Current Funding and Financing Issues in the Australian Hospice and Palliative Care Sector

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1 68 Journal of Pain and Symptom Management Vol. 38 No. 1 July 2009 Special Article Current Funding and Financing Issues in the Australian Hospice and Palliative Care Sector Robert Gordon, MSc, Kathy Eagar, MA, PhD, FAFRM (Hon), David Currow, MPH, FRACP, and Janette Green, MStat Centre for Health Service Development (R.G., K.E., J.G.), University of Wollongong, Wollongong, New South Wales; and Department of Palliative and Supportive Services (D.C.), Flinders University, Daw Park, South Australia, Australia Abstract This article overviews current funding and financing issues in the Australian hospice and palliative care sector. Within Australia, the major responsibilities for managing the health care system are shared between two levels of government. Funding arrangements vary according to the type of care. The delivery of palliative care services is a State/Territory responsibility. Recently, almost all States/Territories have developed overarching frameworks to guide the development of palliative care policies, including funding and service delivery structures. Palliative care services in Australia comprise a mix of specialist providers, generalist providers, and support services in the public, nongovernment, and private sectors. The National Palliative Care Strategy is a joint strategy of the Commonwealth and States that commenced in 2002 and includes a number of major issues. Following a national study in 1996, the Australian National Subacute and Nonacute Patient (AN-SNAP) system was endorsed as the national casemix classification for subacute and nonacute care. Funding for palliative care services varies depending on the type of service and the setting in which it is provided. There is no national model for funding inpatient or community services, which is a State/Territory responsibility. A summary of funding arrangements is provided in this article. Palliative care continues to evolve at a rapid rate in Australia. Increasingly flexible evidence-based models of care delivery are emerging. This article argues that it will be critical for equally flexible funding and financing models to be developed. Furthermore, it is critical that palliative care patients can be identified, classified, and costed. Casemix classifications such as AN-SNAP represent an important starting point but further work is required. J Pain Symptom Manage 2009;38:68e74. Ó 2009 U.S. Cancer Pain Relief Committee. Published by Elsevier Inc. All rights reserved. Key Words Casemix, AN-SNAP, palliative care funding, classification Address correspondence to: Robert Gordon, MSc, Centre for Health Service Development, University of Wollongong, Wollongong NSW 2522, Australia. robg@uow.edu.au Accepted for publication: April 23, Ó 2009 U.S. Cancer Pain Relief Committee Published by Elsevier Inc. All rights reserved. Introduction This article overviews current funding and financing issues in the Australian hospice and palliative care sector. In context, Australia has a total population of 22,000,000 people and approximately 134,000 deaths annually of which /09/$esee front matter doi: /j.jpainsymman

2 Vol. 38 No. 1 July 2009 Palliative Care Funding in Australia 69 approximately one-half will be expected. Cancer is the most frequently encountered cause for expected deaths, with almost 40,000 deaths from the disease this year. Overall, more than 80% of people referred to specialist hospice and palliative care services will have cancer as the diagnosis, and more than 60% of all people with cancer will have such a referral. Organization and Financing of Health Care in Australia Within Australia, the major responsibilities for managing the health care system are shared between two levels of government. 1 The Australian Government, known as the Commonwealth, is responsible for overall policy and funds a range of national programs. The Commonwealth s major responsibility is Medicare, Australia s universal health insurance scheme, under which access to medical services, including primary and specialist care, inpatient private services, and pharmaceuticals are subsidized. 2 The Commonwealth is also responsible for the funding of residential aged care facilities and a limited number of community programs for people with chronic complex needs and the frail aged. The eight State/Territory governments play a dominant role in health delivery through Australia s 750 public hospital services and its multiple community health centers. 1 This sector is the most dominant in the perceptions of the health system in public debate. The Commonwealth holds primary revenue raising powers through the taxation system, which includes a specific Medicare levy. 3 Since 1988, a series of five-year Australian Health Care Agreements (ACHAs) have been negotiated between the two levels of government as the mechanism by which States/Territories receive most of the funding to deliver health services. Under these agreements, States/Territories have primary responsibility to determine how services will be structured and delivered. However, these agreements also include targeted funding for national policy initiatives. For example, the 1988 agreements included specific funding to allow the establishment of community-based palliative care services across the country for the first time, and special provisions for palliative care have been included in each subsequent quinquennial agreement. There are also approximately 250 private hospitals in Australia. These comprise religious not-for-profit, community not-for-profit, and for-profit facilities. Funding for private hospital services is derived from individuals who hold supplementary private health insurance, the Commonwealth Department of Veterans Affairs, third-party payers, and a person s own out-of-pocket contributions. 3 Given the place of palliative care in the Commonwealth/State/Territory agreements, there has been a concerted effort to ensure that hospice and palliative care services are available across the health systemdinpatient, outpatient, and community care. Such population coverage that has been built over the last 20 years will see more than 24,000 Australians provided with specialist hospice and palliative care service input. Funding of Health Care in Australia Funding arrangements vary according to the type of care. Private hospital and private community care are funded under various fee-forservice arrangements. Residential aged care is funded at different per diem rates based on the dependency level of the resident. In addition, a wide range of public and nongovernment community and home care services are funded under annual block grants. Although there are variations between the States/Territories, public hospital funding generally makes a distinction between acute and subacute care. Acute care is defined as treatment-driven primarily by the patient s medical diagnosis and is classified by diagnosisrelated groups (DRGs). Subacute care is defined as treatment driven primarily by the patient s functional status and quality of life and not the underlying medical diagnosis. All palliative care is classified as subacute, as are services such as rehabilitation. As such, they are not classified or funded by DRGs but are still funded through acute care formulae in most States/Territories. Organization and Delivery of Palliative Care Services in Australia The planning and delivery of palliative care services in Australia is a State/Territory

3 70 Gordon et al. Vol. 38 No. 1 July 2009 responsibility. During the last 10 years, almost all States/Territories have developed an overarching strategic plan or framework to guide the development of palliative care policies, including funding and service delivery structures. A key feature of these documents has been a recognition of the importance of comprehensive and integrated systems that offer patients choices about the type, location, and way in which palliative care services are delivered, while seeking to optimize continuity in care. Today, palliative care services in Australia comprise a mix of specialist providers, generalist providers, and support services in the public, nongovernment, and private sectors. Palliative care services are delivered through a combination of delivery modes. These are summarized in Table 1. The National Palliative Care Strategy The National Palliative Care Strategy is a joint strategy of the Commonwealth and the States/Territories that commenced in It was developed in conjunction with palliative care stakeholder groups, with the goal of developing palliative care policies and services consistently across Australia. 4 A key component of the strategy was a commitment of AU$188 million that was provided to State/Territory governments for palliative care services through the ACHAs (2003e 2008). An additional AU$55 million was injected from the 2002 federal budget through the National Palliative Care Program. This major initiative funded a range of activities, including palliative care research, the development of resource materials, community access to subsidized medications considered crucial to symptom control (the first patientdefined section of the national Pharmaceutical Benefits Schedule 5 ), respite care, and projects to improve understanding of palliative care in the community more broadly. This program also saw the establishment of the Palliative Care Outcomes Collaboration (PCOC), a national collaboration between four universities that has developed and is supporting a national benchmarking system that will contribute to improved and more uniform palliative care outcomes and quality of care. 6 Palliative Care Casemix Classification Developments in Australia The Australian Refined DRG (AR-DRG) classification has been used by all Australian States and Territories to classify acute episodes of care since the mid-1990s. Several States also Type Table 1 Profile of Palliative Care Services in Australia Description Designated hospice services Designated palliative care units in acute hospitals Designated palliative care units in subacute hospitals Nondesignated inpatient palliative care services in acute or subacute hospitals Ambulatory palliative care hospital services Specialist palliative care community services Primary care community-based services Mainly located in larger capital cities and typically ranging in size from 20 to 80 beds. Mainly located in capital and larger regional cities and typically between 6 and 20 beds. Most capital cities operate at least one major subacute hospital that provides a significant palliative care role. Typically, these services operate between 30 and 50 palliative care beds. In many rural and remote parts of Australia, these services represent the only hospital-based palliative care service and often have visiting specialist palliative care services. But many hospitals in urban areas also care for palliative care patients on acute wards, with most large hospitals having a designated palliative care consultation liaison team. These are provided in most states as part of a wider program of palliative care services. Patients may be referred from inpatient units or from the community. They typically provide medical, nursing, and some allied health therapies. Some also include bereavement counseling and support services for family and carers. Operate in all States and Territories with services provided by nursing, medical, and allied health staff. Operate in all States and Territories with services provided by general practitioners, generalist community nurses and, to a lesser extent, allied health staff.

4 Vol. 38 No. 1 July 2009 Palliative Care Funding in Australia 71 use the AR-DRG system as the primary mechanism for allocating funds for acute public hospital activity. In 1994, it was recognized nationally that DRGs were not appropriate for classifying subacute care. For this reason, the Commonwealth commissioned a study to develop a casemix classification that could be used to classify resource utilization and, therefore, provide funding models for subacute care. The outcome of this study was the Australian National Subacute and Nonacute Patient (AN-SNAP) classification. In 1996, AN-SNAP was endorsed as the national casemix classification for subacute and nonacute care. 7e10 The AN-SNAP classification was based on a study of 30,057 episodes of care (4530 palliative care) in 104 services in Australia and New Zealand. It comprises five case types, one of which is palliative care. The palliative case type contains 11 inpatient and 32 ambulatory palliative care classes. An average weighting for each class, broken down by various cost drivers, was calculated. Palliative care episodes are allocated to AN-SNAP classes based on palliative care phase, 11 Resource Utilization GroupsdActivities of Daily Living 12 scores, palliative care problem severity score, 11 and age. Version 2 of AN-SNAP was developed in and is now in use. As with other decisions about funding models for public hospitals and community health centers, decisions about the use of AN-SNAP rest with the eight State/Territory governments. Currently, five of the eight have routine data collection processes in place that enable inpatient palliative care episodes to be assigned to AN-SNAP casemix class but less have systems in place for community services. This information is used for clinical management, planning and, in some cases, funding of palliative care services. Costing of Palliative Care in Australia Most efforts to understand palliative care cost patterns in Australia occur through hospital and community health service casemix costing activities. In Australia, two types of casemix costing are routinely undertaken. 3 Cost modeling refers to a top-down process where cost estimates are produced at the level of the casemix class. In contrast, clinical or patient costing refers to a process where the cost of each patient episode of care is individually calculated. 14 Clinical costing systems are considerably more expensive as they require a significant investment in information technology and data collection. In recent years, several States have invested considerable resources in clinical costing systems across major metropolitan hospital networks. One outcome of this has been the capacity to produce patient level costs for palliative care patients treated in these facilities. For example, Queensland recently reported that its current per diem palliative care funding model has been derived from robust costing data that are responsive to changes in patterns of care, and it is easily adjusted if the current AN-SNAP classification system is changed. 15 The availability of this type of cost data represents a major advance in the overall capacity of the sector to cost palliative care services. For example, it provides an opportunity to update the cost relativities (weightings) between AN-SNAP classes. National work in this area is in progress. Funding of Palliative Care Services in Australia Responsibility for the funding of palliative care services in Australia varies depending on the type of service and the setting in which it is provided. Table 2 summarizes funding/payment arrangements for services typically used by palliative care patients. Funding for out-of-hospital medical (including primary care/family practitioners) and pharmaceutical services is covered under the national Medicare system. As such, they are accessed in a largely consistent manner across the country. Estimates on expenditure levels associated exclusively with palliative care services funded under Medicare are not readily accessible, as the Medicare Program s Medicare Benefits Scheme and Pharmaceutical Benefits Scheme do not separately identify payments associated with these services. There is no national model for the funding for inpatient hospital services. Funding for these services is a State/Territory responsibility. Table 3 provides a summary of the models used to fund inpatient services in each State/

5 72 Gordon et al. Vol. 38 No. 1 July 2009 Table 2 Funding Arrangements for Palliative Care Services in Australia Service Who Pays Method of Payment/Subsidy General practitioner consultations, pathology, & radiology Over-the-counter medicines (for patient at home) Prescription medicines (for patient at home) Patient Patient Commonwealth, with small patient copayment Most, if not all, of the cost reimbursed by Commonwealth under the Medicare Program s Medicare Benefits Scheme on a fee-for-service basis None In most cases, cost to patient capped under the Commonwealth Medicare Program under the Pharmaceutical Benefits Scheme subsidy Hospital-based services Varies State/Territory governments (public hospitals), health insurance (private hospitals). Department of Veterans Affairs pays for veterans and war widows. Methods varydsome use casemix funding Community nursing and State/Territory governments Salaried employees of State government other support services and some Commonwealth Special initiatives Mostly Commonwealth Australian Health Care Agreements, National Palliative Care Strategy, and National Palliative Care Program Territory. Additionally, the Department of Veterans Affairs (DVA) and private insurers negotiate directly with private hospitals. Clinicians working in the private sector set their own fees, although contractual relationships with insurers may limit out-of-pocket expenses. As Table 3 illustrates, there is considerable variability in how inpatient services are funded. This, therefore, applies to acute symptom assessment units, palliative care units, and inpatient hospice units. The New South Wales and Queensland models are the most sophisticated as they incorporate separate subpayments that reflect differences in the dependency and complexity of care for palliative care patients in each unit. Funding for community-based palliative care services also varies between States/Territories. Statewide policy frameworks form the basis of a combination of grants and population-based planning models that are used to allocate available funds. For example, the State of Victoria allocates funds to regions using a weighted population model, where adjustments are made for the proportion of people aged over 70, socioeconomic status and rural/remote factors, to determine an adjusted population proportion of overall funding. 16 The State of New South Wales uses a similar approach in its Resource Distribution Formula, which is used to distribute all of its palliative care funding (approximately AU$145 million per annum) among its geographic regions. The New South Wales formula adjusts for age, sex, premature cancer rates, and the availability of private sector services. 17 Other states have been developing creative funding models designed to encourage flexible practices. For example, South Australia recently implemented an out-of-hospital funding strategy that aimed to improve the balance between primary/community-based services and inpatient care. Under this program, community-based palliative care services are able to compete for funds that would previously have been allocated to the hospital sector. Discussion Palliative care has evolved and continues to evolve at a rapid rate in Australia. Increasingly, sophisticated and flexible evidence-based models of care delivery are emerging. As this occurs, it is critical that equally flexible funding and financing models are developed that promote a seamless interface between hospital- and community-based care for hospice and palliative patients. This challenges the practice of separating hospital and community funding and financing systems. Within the hospital system, it is also critical that palliative care patients can be identified, classified, and costed. Casemix classification systems, such as AN-SNAP, that measure clinical and cost differentials at each stage of illness are demonstrably more appropriate for funding palliative care than diagnosis-based systems, such as AR-DRGs. Nevertheless, consultation liaison services are still not well accommodated within current costing and classification systems.

6 Vol. 38 No. 1 July 2009 Palliative Care Funding in Australia 73 Table 3 Summary of Inpatient Palliative Care Funding Models in Australiad2007e2008 State/Territory Funding Model Payment Rate 2007e2008 New South Wales Victoria Queensland South Australia Western Australia Tasmania Northern Territory Australian Capital Territory Blended Payment Model that comprises episode component for case complexity, per diem component for hotel costs and outlier component where required. Model based on AN-SNAP casemix classes and cost weights. Flat bed-day payment for patients classified as palliative care regardless of whether in designated palliative care unit. Bed-day payment differentiated by AN-SNAP class for palliative care patients in designated units. Bed-day benchmark payments for palliative care patients in nondesignated units. Combination of negotiated per diem rates and DRG-based episode based payments. Indexed historical budgets used to negotiate contracts with palliative care providers. Funding levels based on indexed historical budgets. Funding levels based on indexed historical budgets. Funding levels based on indexed historical budgets. Equivalent bed-day rate ranges from $A647 to $A1465 per day depending on the AN-SNAP class Metropolitan bed-day rated$a485, rural/ regional bed-day rated$a489 Bed-day rate range from $A700 to $A1170 per day for designated units. Standard per diem rate for nondesignated units The injection of AU$243m into the Australian palliative care sector by the Commonwealth since 2002 represents a relatively modest injection of funding relative to the recurrent expenditure on palliative care by the States/Territories. Nevertheless, it has allowed a significant increase in the capacity of the sector to provide access to high-quality palliative care services. This has occurred through key initiatives, such as PCOC, the Caresearchd Palliative Care Knowledge Network, 18 and a clinical trials program that is conducting randomized trials of pharmaceuticals for their potential use in palliative care. 19 Investments in recent years by all governments have increased the range and capacity of palliative care services in Australia and have positioned Australian palliative care services for the challenges that lie ahead. Although the development and use of AN- SNAP have been a significant advance, the development and implementation of funding models for palliative care that promote integration across the care continuum and encourage service substitution among settings are an evolving agenda. These developments will become critical as resource pressures increase within the hospital sector. Likewise, PCOC has commenced benchmarking of palliative care services in terms of their quality and their outcomes for both patients and carers. The building blocks are being put into place but Australia is still some distance away from being able to routinely link costs to outcomes and to routinely assess value for money in palliative care. References 1. Palmer GR, Short SD. Health care and public policy, 3rd ed. Melbourne, Australia: Macmillan, Eagar K, Cromwell D, Owen A, et al. Health services research and development in practice: an Australian experience. J Health Serv Res Policy 2003; 8(Suppl 2):7e Courtney M, Briggs D. Health care financial management. Sydney, Australia: Elsevier, Australian Government Department of Health and Ageing. The National Palliative Care Program. Canberra, Australia: Department of Health and Ageing, Rowett D, Ravenscroft PJ, Hardy J, Currow D. Using national health policies to improve access to palliative care medications in the community. J Pain Symptom Manage 2009;37(3):395e Currow DC, Eagar K, Aoun S, et al. Is it feasible and desirable to collect voluntarily quality and outcome data nationally in palliative oncology care? J Clin Oncol 2008;26(23):3853e3859.

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