MICHAEL LAMBERT. The Productivity Commission on Improving Productivity and Health Reform PART 2 OF 2.

Dec 1, 2017

In part 1 yesterday, I outlined the five key areas or themes where the Productivity Commission believes that reform is essential and would deliver major benefits to individuals, the community and the economy. These five themes are summarised below.  

Improved Integration of Health Care

There is poor coordination between and within primary care and secondary care and poor to non- existent multi -disciplinary management of persons with multiple chronic diseases. One telling example of poor primary to secondary coordination cited in the report is that less than 20% of Australian GPs were informed when a patient was seen in an emergency department of a hospital, much lower than in the UK, Europe or New Zealand. This should not be the case as there has been recent progress on creating regional health structures: Primary Health Networks (PHN) to coordinate primary care in regions and Local Health Networks (LHN) to coordinate State funded hospital care. In the mission of these organisations is the goal of working to effectively coordinate between primary and secondary care.

There are some tentative signs of progress in the area of integration of care. The Commonwealth has begun trialling an approach to coordinate health care for patients with multiple chronic conditions called Health Care Homes whereby the GP acts as a health care navigator and coordinator to assist patients develop and then implement a care plan. This is only at a very early stage, being trailed in a number of locations and does not apply on a preventive basis to those at risk of developing multiple chronic conditions. Furthermore it does not involve the LHNs.

The Commission proposes that the States/Territories and the Commonwealth establish a formal collaborative model between PHNs and LHNs across the country which includes measures of performance in integrating care and achieving improved health outcomes. In addition, at a more specific level, the Commission proposes the outline of a model to focus on and fund both chronic condition prevention and management. There is a clear benefit for LHDs to seek a reduction in chronic conditions that present at hospitals. The proposal is for States and Territories to establish a fund in each local health district dedicated to both chronic care prevention and management and for the relevant LHD to work in full collaboration with the relevant PHN to determine the most effective way to use the funding. It should be noted that this will require Commonwealth regulatory change as public hospitals are at present precluded from funding GPs.

Improved health funding models aligned with high value care

Fee for service is the dominant funding/payment model for primary care and similarly public (and effectively private hospitals) are funded on the basis of activity at a standard efficient cost. However while this approach pays for activity it does not directly address health outcomes and does not reward successful efforts at prevention. In fact successful prevention is subject to a penalty in the form of lower revenue.

Private health insurer’s premiums are set on a community rating basis, which while equitable, reduces the incentive for private insurers to engage in funding chronic condition prevention.

There are also many medical procedures that are undertaken with no established clinical evidence of effectiveness.

One of the approaches to address these problems was identified above with respect to chronic condition and care funds being established at a regional level. The Commission also proposes a number of other funding reforms directed at improving quality of care and encouraging chronic condition prevention, these being:

  • Adopting a mixed funding model in primary care, maintaining fee for service as the major funding mechanism but combining this with a risk adjusted capitation payment for GPs that would be intended to fund population health including prevention. This would be coordinated by the PHNs
  • Changing legislation to allow LHNs to fund GPs directly, once again in concert with the PHNs
  • Expanding the Commonwealth trial of Health Care Homes to include the full involvement of the relevant LHNs and to provide funding directed at treating people at clear risk of multiple chronic conditions who have not yet acquired the conditions and giving greater flexibility for LHNs and PHNs to design the appropriate form of integrated care.
  • Putting in place a mechanism for private health insurers to fund prevention with the benefits either quarantined from equalisation amongst the insurers or encouraging a coordinated and cooperative approach by private health insurers.

Improved Quality of Care

At present hospitals are funded on an activity basis and that can include funding hospital acquired complications and procedures which have little or no clinical benefits. In the UK there is a mechanism in place to not fund hospital acquired conditions which exceed a reasonable level and an active program of assessing medical interventions for effectiveness associated with establishing clinical standards that must be adhered to and “do not do “lists of procedures which are not to be undertaken as they are assessed as ineffective .

The Commission recommends adopting a similar approach to that employed in the UK and in addition recommends removing the tax rebate for private health insurance coverage of ancillary services on the basis that they have no proven health efficacy.

Patient Centred Approach

The Commission recommends the explicit commitment to a patient centred approach which requires not just paying lip service to the principle but giving emphasis to the needs of patients and giving patients the information and power to be a “co-contributor” to treatments and disease management.

The Commission identifies a number of steps that could assist in putting this approach into place, these being:

  • Putting in place measures that capture the patient’s assessment of the health episode. There have been developed in various countries and there are now international standards for such measures for each category of clinical intervention. These are called Patient Reported Outcome Measures (PROM) and Patient Reported Experience Measures (PREM), which are integrated into the relevant disease registers, used actively as measures to assess clinical interventions and provide feedback to clinicians and hospitals. NSW is developing such measures to trial them in the public hospital system.
  • Actively seeking to improve health literacy of the population in order to assist people to self-manage chronic conditions through such actions as improved diet and physical activity.
  • Building into the education and training of health professionals the philosophy and practical approach of patient centred care.
  • Identifying and giving greater focus to high users of the health system, seeking to address the underlying causal problem if possible rather than treating each intervention independently.

Improved Use of Information and Technology

The Commission has recently undertaken a major review of access and use of data and noted that the OECD assesses Australia as relatively poor in collecting and particularly linking administrative data. In the health area there is a poor linkage of different data sets and there is a poor flow of information from hospitals to the treating GPs.

The Commission proposes the adoption of its recommendation from the report on data of the establishment of an Office of National Data Custodian which would develop in concert with the health sector   a system for comprehensively identifying and integrating data in both the primary and secondary health areas and the adoption of an e Health information system. The report also suggests s that the My Health Record initiative of the Commonwealth could be extended to not just be a record of patient treatment but also a means of providing in a highly convenient way advice to patients such as reminders about vaccinations, taking medications and tests as well as checking on progress on care plans.

In the area of technology the report has suggested courageous action by the Commonwealth in the area of pharmaceutical dispensing. Pharmacies are well protected legislatively in terms of their role and from competition despite the fact that most of their activities and revenue relate to a more general retail function and that technology is available to transform the prescription dispensing function. The report proposes changes in regulation to allow for machine dispensing of prescriptions under suitable supervision. It notes that such an approach would have a substantial impact on the employment of pharmacists and hence on the level of training of pharmacists in the future., given that the supervisors of dispensing machines would not need to be pharmacists. The role of pharmacists would be transformed into being a part of the community health team and not part of a retail function. It would be significantly more rewarding in an intrinsic sense and be more effective for population health but would involve a large reduction in the level of employment of pharmacists.

The report assesses the total social and economic benefits if the health reforms proposed in the report were adopted and assesses it as having an annual benefit by year 20 of $38billion and a net present value benefit of $140billion. This does not reflect simply savings on health expenditure but more importantly improved health outcomes and the prevention over time of chronic diseases.

The Commission is to be commended on its strategic approach to improving productivity in the Australian economy and improving the quality of life and productivity of the community. The identification of the deficiencies in the health sector and the reform proposals appear correct, though   there would be benefit in a more fundamental reform of the Commonwealth and State roles in the health sector involving joint funding by the Commonwealth and the States of both primary and secondary care and thus a clear alignment of roles and responsibilities of both levels of government. This would be a challenging reform as it would require a major revamp of funding powers between the two levels of government.

It is also suggested that while the matters are covered in part in the report, it would be helpful to explicitly add two further reform themes, these being:

  • Enhanced accountability for improved health outcomes
  • Coordinated and effective prevention of chronic diseases

By having an explicit theme covering these two areas, a more coordinated approach to achieving these objectives will be encouraged.

With respect to accountability, there are various dimensions of accountability including financial, legal, compliance, regulatory and to owners, be they governments or private sector shareholders. However, the one dimension of accountability that needs more focus in the health sector is accountability for improved health outcomes. This form of accountability is in place to some extent in the public hospital system but it is not in place in the private hospital area, the primary health sector or with private health insurance.

The second theme of prevention of chronic diseases needs a mindset, incentives and funding that extends the health system beyond that of treatment of chronic conditions to the prevention of such conditions and involves a whole of government approach including town planning, education, housing and education. This requires a national commitment by both the Commonwealth and the States and Territories, a set of targets to be achieved over time, a series of interventions and monitoring of performance against the targets and ongoing research on the most effective interventions.

Michael Lambert is a former Secretary of NSW Treasury and a director and senior adviser on health economics at the Sax Institute, a not for profit organisation that seeks to connect health research with health policy and programs to enhance population health.

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