1. The Health Roundtable Queensland Chapter 21 July 2011 ©2011 The Health Roundtable Limited 1

2. The Health Roundtable The Health Roundtable … … An Innovation Clearinghouse  Non-profit membership group  73 Members  127 Facilities  Founded 1995  Share problems  Share solutions  Provide informal network 2 Health Roundtable Health Roundtable

3. The Health Roundtable The Health Roundtable … Member Organisations (July 2011) 3 Albury Wodonga Health Alfred Hospital Alice Springs Hospital Angliss Hospital Armadale Hospital Auburn Hospital Auckland City DHB Auckland Starship Austin Health Barwon Health Bass Coast Bendigo Hospital Bentley Hospital Blacktown Mt Druitt Box Hill Hospital Caboolture Hospital Cairns Hospital Caloundra Hospital Camperdown Hospital Canberra Hospital Canterbury DHB Capital & Coast DHB Casey Hospital Caulfield General Counties Manukau DHB Cumberland Hospital Dandenong Hospital Dunedin Hospital Flinders Medical Centre Fremantle Hospital Gisborne Hospital Gold Coast Hospital Goulburn Valley Hospital Gove Hospital Graylands Hospital Gympie Hospital Hampstead Rehabilitation Hawera Hospital Hawkes Bay Hospital Hawkes Bay Rural Hornsby Kuringgai Hutt Valley DHB Invercargill Hospital Ipswich Hospital John Hunter Hospital Katherine Hospital King Edward Memorial Lakes District Hospital Logan Hospital Lyell McEwin Hospital Maroondah Hospital Masterton Hospital Mater Adult Hospital Mater Children's Hospital Mater Mother's Hospital Mater Private Hospital Melbourne Health Mercy Hospital for Women Modbury Hospital Monash Medical Centre Moorabbin Hospital Nambour Hospital Nelson Hospital Nepean Hospital Noarlunga Hospital Waitemata Northern Health Victoria Northland Hospitals Osborne Park Hospital Palmerston North ( Peter MacCallum Prince Charles Hospital Prince of Wales Hospital Princess Alexandra Hospital Queen Elizabeth II Hospital Redcliffe Hospital Redland Hospital Repatriation General Robina Campus GCH Rockhampton Hospital Rockingham Peel Rotorua Hospital Royal Adelaide Hospital Royal Brisbane & Womens Royal Children's Hospital Royal Darwin Hospital Royal Hobart Hospital Royal North Shore & Ryde Royal Park Campus Royal Perth Hospital Royal Women's Hospital Ryde Hospital Sydney Sandringham Hospital Shellharbour Hospital Shoalhaven Hospital Sir Charles Gairdner St George Hospital St Vincents Health ( St Vincents Hospital Sunshine Hospital Sutherland Hospital Swan Kalamunda Sydney Hospital Talbot Park Taranaki Base Hospital Taupo Hospital Tauranga Hospital Tennant Creek Hospital The Queen Elizabeth Timaru Hospital Toowoomba Townsville Hospital Waikato Hospital Wairau Hospital (NM DHB) Waitakere Hospital Wanganui Hospital Wangaratta Warrnambool Hospital Werribee Mercy Hospital West Gippsland Hospital Western District Health Western Hospital Westmead Hospital Whakatane Hospital Whangarei Hospital Williamstown Hospital Wollongong Hospital

4. The Health Roundtable Today’s Agenda ©2011 Confidential Draft Discussion Document4

5. The Health Roundtable Today’s Agenda ©2011 Confidential Draft Discussion Document5

6. The Health Roundtable Charter for the Queensland Chapter ©2011 Confidential Draft Discussion Document6 AIM: improve health service perform by sharing common issues and innovative solutions to operational issues INITIAL FOCUS: prepare for the implementation of Activity Based Funding by sharing information with each other and with experts on: management accounting, costing, operational planning, and inpatient coding techniques. SCHEDULE: Meet twice in 2011 – in July and November – specifically to discuss ABF issues plus monthly teleconferences in August, September, and October to share progress

7. The Health Roundtable Health Reform: Health services need much more expertise to learn how to deliver products within the price structure  Health service providers need to understand their cost structure much better to know which services to offer efficiently  However, they have limited systems and expertise  Few have feeder systems to measure actual activity & cost beyond pathology and imaging  Except Victoria, few have experience with activity based funding  Few have any management accounting expertise  Overall accounting expertise has been removed from many local health networks

8. The Health Roundtable Money Talks: Pricing approach will drive health services to change behaviour  What behaviour is sought?  Increased surgical intervention rate?  Greater usage of emergency departments?  Increased usage of diagnostic testing?  Greater use of primary care?  Increased usage of “hospital in the home/nursing home?”  Avoidance of hospital for chronic care management?  The price differential between hospitals and other alternatives will affect the speed of change

9. The Health Roundtable Queensland Chapter Suggested Goals for next 6 – 12 – 18 months ©2011 Confidential Draft Discussion Document9

10. The Health Roundtable Latest Developments ©2011 Confidential Draft Discussion Document10

11. The Health Roundtable Queries about the Queensland Funding Model  Why would a Laparascopic Cholecystectomy have a different cost weight at different facilities?  1.92284 $8103 at L3  1.63590 $6894 at M2  1.78737 $7532 at M1  2.15900 $9099 at P  “The prices for Acute Admitted Inpatients are dependent on funds available within the ABF pool and agreed activity targets” (2.9.1) (rather than “activity targets are dependent on funds available?”) ©2011 Confidential Draft Discussion Document11 Std Price $4214.08

12. The Health Roundtable 7. Understand The Horsham Insight ? The Alfred Hospital 500+ beds Very high acuity and gravitas Horsham Base 90 Beds “This is the end of the world if The Alfred is paid the same price as Horsham Base for Fracture of neck of femur” This was a universal belief

13. The Health Roundtable … The Horsham Insight Learning / experience curves

14. The Health Roundtable Queries about the Queensland Funding Model  ED patients who do not wait for care are funded at $144.58 ??  “There is no fixed payment relating to ED as in previous models, being fully variable based on activity performed.” 2.16.5  Perverse incentives to avoid incurring imaging and pathology costs by ED staff, and to delay transfer to ward by inpatient units until imaging/pathology completed in ED? ©2011 Confidential Draft Discussion Document14

15. The Health Roundtable Queries about the Queensland Funding Model  “Outpatient services are defined as occasions of service with a clinician via a booked appointment”, including pathology and imaging costs  How can related pathology and imaging costs be measured against specific outpatients or outpatient clinics when there is no outpatient record-keeping at the patient level? ©2011 Confidential Draft Discussion Document15

16. The Health Roundtable Queries about the Queensland Funding Model  Four payment components to each DRG based on length of stay  Short stay outliers (10 th percentile)  Inliers  Long stay outliers (95 th percentile)  Extra long-stay outliers (98 th percentile)  Perverse incentives to hold patients to reach inlier trim point due to trimming formula  Example: Hip replacement I03B low trim point = 4 days  Payment $19,852 if 4 days. Lose $4963 if 3 days. ©2011 Confidential Draft Discussion Document16

17. The Health Roundtable Suggested Work Plan to December 1. Understand purchaser’s scope – what’s in? Out? 2. Unbundle financing and activities 3. Develop operational plans for each activity 4. Track revenue and expense per activity 5. Reconcile actual with expected payments Compare results with other hospitals at each step ©2011 Confidential Draft Discussion Document17

18. The Health Roundtable Today’s Agenda ©2011 Confidential Draft Discussion Document18

19. The Health Roundtable Workshop #1 -- Unbundling  What questions/issues do you have with the current draft of the ABF operating manual?  What activities that you perform do not appear to be covered in the funding model? ©2011 Confidential Draft Discussion Document19

20. The Health Roundtable Workshop #2 -- Operational Planning Model  Concept overview  Cardiology Simulation  Suggested improvements ©2011 Confidential Draft Discussion Document20

21. The Health Roundtable Operational Planning Tool Queensland Chapter Meeting 21 July 2011 ©2011 Confidential Draft Discussion Document 21

22. The Health Roundtable ABF Planning Overview 1. Funder provides an overall inpatient activity target in Weighted Units and Dollars 2. Executive works with clinical leaders to develop an activity plan which:  Meets the target  Reflects likely demand growth  Matches skills available  Executive works with clinical leaders to develop capacity plans which  Fit within target funding  Fit within expected physical bed capacity ©2011 Confidential Draft Discussion Document22

23. The Health Roundtable Overall Planning Cycle ©2011 Confidential Draft Discussion Document23 Funding / Activity Targets Performance Plan Capacity Plans Expenditure Plan Within Funding ? No Yes Annual Operational Plan Capacity Plans Capacity & Staffing Plans

24. The Health Roundtable Basic Performance Plan ©2011 Confidential Draft Discussion Document24 Activity DRG Specialty Hospital EagleCardiologyChest Pain Episodes Days Unstable Angina Episodes Days Obstetrics Vaginal Delivery Episodes Days

25. The Health Roundtable Capacity Plans for Each Service to Support Performance ©2011 Confidential Draft Discussion Document25 Bed Days Theatre Minutes CT Scans Allied Health Interventions Pathology Tests

26. The Health Roundtable Performance Plan Summary Workbook ©2011 Confidential Draft Discussion Document26

27. The Health Roundtable Illustration: Cardiology Unit Summary ©2011 Confidential Draft Discussion Document27 Last year’s actuals for Cardiology This year’s target set by Executive

28. The Health Roundtable Worksheet to Plan up to 20 DRGs per Unit ©2011 Confidential Draft Discussion Document28

29. The Health Roundtable Adjust Episode Volume to Reach Activity Target ©2011 Confidential Draft Discussion Document29 “Slider Bar” for expected activity

30. The Health Roundtable Each DRG has link to Health Roundtable Benchmarks ©2011 Confidential Draft Discussion Document30 Use Roundtable Benchmarks to Understand Improvement Potential

31. The Health Roundtable Clinical Units Develop Their LOS plans for Top 20 DRGs ©2011 Confidential Draft Discussion Document31 Use Slider Bar to Plan LOS for each of top 20 DRGs

32. The Health Roundtable Goal is to Adjust Activity To Meet the Targets ©2011 Confidential Draft Discussion Document32 Adjust Planned Episodes and ALOS to reach Overall Targets

33. The Health Roundtable Result: Performance Plan for Each Major Clinical Unit ©2011 Confidential Draft Discussion Document33 ONCE OVERALL PLAN APPROVED, DEVELOP THE DETAILS Weekly Plan (Electives and Emergency Episodes, Seasonality) Ward Allocation ( Co-morbidity, Likely Gender Mix) Clinical Staffing Plan ( Workloads, Leave Schedules)

34. The Health Roundtable Other Plans Follow Performance Plan ©2011 Confidential Draft Discussion Document34 Annual Operational Plan Funding / Activity Targets Performance Plan Capacity Plans Expenditure Plan Within Funding ? No Yes Capacity Plans Capacity & Staffing Plans Annual Operational Plan

35. The Health Roundtable Suggested Next Steps  Try out the planning tool  Get your feedback  If interested, we will load your historical data (with Queensland Weighted Units, if available)  Provide tutoring on the use of the tool  Encourage sharing of other tools and planning approaches in use in Queensland ©2011 Confidential Draft Discussion Document35

36. The Health Roundtable Action planning  In your hospital teams –  Identify your next steps to prepare  Identify assistance required from colleagues  Identify assistance required from Health Roundtable ©2011 Confidential Draft Discussion Document36

37. Will the world end with the introduction of ABF ? No ABF provides a great opportunity for improved services to patients Yes Will the World, as we know it change,with the introduction of ABF ?

38. The Health Roundtable 1. Understand the Purchaser’s Scope The purchaser will only pay for their very precise scope of work It is essential that a provider understands what activities are In Scope and consequently paid for It is essential that a provider understands what activities are Not in Scope and consequently are not paid for

39. The Health Roundtable 2. Unbundle the hospital’s finance and activities… Expenditure (A,B,C) Finance (A,B,C) Activity ( A,B,C ) Poor Good Expenditure C Expenditure B Expenditure A Finance (A) Finance (B) Finance (C) Activity (C) Activity (B) Activity (A)

40. The Health Roundtable Historical Cardiac Surgery 1 Cost Centre Unbundled 2Unbundled 1 Professional Activities Acute Inpatients Acute Outpatients Rehabilitation Teaching Training Research Investigational 38 Cost Centre38 Operational Plans Operational Planning 3. Develop operational plans for each activity to match funded activities Plan the Work Work the Plan Manage the Variances

41. The Health Roundtable 41 4. Unbundle the hospital’s finance and activities, down to the lowest level…

42. The Health Roundtable Activity A Acute Activity B Mental Activity C Aged Finance Expenditure Surplus/Deficit 5. Track the revenue and expense for each activity Output Pricing Model A Output Pricing Model B Output Pricing Model C

43. The Health Roundtable 6. Reconcile actual and expected payments for each activity A realisation that Cash ($$$) = F n (coded transactions) Daily, Weekly & Monthly Coded Performance reports to Units are required Clinical Units must check coding weekly, Coding Audits Forecast cash revenue weekly, monthly and yearly Ability to replicate all Government Reports Transmit to Department and Hospital Dept Calculates Cash Payment Allocate Revenue to appropriate GL a/c Reconcile Oops! Hospital Calculates Revenue Hospital Allocates Revenue to appropriate GL a/c Hospital Calculates Cash Payment Patient Dept Calculates Revenue Coded Episode Medical Record Cash to Bank

44. The Health Roundtable 7. U nderstand the cost dynamics of your Hospital Essential It is absolutely vital, that the unique cost dynamics of a Hospital are understood, measured and acted upon Data collection and reporting must be fit for purpose – both at the organisation and funder level Example : St Elsewhere

45. The Health Roundtable St Elsewhere...1

46. The Health Roundtable St Elsewhere...2

47. The Health Roundtable St Elsewhere...3

48. The Health Roundtable Role 1 The Patient Advocate / The Case Manager Controller of service utilisation The person who buys, requests, orders all services on the patients behalf Role 2 Departmental Member A specific service provider A member of a department delivering services to a patient The price of all services is determined by the Department The quantity / usage of services is determined by The Patient Advocate Initially the potential big $ savings are in the price of Departmental Products and in Bed Utilisation Essential to Understand 8. Understand that a clinician has 2 roles

49. The Health Roundtable 9. Use ABF to build a major management tool  Given that all outputs now have a price, with a sound costing system, it is possible to determine profitability (or loss) by clinician DRG Unit Service Division Facility Funding stream  This management information enables the organisation to be tuned

50. The Health Roundtable DepartmentsPrice Variation Clinicians Quantity Variation Utilisation 10. Use Standard Costing to highlight variance from plan

51. The Health Roundtable 11. Compare results with other health services to identify improvement opportunities

52. The Health Roundtable Cost Benchmarking…

53. The Health Roundtable Average cost of DRG Family G07: Appendicectomy ranges from almost $9,000 at Gemma to $2,700 at Achilles 3

54. The Health Roundtable Episodes with Complications of Care are more costly, and should drive internal improvement efforts

55. The Health Roundtable The Stages to improve readiness for ABF Recognise that ABF is just a point on a journey. It is not a destination. Advisor : Do not reinvent the wheel Link to a coach /advisor / mentor with significant experience Essential Personnel per Hospital An experienced,world class Management Accountant (1 FTE) Coding Capability (Good and Sufficient ) Excellent Performance Analysis capability (1FTE) Excellent Case Mix Modelling capability (1FTE) Excellent Costing System capability (1+1 FTE) Tasks Understand Purchasers Scope Unbundle Activities,financing and expenditure - A big big task Understand the Purchasers Funding Model -

56. The Health Roundtable Contacts David.Dean@healthroundtable.org Peter.Reeves@healthroundtable.org Tel: +61 2 9440 2016 Questions ?

57. The Health Roundtable Output Pricing Fundamentals … Digital Data DRGW= 14.8 $62,160 Provider Products &Services Purchaser $ $9.00 Price setter

58. The Health Roundtable  Output Pricing =Activity Based Funding (ABF)=Casemix =Output based funding ≠ Historical funding  Financing is based on outputs not inputs  Acute Outputs are measured generically in terms of DRG Weights  The purchaser may determine what they will buy and sets the price they will pay for a coded transaction Examples :Price per Bypass Operation Chest x-ray for outpatients Registrar in training Price per normal birth Laparoscopic Cholecystectomy W/O Closed CDE W/O Cat or Sev CC Output Pricing Fundamentals …

59. The Health Roundtable 3.Thou shalt learn to count and code episodes accurately for this determines your financing Count everything Record everything Code appropriately Medical Record for one Patient

60. The Health Roundtable Accuracy Essential at Each Stage  90% Conditions noticed  90% Documented  90% Interpreted  90% Entered correctly = only 66% accuracy Result: Garbage in – Garbage out

61. The Health Roundtable Monthly performance Reports 1

62. The Health Roundtable Monthly performance Reports 2

63. The Health Roundtable Monthly performance Reports 3

64. The Health Roundtable Monthly performance Reports 4

65. Standard Monthly Report from those accountable for delivery of the performance Plan

66. The Health Roundtable 8. Thou shalt understand that ABF provides the capability to build a major management tool…  Given that all outputs now have a price, with a sound costing system, it is possible to determine profitability (or loss) by clinician DRG Unit Service Division Facility Funding stream  This management information enables the organisation to be tuned

67. The Health Roundtable  Costing is not an essential element of ABF systems.  Given that all outputs now have a price, with a modern costing system,it is possible to determine profitability (or loss) by clinician DRG Unit Service Division Facility Funding stream  A sound costing system combined with output pricing, provides a tool to significantly improve organisational transparency  Cross subsidisation can be made visible

68. The Health Roundtable 9. Thou shalt undertake strategic cost reduction projects … Align bed days and wards to the Performance Plan Address the Long Stay Patients issue Benchmark Departments Reduce the cost of Departmental services Etc As Costs /waste decreases, Quality in general increases

69. The Health Roundtable 10. Thou shalt understand the Cash Flow System A realisation that Cash ($$$) = F n (coded transactions) Daily, Weekly & Monthly Coded Performance reports to Units are required Clinical Units must check coding weekly, Coding Audits Forecast cash revenue weekly, monthly and yearly Ability to replicate all Government Reports Allocate Revenue to appropriate GL a/c Reconcile Oops! Hospital Calculates Revenue Hospital Allocates Revenue to appropriate GL a/c Hospital Calculates Cash Payment Transmit to Department and Hospital Dept Calculates Cash Payment Patient Dept Calculates Revenue Coded Episode Medical Record Cash to Bank

70. Will the world end with the introduction of ABF ? No Yes Will the World, as we know it change,with the introduction of ABF ?

71. The Health Roundtable Contacts david.dean@healthroundtable.org bill.kricker@healthroundtable.org Tel: +61 2 9440 2016 ©2011 Confidential Draft Discussion Document71 Questions ?