Department of Health

What the Royal Commission said

The Royal Commission called for a greater variety and diversity of services to be funded, including by supporting new providers and provider partnerships.

Providers and partnerships will operate under new service standards and funding models which encourage providers to achieve greater value for Victorians, by responding to the individual needs of consumers.

Specifically, the Royal Commission recommended that the Victorian Government:

  • build on Recommendation 8 of the Commission's Interim Report, regarding a new approach to mental health investment
  • empower Regional Health and Wellbeing Boards to use the new service standards developed by the Royal Commission to select providers and partnerships for the delivery of mental health and wellbeing services
  • support the development of new and existing providers to meet the long-term ambition of the new service standards.

The Royal Commission also recommended the development of new ways of funding providers that encourage the provision of mental health and wellbeing services that consumers, families, carers and supporters value and result in an equitable allocation of resources.

What are the opportunities?

The Royal Commission acknowledged community concern that current funding arrangements for mental health services do not adequately cover demand, are inequitable in the distribution of resources, and do not reflect local needs.

The Royal Commission called for rethinking of the way mental health and wellbeing service funding is distributed, including by shifting the focus of current funding arrangements on the 'inputs' provided - such as operating costs - to the 'value' or outcomes delivered to consumers.

This is to be achieved by:

  • trialling then implementing an activity-based funding model for both bed-based and community-based mental health and wellbeing services.
  • working with the Collaborative Centre for Mental Health and Wellbeing to develop and implement an approach to bundling funding into one price for an evidence-informed pathway that is linked to improving outcomes.
  • developing and trialling a capitation funding model that provides a tailored package for consumers, families, carers and supporters.

A range of tools, resources and supports can also be made available by the department and Regional Boards for the further development of providers and their workforces, such as collaborative and participatory learning platforms to share knowledge and experience.

What are we doing?

The Royal Commission acknowledged the work already underway in the department to develop an activity-based funding model, beginning with a model for adult community mental health services.

This work will provide a foundation for the development and trialling of activity-based funding models for other age groups and service settings, including inpatient and residential care.

As this work progresses, each model will be trialled by calculating the funding provided to each service and comparing it to the funding received under existing funding arrangements ('shadow funding' the model). This trial period will assist services to refine their information management systems to ensure they are able to receive their full funding entitlement under the activity-based model.

By funding service activity according to the level, type and cost of the care needs of consumers, the essential ingredients of future bundled and capitation funding models will also be captured.

The outcomes of care provided can also be identified in the activity-based funding models being developed in Victoria. This will provide invaluable information to the new Collaborative Centre for Mental Health and Wellbeing on the value and cost-effectiveness of the care provided by mental health and wellbeing services.

Reviewed 17 March 2022

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