence a derivation of the P4P system, is very much similar to Hong Kong’s P4P system. However, on the main, the casemix system emphasizes that “the budget for a hospital is based on the number and type of patients treated in the hospital. The development of diagnosis-related groups (DRGs) as clinical and resource homogenous categories for inpatients provided a means of grouping types of patients treated, which could be used for payment purposes” (Duckett, 1998). Therefore, in such a case, the hospital finance system is based mainly on the performance of the hospital or on its output, not so much on negotiation or even history (Duckett, 1998). Below, the process of classification in the DRG system is illustrated by the Royal Children’s Hospital (n.d, p. 5) in order to show how specific and comprehensive the process of classification is. DRG Classification System Patient Discharged Discharge Summary Completed Patient Discharged Discharge Summary Completed The Health Information Manager reviews the medical record - reads the discharge summary, progress notes, operation report and checks investigation reports Medical record is coded using ICD-10 AM codes Codes are entered into the hospital computer system ICD-10 codes run through the Australian Refined Diagnosis Related Groups Grouper (software) Allocate DRG Casemix funding = Hospital funding / budget Application The Government of Hong Kong (2008) further discusses that the P4P system applies to hospital administration or funding by giving clusters additional funding for service growth in response to demand pressure areas for quality improvement. It is also based on service improvement as a result of service re-configuration, technology advancement and training and retention of workforce (Government of Hong Kong, 2008). This makes the P4P system a system which is based on what the population actually demands, and where areas of improvement in the hospital system are needed. It is largely based on needs and also very much on the rationalization process. Duckett (1998) discusses that Australia’s casemix hospital funding system adapts common funding elements in about five states. All states use the Australian national diagnosis-related groups. He further discusses that these funding arrangements also coincide with budget reductions with all states introducing capping on the hospital level with hospital-specific targets (Duckett, 1998). In such instances, the specific targets may receive additional funding, although these may be at a lower price. The DRG assignment is also based on recorder diagnosis and procedure codes, with all states introducing coding audits in order to promote accurate recording (Duckett, 1998). In the case of Australia, the case mix system is very much based on the diagnosis and on the diseases which most commonly need more funding than any other hospital disorders. Essentially, both the P4P and the casemix system focus on the needs of the population. However, the casemix system is more specific, because it focuses on diagnosis; on the other hand, the Hong Kong system is more holistic – because it covers the needs of the population. Both systems take into consideration the importance of bearing in mind that financial management does not exist in a vacuum (Finkler, Kovner, and Jones, 2007). As discussed by Finkler, Kovner, and Jones (2007, p. 32), there are various participants in the health care system. “These participants not only include the providers of care and the patients, but also the health care suppliers, regulators and payers” (Finkler, Kovner, and Jones, 2007, p. 32). Both systems focus on the interplay of these elements in order to ultimately decide the allocation of health care services. Target Areas Hong Kong’s P4P system focuses on several target areas. The Government of Hong Kong (2008) discusses that these target areas were chosen because of Hong Kong’s growing and ageing population and its increasing expectations and demands from the community. Dr. Edward Leung (2008) revealed in a Hong Kong Medical Diary report that by the year 2033, one in four persons in Hong Kong, will be over the age of 65. This problem has a great impact on Hong Kong’s health care system which will struggle to meet the needs of the large number of elderly citizens. The Hong Kong Government (2008) also points out that the P4P system will also be enticed to focus on enhancing the response to population growth and on ageing in underdeveloped communities (like in the New Territories West or the NTW and in KE). It also focuses on enhancing services for the treatment of life threatening diseases in order to address the Government’s priority areas that include oncology and renal dialysis services (Government of Hong Kong, 2008). Based on discussions and evaluations by the Hong Kong Government (2008), the P4P system also seeks to focus on addressing unacceptable long waiting time for patients in areas which include cataract surgeries, joint replacement surgeries for lower limbs, and urology surgeries for urinary passage obstructions. These are high-priority areas which eventually affect the quality of lives of people who need these surgeries. The Hong Kong Government (2008) also emphasizes that the P4P system focuses on secondary prevention programmes like diabetes and hypertension management. And finally, this system also focuses on public-private partnership programmes. The Hong Kong health system is a combination of public and private health care, and this system is further reinforced by the P4P hospital funding system (Government of Hong Kong, 2008). In Australia, the target areas of the casemix system are the diagnosis-related groups. Dr. Charles Brook (n.d), the Director of Acute Health in Victoria, Australia emphasizes three rules or target areas for an effective DRG system. Firstly, points out that each DRG system must be clinically meaningful (Brook (n.d). In other words, the diagnostic clusters must be accepted by clinicians. In this instance, it must be based on medically accepted and recommended target areas or clusters. Secondly, each target cluster must also be homogeneous (Brook, n.d). Therefore, the type and amount of resources used should be, more or less, the same for each area or aspect of care within the DRG. And lastly, within the DRG, the diagnostic aspect should ‘map’ or conceptualize for that DRG only, and not for several possible DRGs (Brook, n.d). These target areas, as compared to the Hong Kong P4P system focuses more on the diagnosis for the patient, and what can be done for the patient based on such diagnosis. The Hong Kong system targets diseases which may cause problems for patients; it therefore focuses on what the patients potentially face in their admission to the hospital. The hospital system funding in Hong Kong is consequently based on needs; whereas, the Australia system is based on diagnosis. Although, essentially, there may not be a difference between these two systems, the difference actually lies in specificity. The Australia casemix system seeks more specific applications and targets for hospital funding, while the Hong Kong system focuses on more general needs of hospitals and of patients. Key Findings The key findings of this report revolve around the target areas of the Hong Kong P4P system and Australia’s casemix system. Hong Kong’s P4P system is more focused on performance, on what would most benefit the health care system. It is also focused on responding to the problem of the Hong Kong population at any given particular time. As of now, its problem is on addressing the needs of its ageing population and on its increasing population in general. For Australia, its focus is on diagnosis-related groups. It addresses the more specific needs of the population, regardless of the age of the population involved. A critical analysis of these points shall be discussed forthwith. The discussion above is a reminder of the economic principles set by Stembeck (2001) on scarcity and rationality. Stembeck (2001) discusses that scarcity is seen when needs or wants exceed the means. In this case, the needs and the wants of the hospital system and of the patients exceed the means of the government and private institutional funding. Therefore, Stembeck (2001) recommends rationality in order to guide people’s choices or decisions. This process of rationality assesses the benefits and the costs of health care spending in order to ultimately make the best and most appropriate options for health care. Critical review of the findings The Hong Kong and the Australia hospital funding systems are both needs and evidence-based practices in health care administration. In the current age of health care financial crisis, it is the best and most appropriate method to apply. For its budget, it takes into consideration what the patients and the hospitals actually need, not on what has traditionally been purchased or acquired by the hospital. The evidence-based or needs-based approach is ideal in times when the budget is limited, and vital choices about health care allocation need to be made. It compels health care administrators to be more prudent in their managerial methods in order to best serve the large population of people affected. The World Health Organization has emphasized the importance of keeping up the health status of the people in order to eventually achieve economic well-being. The World Health Organization considers these as aspects of macroeconomics and by “critically examining selected key aspects of health and development, the CMH [Commission of Macroeconomics and Health] is increasing the set of tools and policy conclusions available to ministries of health and finance” (WHO Commission on Macroeconomics and Health, p. 4). Even on a more limited context, the same applications of macroeconomics still apply to both nations. A critical selection of key health aspects have to be considered by health administrators in order to enable efficient allocation of limited resources. In Hong Kong the Pay for Performance (P4P) approach is very much beneficial to the hospital funding system because it is more transparent than the previously applied hospital resource allocation system (Hong Kong College of Health Service Executives, 2009). The previous system was originally based on the whim and the preferences of hospital administrators, not on what the patients actually needed. The pay for performance system is also beneficial in terms of improving the quality of health care services. The incentives given out to hospitals and providers who offer the best quality in health care services is actually beneficial in improving the health of the people at large (Hong Kong College of Health Service Executives, 2009). It also gives them better choices. Poor performing providers are left out and are forced to improve their services or else be left completely out of the health care system. Transparency is an important factor in the health care financial allocation system because it helps ensure the people and the patients that the taxes they pay and the budgeting process left in the care of hospital administrators is not being corrupted (Hong Kong College of Health Service Executives, 2009). There is also greater assurance in the fact that hospital administrators are being critical about the responsibilities of health care allocation left in their hands. Transparency potentially builds trust and confidence between the patients and the hospital administrators or the government administrators. Australia’s casemix system relies on American classification systems and it costs software and relative weights in order to allocate hospital costs to the different DRGs (Epidemiology and Health Information Branch, n.d). The equivalent diagnosis given to each patient case or diagnosis has become very controversial. Victoria and New South Wales have come up with ways to make the diagnosis and assessment process more orderly and more in keeping with the needs of the patients and the hospital system. So far, it has succeeded. However, there are still problems with developing clinically relevant diagnostic clusters for clinicians. The standards of medicine are changing every day. Some diseases are emerging as more potent than other diseases. Hence, there is a need to redirect and re-allocate hospital funds into these hospital concerns. However, the process of reallocating will now affect the overall efficiency of the health care industry. Many people criticise this system as discriminatory against patient needs; they question the assessment and the classification system which emphasizes too much on the diagnosis of patient diseases. Various studies on the matter emphasize that “accurate diagnostic information about each patient is important because funding depends on accurate allocation of patient DRGs. If the diagnoses and procedures are not recorded accurately, the hospital may be underpaid for work done” (Royal Children’s Hospital, n.d, p. 5). This process may turn out disastrously for the casemix funding system being applied by Australia. The preoccupation with the DRGs in one instance, may indeed improve the health care system on aspects which are highly prioritized; however, other areas of care may be ignored and neglected in the process. Conclusions This study concludes that the Hong Kong pay for performance system is a system based on patient needs and on the quality of health care services rendered by providers. The Australian casemix system is very much similar to the P4P system; however, it is more specifically based on the diagnosis of patient illnesses and on classification of needs of hospitals and of patients. The diagnosis-related groups being applied in the casemix system is more efficient in addressing the needs and the concerns of the patient. However, the P4P system is highly focused on performance and on quality of care. Incentives to health care providers help make the P4P system refined and possibly as specific as the casemix system. Recommendations This study recommends that each system of hospital administration and funding system be fashioned according to the needs of the patients and of the health care industry. The current problems in health care financing are indications of the compelling need for the health care industry and administrators to consider and focus on spending wisely and allocating wisely. Multi-national corporations which used to dictate the price and the quality of health services will also be forced to produce and offer quality health services at the lowest possible cost. The focus now will be on quality – not cost of health care services. This study recommends that improvements on the classification system in Victoria and New South Wales under the casemix system be made in order to be more applicable to a variety of conditions, not just to those which commonly manifest in hospitals. By overly focusing on some diseases, there is a risk of neglecting and exacerbating the problems for other diseases. Mooney and Scotton (1998) actually emphasize that every time resources are allocated in a particular way, other opportunities are lost. They further emphasize that “it is not enough ‘to do good’ with health care resources: we need to ensure that in choosing one particular way to use resources there is no better way to use them” (Mooney & Scotton, 1998, p. 3). The rationalization process that is being used in both systems in both countries should be made applicable to larger areas and to other countries which are also having problems in health care financial allocation. The model for hospital administration being used in Hong Kong is applicable to basic care services. It relies on salaried, professional doctors who are free to provide care independent of personal compensation. The Centre for Public Policy Studies and Lo (2001) point out that the current hospital administration system actually follows the professional model which is still dependent on bureaucracy. The P4P system does its part in ensuring that health care reaches the grass roots level, however, many experts still recommend “market participation by doctors and insurers...[in order to] provide useful supplementary services and...enhance choices” (Centre for Public Policy Studies and Lo, 2001, p. 160). Works Cited Brook, C. (n.d) Casemix Funding for Acute Hospital Care in Victoria, Australia. Department of Health, Victoria. Retrieved 06 October 2009 from the World Wide Web: http://www.health.vic.gov.au/__data/assets/pdf_file/0007/302875/casemix.pdf Centre for Public Policy Studies and LS Ho (2001) Health Care Funding and Delivery in Hong Kong: What should be done?. Hong Kong Marketing Journal. Retrieved 06 October 2009 from the World Wide Web: http://www.hkmj.org/article_pdfs/hkm0106p155.pdf Casemix Funding (n.d) The Royal Children’s Hospital. Retrieved 06 October 2009 from the World Wide Web: http://www.rch.org.au/emplibrary/rchhis/Casemix_funding_educational_document.pdf Duckett, S. (1998) Casemix: Moving Forward Casemix Funding for Acute Hospital Inpatient Services in Australia. Medical Journal of Australia. Retrieved 06 October from the World Wide Web: http://www.mja.com.au/public/issues/oct19/casemix/duckett/duckett.html Epidemiology and Health Information Branch (n.d) An Introduction to Casemix and the National Costing Study. Department of Health, Queensland. Retrieved 06 October 2009 from the World Wide Web: www.health.qld.gov.au/publications/infocirc/info20.PDF Finkler, S. A., Kovner C. T. and Jones C. B. (2007) Financial Management for Nurse Managers and Executives (3rd.ed.). St Louis: Saunders Elsevier. pp 56-70 Hong Kong College of Health Service Executives (19 February 2009) Pay for Performance Using Case-mix in HA. Hong Kong College of Health Service Executives. Retrieved 06 October 2009 from the World Wide Web: http://www.hkchse.org/database/2009/20090219_seminar_2.pdf Leung, E. (9 September 2008) Health Care Professionals in theAgeing Era. The Hong Kong Medical Dictionary. Volume 13, number 9. Retrieved 06 October 2009 from the World Wide Web: http://www.fmshk.org/database/articles/3234.pdf Mooney, G. and Scotton, R. (1998) Economics and Australian Health Policy. New South Wales, Allen and Unwin Publishers Pay for Performance (P4P) in Hospital Authority (HA) (n.d) Government of Hong Kong. Retrieved 06 October 2009 from the World Wide Web: http://gia.info.gov.hk/general/200811/19/P200811190266_0266_46927.pdf Slembeck, T. (6 October 2001) Principles of Economics. Slembeck.com. Retrieved 06 October 2009 from the World Wide Web: http://www.slembeck.ch/principles.html WHO Commission on Macroeconomics and Health (2001) A Commission Examining the Interrelations Among Investments in Health, Economic Growth and Poverty Reduction. World Health Organization. Retrieved 20 July 2009 from the World Wide Web: http://www.who.int/macrohealth/en/CMH-overview.Summary.pdf Read More