Department of Health

Funding Models Forum 2017 - Department of Veterans' Affairs

  • 18 October 2017
  • Duration: 21:17
  • Just to throw you off again I'll change the topic again to DVA. This is probably the last of the three presentations which have got the most amount of changes. So I'll cover after this slide deck ED, admitted subacute and any other funding model change that you want to talk about, so this is an opportunity for everybody online as well as in the room to question and also inquire about how the department is approached all its other funding models that have occurred as part of the 2017-18 budget. So in terms of Department of Veterans Affairs this very long process Ben can agree being part of it. This all began in May 2014 when the Commonwealth Minister for Department of Veterans Affairs wrote to the department and all the other jurisdictions seeking to implement a consistent purchasing arrangement for all care provided to veterans and that this would be based on the independent Hospital pricing authorities annual determination, took us about three years, just under three years in February 2017 we finally signed an agreement I'm not even clear that every state has signed an agreement but at least Victoria has, which brings this new arrangement into effect. We haven't adjusted anything retrospectively but the new arrangements apply from  1July 2017 until the end of the current contract which could be another 2 or so years. Under the key change and the new agreement is we've gone from agreement where DVA has funded us block plus variable using the Victorian funding  models, so we had the benefit of availability being paid as well as the throughput under the new agreement it's purely based on the national funding model which is a hundred percent activity there is no available availability funding provided under this model so there's no fixed grants. In addition funds are only provided on approved reported throughput so anything that's reported through the VAED all the other data collections and then is rejected by DVA, the department foots the bill DVA will not pay even though this is after we reconcile with the Commonwealth, they're effectively Commonwealth doesn't pay because it defaults a public activity and DVA doesn't apply because it's ineligible and we foot for 100% in the bill and so we've had a few challenges in determining how we best approach this to give you budget certainty as well as making sure that neither the department or health services are unintentionally exposed.

    So the way that the national funding model if you ever wanted to check my calculations to see whether or not the fund, the block funds which I've given to you are correct, I have this is the way the DVA will fund us so for admitted acute based on DRGs and the sources of the VA ED. the ED component for patients admitted through the ED and this is based on URG's or urgency disposition groups which is diagnosis triage and diagnosis triage disposition and the sources of the VMED, patients who are admitted and discharged home, so they don't go through the short stay unit or don't go through a ward they're based on again URG's and the source is the VMED and admitted sub-acute patients are based on AN-SNAP similar to a subacute WIES and the source is the VAED nursing home type which is apply to only a few local rural health services, based on AN-SNAP, the source is the VAED. For non-admitted acute based on tier two but not the WASE model source is the  S10 aggregate collection Non-admitted subacute based on tier two but not the WASE model again and the source is S11. Admitted mental health based on DRGs not on available bed day, not other any metric and the source is the VAED and not admitted mental health is based on the total number of contacts as a proportion of total public total activity in the state and is multiple sources. As you can see all DVA's contribution to the state which has been fully passed on to health services is entirely linked to activity datasets and so my first plea to everybody in the room as well as online is please ensure that you're accurately reporting the data that goes to each data set so that we maximize the benefit payable to the state which then you receive and we minimize any shortfall which also impact your budget year on year.

    So when we reviewed the agreement we decided we had two options, the first option do we implement the national model as described on that previous page which many of you will probably don't know what an n-well is the other alternative is to implement a local version which means that the department effectively operates as a foreign exchange in a whereby we receive funding based on the national weighted activity unit and we pay out in a different currency and the latter is what we decided to do. In addition the commonwealth price the DVA is paid has been, is being held at 5007 so to give you a bit of perspective the national price in 12/13 was 4483, in 2017/18 it's 4971. If we were to adopt the national model you probably would have happened at less than point zero five percent indexation year on year. Instead we've decided to keep in the local model index, index the price based on what's applied to all the other service streams to make sure that you've got an adequate and stable funding Base in so what we've done is, this is the approach that I've applied this year in developing a budget so for admitted acute we're still using WIES and when using the WIES DVA line. The ED component of patients admitted through the ED and subsequently go to a ward or ward equivalent including the short stay we're funding it through the WIES again DVA, because the WIES model bundles the ED component will be developing the cost weights but not admitted ED patients who don't get admitted and go home after their treatment it's funded by a non-admitted DVA ED grant. For admitted sub-acute including nursing home type, we're funding it through sub-acute WIES DVA line for non-admitted acute, non-admitted sub-acute we're funding it through two blocker outlines one being acute specialist clinics DVA and the other called health independence program DVA. For admitted mental health it's incorporated in the available bed day price, so there's no separate target, no separate payment for DVA's, it's all wrapped up into that single price. Likewise for not admitted mental health it's wrapped up into the other contact targets, so there's no differential, will if you do less or doing more you still get the same amount. so the only three service streams that will be two service streams that will be paid based on activity will be true activity and reconciled to actuals at the end of the year will be WIES and subacute WIES all the others are more or less a block grant to give you budget sustainability stability and we'll manage any over or  underpayment from the Department of Veterans Affairs.

    So the way that I approach the admitted acute, was again we use the same WIES24 parameters as we do for our PPWIES we've still got a Department of Veterans Affairs specific price which is a premium, to the normal WIES price. Payment is based on actual throughput and services are also able to build DVA for other costs such as medical and diagnostic costs. the way that the model budget has been set is we took a snapshot of your March to February activity when we developed the budgets in April and in May that's the latest data that's been reconciled that's the best available, that's what we use we then apply a decline factor which is about 10% because these patients are getting older, they are dying off, there's a smaller population and then what we do is we work out how much target we've got from DVA, and we'll give you a share, sometimes that'll be more than what your throughput will be sometimes it will be less, but again it's reconciled at the end in the year because it's paid to actuals.

    But we try to get it as accurate as possible to minimize any variation in cash at the end of the year. For subacute, we do the same thing we apply the subacute WIES 2 parameters it's based on improve throughput again you can bill DVA for any medical and diagnostic costs and we apply the same approach the 12 month snapshot is being used, the client factor is then used and then you receive a portion of the available targets that we've got based on your share of total activity in the system or our predicted activity.

    The key changes that we put in, so in the case, one of the key changes that you'll need to be aware of is in 16-17 we've given you the benefit of doubt we've paid claims potentially when they've been rejected and we converted to public WIES or public sub-acute WIES in 17-18, health services are required to make sure that anything reported to the VAED prior to consolidation is an approved claim if they're not an approved claim they need to be converted back to public activity in order you order for those patients be recognized as public activity. In prior years we did the conversion for you in 17-18 and beyond, health services need to do it however there will be a window where there are patients where they're unknown because DVA haven't got back to it in those cases we'll pay you the benefit, but where there's a decision made by DVA a for example the first eight months of the year we're expecting services to update the VAED accordingly because then that gives you an appropriate payment because you'll get the declined patients aspublic, it also meant the department will get a revenue source that we can support, continuing to support budgets with because a Commonwealth paying a contribution to us. For emergency departments this year you would have seen a new grant called non-admitted emergency department DVA  or something by that name introduced and the way that we did it was based on looking your activity reported in the VMED, we then took that activity assigned it a URG based on the triage and diagnosis because these are all not admitted patients, applied the upper weight and then we worked out a proportion of total weighted activity so Health Service A might do 10 % Health service B 5 % etc., then what we did was then we worked out what the total revenue was going to be we then declined the total revenue based on expected population decline and then we applied the proportion, your proportion of weighted activity amounts to the available funds and that amount becomes what you got against that new specified grant. We're not going to reconcile so if you do more patients during the year you won't get paid more, if you do less we're not going to recall anything. It's to give you budget stability because EDs are around availability and so we're not at this point in time changing the ED grant to throughput some services have asked it but I'll leave that to you to give us feedback on whether or not DVA for ED outpatients, subacute should move to the activity. I'll leave that for you to feedback at the end of this session.

    For not admitted care so there is an acute specialist clinics DVA grant that was again introduced, the way that we have calculated a grant is very similar to the way that we've done it for the ED model, we've taken all the activity reported to the S10, we've excluded all the activity that's funded by another funding model WOWS, radiotherapy is funded by the WOW model, home renal that's provided to veterans is funded by the home renal targets, that they've all been excluded we then apply the Tier 2 classification system and the associated weights on the data and work out a proportion of weighted activity for each Health Service. We then work out what revenue based on that activity will generate using the national model we'll decline it based on the population decline factor and then give you a proportionate share like the ED grant. We will give it it's a block grant, there's no recall applied. Likewise for a non-admitted sub-acute we've used the S11 form rather than S10, gone through the same procedure and giving you a grant, unfortunately I did the mistake of recycling a grant called the Health Independence Program DVA, in hindsight I should have created a grant called Non Admitted Sub Acute DVA for clarity because HIPS only a proportion of total sub-acute activity, but that HIP DVA line represents all the sub-acute activity reported to the S11 but provided to veterans that we think you are going to provide and we're giving you a grant to support that. Most of you would have seen a decline in contrast the ED and non-admitted where there would have been an increase, what we found is that the revenue, or the revenue associated with non-admitted sub-acute has drastically decreased, so I'm not sure whether or not this is driven by activity reporting, because it's very low activity for the amount of revenue that we're paying out and so what we did this year was reduced the total available funding pool to what DVA paid. In next year if activity is properly reported and we get more funding the grants will increase but you self-calibrate based on the level of reported activity and consequently how much revenue we get from DVA, that's how those three grants will work and we will revise the approach next year, subject to your feedback, but at this stage we're not anticipating to move to 100% activity based model for a non-admitted ED outpatients or non-admitted subacute just because of the complexities associated.

    I think there's more cost to it than benefit Radiotherapy no change, so you'll be continued to be paid against the WOW DVA targets and you still be can able to raise MBS charge, as described in the PFG. Admitted and not admitted mental health there will be no specific grant line for this and so what we've done is if you've if you look at your admitted mental health ED day model grants these have all been rationalized either into their transitional grant or into the bed day price and so we didn't want to send out a signal that would incentivize or disincentivise particular cohort in mental health it should be based on clinical need, it should be based on the demands and so what we did was we embedded all DVA funding related to veterans into the existing bed day model. Nobody is worse off and so that's why you don't see any specific line for non-admitted or admitted mental health. But we still would like services to accurately report because what your report drives our revenue, so our revenue that we subsequently allocate as part of the ten billion dollar budget is based on your reporting. So that's the end of the presentation about DVA, I'll open it to questions if you've got any questions.

    Always good to have a question.

    I just want to know all this Commonwealth funding that we get how do we know that we're getting our fair share of it.

    I think it's all published in the National...

    I was going to say Victoria doesn't think we get our fair share any either but you know at a hospital level...

    Sorry at a hospital level I mean if you want to know how much you're getting it's quite easy I mean you look at what we published in the policy funding guidelines eleven billion dollars the Commonwealth's share is around four point nine billion so the state's still topping up more than half at the moment so there's always it's growing every year you can see the step up, you can see the contributions growing. We're not taking it what and it flows directly to you because under the national health reform agreement arrangements the commonwealth money flows directly to you, we top up to your budgets, so in effect all the commonwealth money's going to you we're not taking any.

    She doesn't trust us, those dodgy bureaucrats down at the front of the room, no the reality is from a Commonwealth funding perspective I mean with the national health reform agreement and the way that that works in terms of the national efficient price and the way that the growth is allocated in terms of what our percentage is, so Commonwealth contribution to growth at forty five percentage of growth then actually through the administrator and the payment system that actually flows to the hospital directly and then as Phuong said, we make the payment from our state perspective, now in other jurisdictions they've moved away from local model and just applied the national efficient model you know in terms of the price and it state average and all those things are they talk in N-WOW language as Phuong rightly put it we do a currency conversion from N-WOW to WIES because people are familiar with that activity in Victoria but actually the N-WOW basis is flowed directly to your hospital bank accounts as and then we top up the budget from a state perspective, so you're getting your share of reported activity, so again in the model and I have to be cautious about this because this year is the first six and a half percent cap that the Commonwealth are putting on activity growth, but in the models previously up to now the more activity the state's report, obviously the more the contribution from the Commonwealth. Now with the cap in place we as a state have to manage that financial risk as well so if we breach the cap in terms of activity growth keep in mind all activity, not just inpatient activity, all activity, then the state bears a hundred percent of the cost of anything over and above that cap so obviously we're trying to ensure that you're getting funded appropriately without incentivizing way too much growth in the system. Because we will bear full brunt of that cost and the Commonwealth contribution will be zero. State finances, if anyone's seen ever that graph that looks like state health finances state budget at some point typically in that graph they cross guess what health consumes the whole of the state budget we were already you know I think third of the state budget already in healthcare so, so part of the management for ours is actually trying to manage that growth activity so from your point of view revenue is good from our point of view Commonwealth revenue is great, to a point, and then we have to be careful about whether or not we can sustain it going forward. I don't know about you but I'm getting older I'd like our hospitals to be able to deliver good care, as I get older and if we are financially unsustainable we're in all sorts of manure, to be quite blunt, with that so I think that's part of the challenge. So yeah you can say that and then see it I think N-WOW is still in SOP, the version in the back of SOP.

    So what you think you will earn under the the national model it is in your part Ds they will come out shortly as soon as I finished the estimates and if you're multiplied by roughly the national efficient price and then apply an efficiency factor of about eighty five percent most you'll get an indication of what you would get under the national model.

    David um thanks Phuong I just had a question about you use the IPPA weight to do the adjustments, just wondering why you use the IPPA weight versus say you've got local cost data and local weights you could develop for DVA patients in those programs just wondering if you considered using those and what the implication may be?

    So I used the DVA weights so yeah the  IPPA weights just for simplicity, we don't unless I burden Dan more and the team more and go can I have another set of weights for DVA small sample size volatility that comes to mind, we rather not and just stick with the national weights and it's a transparent approach, you know exactly you can verify our calculations rather than having another black box which we do these calculations and I do get it wrong, I don't want that to happen it's easy using the national model.

    And I think as Phuong said population size I think it's important as well. I don't think I've got any questions from the online crowd so we'll move are we moving Phuong? okay so we do plan to finish up I've got on the agenda here by 12.25 and then for me to do a quick wrap-up which will be super quick but we've got probably around about more 15 minutes for Phuong to get through the rest of what I might do Phuong is if you're happy to go through all of your stuff and then we'll leave maybe five or six minutes at the end.

Presentation from the Funding Models Forum, 17 August 2017.

Reviewed 18 October 2017

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