Chapter 2
Issues
Introduction
2.1
The Independent Hospital Pricing Authority (IHPA) is central to a new
approach to activity based funding of public hospitals. It also heralds a
fundamental change in the nature of Commonwealth and state and territory arrangements
for public hospital funding. Since 1984, the Australian Government has provided
block funding to state and territory governments to support the delivery of
free public hospital services.[1]
2.2
Despite periodic agreements, tensions between the Commonwealth and states
and territories in relation to funding of hospitals have been ongoing. States
and territories have disputed the adequacy of the Commonwealth contribution.
The Commonwealth, in turn, has found it difficult to determine if states are
maintaining levels of service provision appropriate to the population level,
and have been concerned that states have shifted public hospital provided
services to private practice arrangements that draw subsidies from Commonwealth
programs. This new approach addresses these issues through a shift to primarily
activity based funding (ABF) and the setting of a national efficient price,
while maintaining a provision for block funding where required.[2]
2.3
There was broad support for the establishment of the IHPA from submitters.[3]
Mr Martin Laverty, Catholic Health Australia (CHA), stated that:
...we do support the intent of the bill. We think this is
sensible legislation. We think once a pricing authority is established, if the
definition of a public hospital price is adequately worked through, it will
give the opportunity for Commonwealth, state and NGO hospital providers, and
indeed the ultimate consumers of those hospitals, to understand the price
drivers of the delivery of public health care and for public health care to
then be purchased from the most efficient providers. That is why we are
unabashed supporters of this component of the health reform agenda.[4]
2.4
Ms Carol Bennett, Consumers Health Forum of Australia (CHF), also
expressed support for the IHPA and stated:
CHF supports the establishment of the hospital pricing
authority. Developing a national efficient price for hospital services on which
Commonwealth hospital funding will be based has the potential to introduce into
the system the efficiency and transparency that has been sorely lacking to
date. This includes public reporting and transparency in appointments to all
advisory structures.[5]
2.5
Submitters, however, raised some matters in relation to specific
provisions of the Bill.
Proposed Part 4.2 – IHPA establishment, functions, powers and liabilities
Proposed section 131 – Functions of
the Pricing Authority
2.6
Proposed subsection 131(1) provides for the functions of the IHPA,
something that occasioned much interest from submitters, in particular proposed
paragraphs 131(1)(a)-(e). Submitters also commented on proposed subsection
131(3) which pertains to the matters that the IHPA must have regard to in
performing its functions. A number of submitters proposed additional matters
they believed the IHPA should also have regard to.
Proposed section 131(1) – National
efficient price for activity based funding (ABF)
2.7
Proposed paragraph 131(1)(a) provides for the IHPA to determine the
national efficient price for health care services provided by public hospitals
where the services are funded on an activity basis. The Department of Health
and Ageing (DoHA) stated that ABF will:
...provide incentives for most hospitals to treat more
patients more efficiently, while still ensuring the viability of smaller
hospitals and some particular kinds of services for which ABF is not
appropriate.[6]
2.8
Many submitters supported moving to a national activity based funding
system.[7]
CHA, for example, commented that proposed paragraph 131(1)(a), together with proposed
paragraph 131(1)(d) (provision for adjustments), provide reasons that 'the Bill
should be supported as benefiting the future planning of resource allocation
across the Nation's public hospital system'.[8]
2.9
However, a number of concerns were raised by submitters. CHA observed
that whereas the Bill provides a mechanism to determine a national efficient
price, 'it does not set a nationally agreed public hospital payment'. CHA noted
that, through the Council of Australian Governments (COAG) agreement, there
will be certainty as to how much the Commonwealth will contribute, but it is
not certain how much the states or territories will contribute.[9]
2.10
Similar concerns were raised by the Australian Medical Association (AMA),
which noted that the National Health Reform Agreement (NHRA) allows state and territory
governments to pay public hospitals less than the full efficient price
determined by the IHPA (clause A65). The AMA submitted that this information
should be included in the report the IHPA must make to Parliament each year,
pursuant to proposed section 210, and should also be provided to the National
Health Performance Authority (NHPA), so that it is clear when poor performance
is linked to insufficient funding.[10]
2.11
In responding to these concerns, Mr Peter Broadhead, DoHA, told the committee
that 'under the agreement reached in early August there is a role for a
national health fund administrator and the national health funding pool', and
that these may be established by legislation later in the year.[11]
He explained further:
It is a very strong principle through the agreement that the
aim here is to have the amount of funding, the source of funding, the
destination of funding and the basis upon which the quantum was arrived at all
publicly reported. This would mean that, to the extent that a state's
contribution to activity-based funding for a particular local hospital network
was less than or more than the national efficient price or the same as the
national efficient price, it would be visible for people to see in the
reporting that is required. That includes not only the reporting to parliament
but also the public reporting that is required.[12]
2.12
In relation to the contribution of states and territories to the
national efficient price, Mr Broadhead, DoHA, stated that there is an
underlying efficient basis for providing funding to hospitals. However, states
have a capacity to adjust their contribution so they are not bound to simply
pay exactly the balance of the national efficient price, and that in some areas
it may be more and, in some, less.[13]
2.13
Mr Broadhead also noted that government does not generally cover 100 per
cent of costs as hospitals have their own revenue sources, particularly in
metropolitan areas. He also noted that the states' contribution will
undoubtedly take into consideration other factors that may vary locally for
that hospital, in terms of both costs and revenue.[14]
2.14
The Victorian Healthcare Association (VHA), while supporting the
standardisation of ABF across Australia, drew on their experience of ABF in Victoria
over the last 18 years – in the form of casemix funding – to sound a note of
caution. VHA noted that in Victoria, grants have been introduced to cover
various shortfalls due to differential pricing. These grants, however, are not
transparent as not all agencies receive them.[15]
2.15
Dr Kathryn Antioch, drawing on her experience leading the reform of ABF
in Victoria, also noted that extra 'risk adjusted' funding was required in the
Victorian situation, 'given hospitals incurred significant funding deficits
under the ABF arrangements because funding does not meet the health need in the
absence of such adjustments'.[16]
2.16
Dr Anthony Sherbon, Acting Chief Executive Officer, interim Independent
Hospital Pricing Authority, responded to these comments and stated that 'most
definitely we will take into account the Victorian experience'.[17]
Dr Sherbon explained further:
As you know, South Australia also has an activity based
funding system. It is not quite the same as the Victorian system, and some
would argue that it is perhaps not as comprehensive as the Victorian system.
But there are other systems all around the world as well, of
course, some of which have been operating for some time. So we will seek to
draw from the experience of many jurisdictions across the world, but the
Victorian experience will be very much to the fore in our consideration.[18]
2.17
The Australian Healthcare and Hospitals Association (AHHA) argued that
there is a risk that introduction of ABF could reinforce existing models of
care, with 'the potential for skewing of incentives resulting in some patients
being treated inappropriately as inpatients'. AHHA advocated an innovative use
of ABF, including 'developing comprehensive understanding of how ABF systems
for non-admitted patients are constructed in order to fund care delivery in the
setting most appropriate to the patient needs'.[19]
2.18
Mr Broadhead described at length to the committee the preparatory work
that is currently being carried out in the Health Reform Transition Office and
the Health Reform Implementation Group. This includes work on what are known as
tier 2 clinics. He explained:
These are a list of a little over 100, I think, clients of
non-admitted or outpatient clinics that will be used as the initial
classification for non-admitted patients. Again, there has been a lot of work
done with states and territories, and indeed with clinical input, to look at
those as the initial basis for activity based funding and outpatients.[20]
Proposed section 131(1) – Efficient
cost for health care services provided by public hospitals where the services
are block funded
2.19
Proposed paragraph 131(1)(b) provides for the IHPA to determine the
efficient cost for health services provided by public hospitals where the
services are block funded. The National Rural Health Alliance (NRHA) emphasised
the importance of the IHPA taking into account the full price of care through
the provision of block funded hospitals in rural and remote areas. The NRHA
noted that the cost of providing care in these circumstances includes:
the costs of travel and accommodation for locum and agency
staff to cover shortages, staff leave and continuing professional development,
higher operational and infrastructure costs due to the higher costs relating to
location and more limited services, and the need for local capacity building
and training for management and administrative staff.[21]
2.20
The VHA advocated that maternity services be funded as a strategy,
rather than on the basis of an activity, as otherwise low-volume maternity
services will become less viable.[22]
2.21
Dr Sherbon, interim IHPA, explained to the committee that the interim
authority is currently analysing 'what is an appropriate scope of activity
based funding in accordance with the agreement...as well as some criteria for
the application of activity based funding versus block funding in various
situations'. He went on to explain that 'no decisions will be made until the
authority proper is established'.[23]
Proposed section 131(1) – Classification
systems and data collection
2.22
Proposed paragraphs 131(1)(c) and 131(1)(e) provide for the development
of classification systems for health care and other services and to determine
data requirements. In general submitters were supportive of a move to national consistency
in data management. The Australian Institute of Health and Welfare (AIHW)
observed that they view the data related functions of the IHPA as providing:
...a valuable opportunity to improve the quality of
statistical information on Australia's hospitals. It is anticipated that the
Authority's work will result in better information becoming available over time
on the nature of public hospital services, the costs of the services, and the
efficiency with which they are provided. The information is not only likely to
be more comprehensive and accurate than is currently available, it is also
likely to allow better comparability between the states and territories and
over time than is currently the case.[24]
2.23
AIHW went on to make a strong case for the IHPA to draw upon the current
sets of nationally agreed data definitions and standards for the national
hospital collection which have been 'developed and agreed by the jurisdictions
and AIHW through multijurisdictional processes auspiced by Health Ministers
through the National Health Information Agreement'.[25]
AIHW argued that this would ensure:
...that the definitions, classifications and data collections
used by the Authority were consistent with those in the current national
collections, allowing the total national hospital information resource to
expand in a way that would be most useful for a wide range of data users. It
would also contribute to greater efficiencies in the national processes to
collect and report data, with the objective to collect one consistent set of
data on each aspect of hospital activity. This should be suitable for multiple
uses, including those of the Authority (and others involved in the
establishment of activity based funding) and the wider purposes for which national
hospitals data are required. [26]
2.24
However, a number of submitters expressed concerns about how the IHPA
will classify, collect and manage data. Concerns included the challenges in
aligning the differences in how health services are delivered and counted
between and within the states and territories, the need to link patient-centric
data sets, the burden of compliance on hospitals and the timeframe to resolve
data issues. Ms Prue Power, AHHA, commented:
The IHPA will have a key role in determining new
classifications and data requirements. This will be a significant challenge to
overcome because we need to make sure that the costing and clinical data across
Australia is of a consistent nature before it can be properly analysed. At the
moment, it is inconsistent between states and territories.[27]
2.25
The Australian Private Hospitals Association (APHA) sought clarification
as to whether the Government intended that the IHPA would develop a separate or
replacement system to that of the Australian Refined Diagnosis Related Groups
(AR‑DRG's), believing that the Bill implies a new system. The APHA argued
that the development of a new system 'would be an unnecessary and costly
duplication of resources'. APHA explained further:
DRGs are a patient classification system that provides a
clinically meaningful way of relating the types of patients treated in a
hospital to the resources required by the hospital. AR-DRGs are used in the
public and private sectors and have been under development for many years in
collaborative work amongst the Commonwealth, States, Territories and the
private sector through the Clinical Casemix Classification Committee of
Australia and its various coding and clinical groups.[28]
2.26
Women's and Children's Hospitals Australasia (WCHA), however, raised
concerns that 'the current classification used to fund acute inpatient care
(AR-DRGs) in general do not differentiate adult from paediatric care and yet
there are significantly higher costs in paediatric care compared to adults'. WCHA
went on to observe that a published study it had commissioned in 2008 into
healthcare costs in Australian Specialist Paediatric Hospitals found that the
AR-DRG system:
...fails to account for a large number of complications and comorbidities
that materially affect the cost of care of children particularly those cared
for by specialist paediatric hospitals, because the Australian DRG does not
include almost 1,500 diagnosis codes included in the international ICD-10-AM [International
Statistical Classification of Diseases and Related Health Problems, Tenth
Revision, Australian Modification].[29]
2.27
The AHHA argued that there is significant work to be done to 'ensure
consistency in classifications and linkages between data sets held by various
jurisdictional bodies' and that this will be essential to enabling 'meaningful
analysis of the performance and cost of the public hospital system across
Australia'.[30]
AHHA went on to note that currently the disparate data sets cannot be linked.[31]
2.28
The AHHA also observed that 'there are still major gaps in the
measurement tools available', making particular note of the absence of nationally
acceptable measures for out-patients and mental health.[32]
2.29
The AMA submitted that the IHPA must have regard to any, and all,
performance indicators that hospitals are required to achieve as mandated by COAG.[33]
The AMA explained that the NHPA will be required to report on the performance
of public hospitals against performance indicators contained in a Performance
and Accountability Framework as mandated by COAG. The AMA argued that this also
has an impact on the IHPA:
If hospitals are expected to perform to a certain standard,
the national efficient price and the efficient cost must provide sufficient
funding to achieve those standards. The AMA considers this to be the
'effective' cost.[34]
2.30
Mr Broadhead, DoHA, told the committee that significant work over many
years has been undertaken on standardisation of hospital data, with less work
on non-admitted data or outpatient data being undertaken. He further explained
that ahead of the arrival of the pricing authority, further work has been
undertaken on what standards will apply and what data will be collected. Mr
Broadhead provided further details:
There is a rather large group of all jurisdictions and three
deputy secretary level representatives from each jurisdiction which oversees,
under COAG, implementation of health reform. It gets spoken of by its acronym,
HRIG, the Health Reform Implementation Group. That body agreed a set of initial
classifications that would be used for activity based funding several months
ago—in fact, from memory it was in 2010. So there has been work going on apace
to further develop those classifications so they will be fit for purpose from 1
July next year and to implement data collections that will enable them to be
used.
For example, in the Health Reform Transition Office there
have been people working on a thing called urgency related groups. This is a
particular classification that was originally developed in Western Australia
which will be used for emergency department services. We have now got a
detailed specification which has gone to states and territories for trialling.
This is consistent with the agreement that HRIG reached on the classification
that would be used initially. All states are aware of the data requirements to
populate, if you like, or to meet that classification.[35]
2.31
Mr Broadhead, DoHA, also clarified that once the legislation is passed, this
work 'will go to the statutory authority to then be the custodian of those
standards that are used to count and classify hospital activity for the
purposes of funding'.[36]
2.32
In relation to the burden on hospitals of complying with additional data
collection, classification and reporting, the AHHA noted that hospitals
currently are required to submit data to a plethora of Commonwealth agencies
and state/territory departments of health/human services.[37]
These comments were echoed by the AMA, which submitted that 'every effort
should be made to minimise data collection duplication and therefore
unnecessary administrative burden on health care providers'. The AMA went on to
argue that:
Clarity on the relationship between the three agencies will
assist in achieving this. The Bill should require that the Authority, the
National Health Performance Authority and the Commission collaborate with each
other and other relevant bodies to ensure that data collection requirements are
consistent, synchronised and streamlined.[38]
2.33
Dr Sherbon, interim IHPA, explained to the committee that the interim
IHPA 'will be an active partner in attempting to streamline as much as possible
any data requests on states and territories'. He noted that at the Australian
Health Ministers Conference held in Darwin in early August, health ministers
had resolved to 'seek to rationalise the data impact on states, territories and
the Commonwealth...and other data providers'.[39]
2.34
The AMA noted that the NHRA addressed the funding of teaching, training
and research within the public hospital system. Yet the AMA observed that the
funding of these functions and the role of the IHPA in calculating costs is not
made explicit in the Bill.[40]
The AMA was of the view that proposed paragraph 131(3)(c) should be amended to have
regard to:
...the need to ensure that public hospitals are able to fulfil
their role and function to provide teaching and training and to undertake
clinical research.[41]
2.35
Mr Broadhead, DoHA, addressed the committee at length on the issue of
teaching, training and research. He observed:
There are a number of specific provisions in the reform
agreement which deal with teaching, training and research. In particular,
initially teaching, training and research are to be funded on a block basis.
The amount in the first year is to be settled between the Commonwealth minister
and the minister of each state and territory. This is because there is not at
the moment a basis for funding teaching, training and research on an activity
basis, if you like, although some may wish to put forward particular ways in
which it might be done, but there is no agreement that it could be done at this
juncture. There is a clause in the agreement which does say that the pricing
authority should provide advice by, I think, 2018 on the feasibility of moving
teaching, training and research funding to an activity basis, but the general
view amongst all of the jurisdictions in the development of this agreement is
that the particular costs of teaching, training and research are not currently
well identified separately within the existing funding arrangements and so it
is not possible at this juncture to try and move to a more particular or
activity based approach.[42]
Proposed section 131(1) – Advice and
public submissions
2.36
Proposed paragraphs 131(1)(h) and 131(1)(i) go to advice in relation to
the funding model for public hospitals and confidential advice on costs for
health care services to be provided to the Commonwealth and states and territories.
Proposed paragraph 131(1)(l) provides for the IHPA to call for and accept, on
an annual basis, public submissions. Concerns raised in relation to proposed
paragraphs 131(1)(h) and (i) were also raised by other submitters in relation
to Part 4.13 on the reporting obligations of the IHPA. These are discussed below.
2.37
The AHHA sought clarification on whether the advice provided pursuant to
paragraph 131(1)(h) will also be made available to the public and the public
hospital sector. The AHHA argued that 'the acute sector will be responsible for
implementing decisions and hence informed stakeholder involvement will be
critical to the success of the program'. [43]
2.38
Some submitters took issue with proposed paragraph 131(1)(i) which gives
the IHPA a power to make confidential advice to government on future cost as it
was argued that the provision of confidential advice is at odds with proposed
subsection 129(2) which provides a commitment to transparency. It was argued that
the workings of the IHPA should be public and transparent.[44]
2.39
Mr Graeme Head, Deputy Secretary, Health Reform Transition Office, DoHA,
told the committee that 'there are a range of other provisions in the bill that
clearly reinforce the intention of governments to increase greatly the
transparency in respect of these financing arrangements'. He explained further
that this provision simply provides that one of its functions can be to provide
confidential advice.[45]
2.40
Mr Broadhead, DoHA, also added that the confidentiality provision is the
same as the usual practice on the part of the Commonwealth in not publishing
the parameters that underpin Commonwealth indexation: 'we put out forward
estimates of future expenditure but some of the bases on which those are
estimated we do not publish because it is sensitive information'.[46]
He emphasised that confidentiality pertains to:
...the advice it provides to governments about the costs of
providing healthcare services in the future. It is not meant to be about the
present or the past...It is only where it is venturing into territory which is
in a sense speculation, if you like, or projections that it has the opportunity
to remain confidential in advising governments about what it thinks might
happen in the future.[47]
Proposed subsection 131(3) –
Matters which the IHPA must have regard to in performance of its functions
2.41
Pursuant to subsection 131(3) there are a range of matters that the
IHPA, in performing its functions, must have regard to, including relevant
expertise and best practice within Australia and internationally, as well as the
range of public hospitals and the variable affecting the actual cost of
providing health care services in each of these hospitals.
2.42
Dr Antioch argued that adequate risk adjustment must also be taken into
account in order to 'enable reasonable access, quality, predictability of costs
and effectiveness, efficiency and financial sustainability given the price
could more accurately reflect the costs required to meet health need'. Dr
Antioch cited the experience of ABF in Victoria and stated that:
This is a serious matter and should not be taken lightly
given the experience where ABF has been implemented in Victoria. ABF in the
absence of adequate risk adjustment has been associated with underfunding of
hospital networks and would have further implications for patient safety (in
the absence of adequate EBM [evidence based medicine] initiatives) and
stretches the capacity of dedicated staff.[48]
2.43
Dr Antioch went on to submit that:
The legislation could be amended to include reference to the
need for adequate risk adjustment in the deliberations of the Independent
Hospital Pricing Authority to avoid reductions in quality that may result from
underfunding if the funds do not adequately match health need.[49]
2.44
As previously stated Dr Sherbon, interim IHPA, noted to the committee
the intention to heed the Victorian experience.[50]
2.45
The CHF observed that proposed subsection 131(3)(a) of the Bill requires
that the IHPA 'must have regard for relevant expertise and best practice within
Australia and internationally'. The CHF advocated that in this case relevant expertise
'must include the expertise of health consumers, as the users, and ultimately
the funders, of the health system'.[51]
2.46
The CHF submitted that the views of consumers 'provide an important
balance to the views of other stakeholders, including clinicians, health
economists and state and territory bureaucrats' and argued that:
There is increasing recognition, both within Australia and
internationally, that involving consumers in healthcare policy and
decision-making leads to better outcomes for both health consumers and the
health system as a whole.[52]
2.47
Dr Sherbon, interim IHPA, responded to concerns about consumer
engagement with the IHPA noting that 'over the years in my practice leading
healthcare organisations, usually one invites the peak body that is relevant to
either the task in hand or the jurisdiction they are working in to participate
in ongoing processes'. He explained:
From the interim authority's point of view, the consumer
input into the work that we are doing around the activity based funding
technical systems and also the very important work on the strategic pricing
framework will be very important, and we will be seeking participation of the
Consumers Health Forum in that process.[53]
2.48
Medibank raised the issue of the need to take account of the significant
differences in the comparability of cost data across public and private
hospitals, with a number of factors making a direct comparison of technical
efficiency between public and private hospitals complicated.[54]
2.49
CHA voiced similar concerns and noted that there is a lack of
recognition of the unique position of some Catholic hospitals which are defined
as private by statute, yet maintain a public service orientation and deliver
public health services. CHA argued that:
If the intent of the Bill is to empower the Authority to
determine an efficient price for every Australian hospital identified in
practice as being public, the Bill should require the Authority to have regard
to the different efficient price components that operate in (at least) the 21
public hospitals operated by Catholic services.[55]
2.50
For this reason CHA recommended that proposed subsection 131(3)(d) be
amended to require the IHPA to have regard to the cost components of delivering
public hospital services by non-government hospitals, such that it reads:
...the range of public hospitals and non-government hospitals
providing public health services and the variables affecting the actual cost of
providing health care services in each of those hospitals.[56]
2.51
In responding to these concerns about the non-government provision of
public hospital services Mr Broadhead, DoHA, told the committee that:
...the authority, in reaching its determination about the
national efficient price, is required to have regard to the actual costs of
service delivery in as wide a range of hospitals as practicable. It also has a
function to produce adjustments or loadings to that price in respect of
hospital characteristics, including type, size and location.[57]
2.52
Dr Sherbon, interim IHPA, also commented on this matter:
...the interim authority will establish a preparatory pathway
for the receipt of public submissions and it will gather the evidence around
the world of efficient practice in preparation for the authority proper's
commencement. That public process will include submissions from any interested
organisation—no doubt, Catholic Health Australia will be an interested
organisation—and it is appropriate that they express their view of what they
think is an efficient price and an appropriate time.[58]
Proposed section 134 – Constitutional
limits
2.53
Proposed section 134 sets out the Constitutional limits of the IHPA.
Pursuant to proposed subsection 134(a) the IHPA may perform its functions only
for purposes related to (i) the provision of pharmaceutical, sickness or
hospital benefits; or (ii) the provision of medical or dental services.
2.54
The AMA submitted that there is nothing in the NHRA to support the
involvement of the IHPA in determining an efficient price or efficient cost
related to the provision of pharmaceutical, sickness or hospital benefits. The
AMA also commented that the intended purpose of this provision is not clear and
should be removed. The AMA concluded that 'if the government has a particular
role in mind for the Authority in this regard, it should undertake full and
proper consultation with the health sector'.[59]
2.55
Mr Broadhead, DoHA, explained that this is standard drafting procedure
to set out the Constitutional limits. Rather than extending the functions of
the IHPA or the powers of the IHPA into the areas listed, this provision sets
out that, in performing its functions and exercising its powers, the IHPA
cannot go beyond things for which the Commonwealth has a head of power under
the Constitution.[60]
Proposed Part 4.3 – Cost-shifting disputes and cross-border disputes
2.56
Proposed section 139 provides for assessment of cost-shifting disputes,
with a Health Minister able to request the IHPA to make an assessment about a
cost-shifting dispute between his or her jurisdiction and another jurisdiction.
2.57
The AMA noted that 'AMA members working in public hospitals have
experienced many examples of activities that could be interpreted as a state or
territory government cost-shifting to the Commonwealth'. Consequently, the AMA
submitted that the Bill should also allow for individuals or non-government
organisations, in addition to jurisdictions, to report cost-shifting to the
IHPA.[61]
2.58
Dr Sherbon, interim IHPA, explained that in the past there have been
references to voluntary arbitration in previous healthcare agreements. However,
for the first time there is now a clear legislative mechanism for resolving cross-border
and cost-shifting disputes, with the legislation outlining a process and an
authority 'whose job it is to take those complaints, examine them, assess them
and make a recommendation'.[62]
Proposed Part 4.4 – Constitution and membership of the IHPA
2.59
Proposed section 144 provides for the appointment of members of the IHPA.
Pursuant to proposed subsection 144(4) the Minister must ensure that at least
one member of the IHPA has substantial experience or knowledge and significant
standing in regional or rural health care.
2.60
A number of submitters proposed greater specificity regarding membership
of the IHPA. By way of example, WCHA submitted that section 144(4) be amended
to require inclusion of at least one person with substantial experience and
knowledge, and significant standing in children's and young people's
healthcare.[63]
2.61
Similarly, the CHF proposed a requirement for the IHPA to include a
member with expertise or knowledge in consumer experiences of health care. This
proposal was also supported by WCHA and Dr Antioch.[64]
2.62
Dr Antioch noted that the Senate Community Affairs Legislation Committee
inquiry into the National Health Reform Amendment (National Health Performance
Authority) Bill 2011 recommended 'that COAG should consider a broader range of
mandated representation on the Authority and in particular should consider
representation of consumers and indigenous health stakeholders'.[65]
Dr Antioch went on to note that the current Bill has not addressed this
issue in the context of the IHPA for either indigenous health stakeholders or
consumers. Dr Antioch submitted that subsection 144(4) be amended to
address the issue of indigenous inclusion. She concluded that 'this will enable
consistency with all Federal-State financing agreements which include
indigenous health as an overarching top priority for Australian Governments'.[66]
2.63
CHA submitted that the Bill would be enhanced by requiring the
appointment of members skilled and experienced in non-government hospital
service provision on the IHPA. CHA noted that it operated 21 public hospitals,
in some cases large, iconic and well-known hospitals, which provided 2 700
public beds. Mr Laverty stated the Bill ignores the requirements of how these
beds are operated by CHA. Although this oversight was not seen as intentional, CHA
assert that it is important that these considerations be taken into account. It
stated:
Over time, government purchasers of hospital services will be
able to make informed decisions as to where the most efficient service can be
obtained from. In order for the Authority to enable a genuine comparison of
costs between government-owned hospitals and non-government owned hospitals,
the definition of what a national efficient price comprises will need to be
informed not just by practices of government owned hospitals, but also by non-government
owned hospitals.[67]
2.64
Mr Laverty concluded:
The remedy that this inquiry can recommend is pretty simple.
We are simply suggesting that provision be made, in two of the bill's
provisions, for a director on the board of governance to have experience in the
operation of NGO public hospital services. We are not arguing that the number
of directors be expanded from the proposed eight to nine; we are simply saying
that one of those eight should be skilled and understand the differences of NGO
public hospitals and, similarly, that the workings of the authority in the
setting of the price should give consideration to the variances of running a
public hospital.[68]
2.65
The APHA also expressed disappointment that there is no reference in the
Bill to the need to draw on the knowledge held by the private sector. They
observe that the 'private hospital sector should be an integral part of
developing reform solutions' and that:
...the new Authority would be well advised to draw some of
its membership and some of its staffing as well, from the ranks of people who
have appropriate experience in the private hospital sector.[69]
2.66
In support of their case, the APHA cited the 2009 Productivity
Commission Research Study into Public and Private Hospitals. The APHA noted
that the Commission found that:
- on average treatment in Private Hospitals costs $130 per case-mix
adjusted separation less than in public hospitals;
- when analysing the costs that private hospitals can control they cost
32% or $1,089 less than public hospitals;
- private hospitals have a more complex casemix than public hospitals;
- where comparable safety and quality data exists in the report private
hospitals are shown to be safer than public hospitals;
- private hospitals offer more timely access to elective surgery; and
- analysis by the Commission shows that private hospitals carry out more
elective surgery with patients from disadvantaged socioeconomic backgrounds
than public hospitals.[70]
2.67
Mr Head, DoHA, explained to the committee that there are many different
kinds of opportunities for inputs to the processes of the IHPA:
The provisions that relate to the membership of the pricing
authority, while they only prescribe two forms of specific expertise, of course
leave it open to COAG in determining appointments to choose people from a wide
range of backgrounds. There are also provisions in the bill that allow for the
authority to establish committees other than those that it is required to
establish...it is open to the authority to establish other advisory bodies and
it will call for public submissions, so there are a range of opportunities in
the existing terms that do provide for the input.[71]
Proposed Part 4.10 – Clinical Advisory Committee (CAC)
2.68
Proposed Part 4.10 provides for the establishment (section 176),
functions (section 177), and membership (sections 178–190) of the CAC. The
Explanatory Memorandum states that the CAC advises the IHPA on the formulation
of casemix classifications for healthcare and other services provided by public
hospitals, provides advice on matters referred to it by the IHPA and is
empowered to do anything incidental to, or conducive to, the performance of
those functions.[72]
Proposed section 179 – Appointment
of CAC members
2.69
Pursuant to proposed subsection 179(3), for a person to be eligible for
appointment to the CAC, they must be a clinician. A clinician is defined under
the National Health and Hospitals Network Act 2011 (Cth) to mean 'an
individual who provides diagnosis, or treatment, as a professional: (a) medical
practitioner; or (b) nurse; or (c) allied health practitioner; or (d) health
practitioner not covered by paragraph (a), (b) or (c)'.[73]
2.70
The AMA supported the requirement to establish a CAC comprised of
clinicians to provide advice to the IHPA. However, it noted that the Bill does
not specify the process for selecting members, apart from the fact that
membership is a Ministerial appointment. The AMA submitted that at a minimum,
the Bill should require that the process should be 'transparent and apolitical'.
In addition, at least one member of the CAC should be appointed from nominations
provided by the AMA.[74]
Mr Francis Sullivan, AMA, stated in relation to the CAC:
...what you are looking for, one assumes, is a specific set
of advice to do with clinical practice inside the hospital. That clinical
practice is obviously medical, but there are other clinical areas that would
need to have a voice in a committee as such. That is why we have gone with the
idea that, at least, an AMA nominee on the committee would ensure that there is
a broader medical voice than, say, just a specific voice.[75]
2.71
The Australian Institute for Primary Care and Ageing (AIPCA) submitted
that the definition of clinician should be narrowed so that appointment to the
CAC be only open to health professionals registered under the national law, and
only to those who have practice experience in public hospitals. They further
suggested that in order to provide a minimum core of health professionals
possessing a broad range of expertise there could be further specification 'for
example that there must be a minimum of one medical practitioner, one nurse,
one pharmacist and one other allied health professional (e.g. podiatrist,
psychologist)'.[76]
2.72
The WCHA welcomed the commitment to establish a CAC. However, WCHA
submit that proposed section 179 be amended to allow the Minister to appoint
individuals to the CAC with coding and classifications expertise in addition to
clinicians.[77]
2.73
Mr Broadhead, DoHA, responded to these matters and stated that in the
legislation establishing the ACSQHC, the term clinician was not defined, but it
was later defined in a subsequent amendment to mean 'essentially people who
have a clinical role in respect of patients. It is not purely medical but
includes nurses, allied health practitioners and so on'. He went on to explain
that as the Bill is amending legislation, that same definition of clinician
will also apply.[78]
Proposed Part 4.12 – Other Committees
2.74
Proposed section 205 provides for the IHPA to establish committees to
advise or assist it in the performance of its functions. The CHF proposed the
establishment of a Consumer Advisory Committee under this section to enable
'genuine consumer engagement and involvement in the work of the Pricing
Authority'.[79]
Proposed Part 4.13 – Reporting obligations of the IHPA
2.75
Pursuant to proposed Part 4.13 of the Bill, which provides for reporting
obligations of the IHPA, there is provision for the Minister or state/territory
Minister to require the IHPA to prepare reports or give information (section
208), for the IHPA to keep the Minister informed (section 209), for the IHPA to
report to Parliament (section 210), for the Minister or state/territory
Minister to provide comment before public reports (section 211) and for the
IHPA to prepare and give to the Minister an annual report for presentation to
Parliament (section 212). Reporting obligations are also provided for in sections
131 and 193.
2.76
A number of submitters raised issues of transparency and access in
relation to these provisions. The AMA submitted that all reports should be made
available on the internet.[80]
The APHA noted that the Minister stated in the second reading speech on the
Bill that:
The authority will have strong independent powers: it will be
for public hospitals what the independent Reserve Bank is for monetary policy.
This is unprecedented for the public hospital system. The result will be a
thorough and rigorous determination without fear or favour to governments. The
government is confident that the authority will provide the health system with
the stability and robustness that the Reserve Bank has provided for monetary
policy for decades.[81]
2.77
However, the APHA argued that the provisions contained in sections 208,
211 and 212 'fall a long way short of the practise of the Board of the Reserve
Bank of releasing its decisions and monthly minutes publicly with no prior comment
by the Executive'. The APHA went on to observe:
If the Authority is to truly 'be to public hospitals what the
Reserve bank is for monetary policy' then its governing legislation should
require the Authority to publish on its website the minutes of its meetings and
the reasons for its decision in regard to pricing. This would be in the best
interests of hospitals, health consumers and the broader community. We urge the
Committee to look closely at the disclosure and reporting regime of the
Authority as specified in the Bill, as we believe there is room for significant
improvement in terms of transparency and accountability.[82]
2.78
Pursuant to section 211, the IHPA must not report publicly unless the
report, and a period of 45 days in which to comment on the report, has been
given to the Minister and each state/territory Health Minister. This does not
apply, however, to a report under section 212.
2.79
The CHF submitted that 'in the interests of transparency, it is
important that health consumers have access to complete and uncensored
information on hospital pricing and any jurisdictional disputes that have
arisen'. Further, the CHF sought clarification on:
...whether the comments of Ministers will influence the final
report that is released to the public, and whether the comments of Ministers on
the report will also be made public.[83]
2.80
DoHA provided evidence on transparency issues. Mr Head noted in relation
to section 131 that 'there are a range of other provisions in the bill that
clearly reinforce the intention of governments to increase greatly the
transparency in respect of these financing arrangements'.[84]
In responding to questions about the provisions of section 211, Mr
Broadhead confirmed that it does not cover changing or varying a negative
report.[85]
He explained further that section 211:
is essentially about a 'no surprises' provision in terms of
people who may be asked to respond to the things that are published,
particularly state and federal ministers. There is nothing in this provision
which prevents the publication of something, but it does give to people who
will likely be called on as soon as such a report is published the opportunity
to understand it and therefore respond in an informed way [86]
Proposed Part 4.14 – Secrecy
Proposed sections 221, 222 and 228 –
Disclosure to researchers, disclosure with consent and protection of patient confidentiality
2.81
The Office of the Australian Information Commissioner (OAIC) noted that
in addition to the IHPA's obligations under the Privacy Act, proposed sections 221 and 228
prevent the disclosure of indentifying information. The OAIC concluded that 'it
appears to the OAIC that appropriate privacy safeguards will be built into the
regulatory framework governing the IHPA'.[87]
Similarly, Dr Antioch considered that 'these privacy inclusions are an
excellent development and clarify the privacy issues in the NHRA (July 2011)'.[88]
2.82
Pursuant to section 222, an official of the IHPA may disclose protected
IHPA information that relates to the affairs of a person if (a) the person has
consented to the disclosure; and (b) the disclosure is in accordance with that
consent.[89]
2.83
Pursuant to section 228, the IHPA, NHPA and the ACSQHC must protect
patient confidentiality with some provision for consent. The CHF argued that
the legislation should specify that this must be informed consent, so that the
consumer or another person who is able to give consent is fully aware of the
implications of providing consent.[90]
2.84
The CHF noted that the National Health and Hospitals Network Bill 2010
was amended in the Senate to include reference to informed consent in the relevant
provisions of that Bill and submitted that it is appropriate that this is
reflected in the current Bill.[91]
Other matters raised in submissions
2.85
Principal among the reasons for referral of this Bill to the committee
was consideration of the relationship of the IHPA and the ACSQHC, and the
relationship of the IHPA with the NHPA.[92]
2.86
The AIPCA observed that the current/proposed legislative scheme contains
no real obligation for the three statutory bodies to work together to avoid
duplication when collecting similar and related data.[93]
The AIPCA further noted that:
The only real legislative connection between the Pricing
Authority, the Performance Authority and the Commission is found in the secrecy
provisions of the Bill, enabling disclosure of protected information by the
Pricing Authority to assist the other two statutory bodies. [94]
2.87
Similarly, the AMA argued that more detail needs to be provided by governments
on the circumstances in which information would be shared between the three
agencies.[95]
2.88
The AIPCA suggested that consideration could be given to recommending an
amendment to the Bill to establish a duty of cooperation between the three
bodies. The AIPCA explained that such a provision is contained in the United
Kingdom's Health and Social Care Act 2008.[96]
2.89
However, DoHA submitted that the IHPA will have a legislative
requirement to have a strong consideration of how its functions will interact
with the safety and quality of health services. They also note that disclosures
of information between the IHPA and the ACSQHC in regard to ensuring safety and
quality in healthcare services are provided for by proposed section 220. DoHA
also submitted that the NHPA reports and its performance framework will play a
vital role in ensuring that the IHPA can drive improvements and efficiencies
within the health sector.[97]
Conclusion
2.90
The establishment of the IHPA represents a key part of the Government's
health reforms. The Bill reflects the historic agreement concluded by the
Council of Australian Governments on 2 August 2011. The IHPA will have a pivotal
role in increasing the efficiency of hospital services through determining a
national efficient price for activity based funding and determining amounts for
block funding. Critically, it will do this in an independent manner. This
provides a guarantee of Commonwealth funding for hospital services based on an
efficient price for each kind of service. In addition, the IHPA will, for the
first time, provide a legislative mechanism for resolving cost-shifting and cross-border
disputes. The Government's health reforms provide a different, and more
transparent, approach to funding hospital services in the future.
2.91
The committee notes the broad support for both the IHPA and the national
activity based funding system. The IHPA will be drawing on experience from many
other jurisdictions, including Victoria which has had activity based funding
for 18 years.
2.92
The committee considers that the measures set out in the Bill will
ensure that the unique features of Australia's hospital sector will be
adequately addressed. There is provision for block funding where circumstances
are such that activity based funding is not appropriate. A further feature of
the provision of hospital services in Australia is the engagement of
non-government organisations in the provision of public hospital beds. In
particular, Catholic Health Australia pointed to the large part its hospital
network plays. The committee has considered the concerns of Catholic Health
Australia that due consideration be given to the difference in provision of public
beds by a non-government organisation. Catholic Health Australia recommended
that a member of the IHPA have experience in the operation of non-government
public hospital services.
2.93
The committee is satisfied that the Bill provides adequate recognition of
the diversity of the hospital sector. In particular, the committee notes that
in determining the national efficient price, the IHPA must have regard to the
actual costs of service delivery in as wide a range of hospitals as
practicable. It also has a function to produce adjustments or loadings to that
price in respect of hospital characteristics, including type, size and
location. In addition, the IHPA will call for public submissions. Finally, the
committee notes that it is open to COAG in determining membership of the
pricing authority to choose people from a wide range of backgrounds.
2.94
The committee is also satisfied with information provided by both the
Department of Health and Ageing and Dr Sherbon, of the interim IHPA, that there
are many opportunities provided by the provisions of the Bill for meaningful
consumer input, including the establishment of specific committees if required.
2.95
In relation to concerns about funding of teaching, training and
research, the committee notes that the Government has indicated that initially
this will be funded on a block basis.
Recommendation 1
2.96 The committee recommends that the National Health Reform Amendment
(Independent Hospital Pricing Authority) Bill 2011 be passed.
Senator
Helen Polley
Chair
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