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Hospitals could pay for mistakes

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Public hospitals would be charged for mistakes that seriously harm or kill patients and penalised for avoidable readmissions under reforms being developed at the behest of Health Minister Sussan Ley.

Ms Ley has directed the Independent Hospital Pricing Authority (IHPA) to model how funding and pricing could be used to cut the cost to the Commonwealth of so-called sentinel events such as operating on the wrong body part, incompatible blood transfusions, deadly medication errors, sending a baby home with the wrong parents or patient suicide.

The Authority has also been asked to look at ways to penalise hospitals that exceed a predetermined rate for avoidable readmissions.

The move coincides with the release of draft Productivity Commission proposals to publicise treatment outcomes for individual hospitals and doctors as part of measures to boost competition and contestability in the provision of health care.

In a consultation paper released on 30 September, IHPA said that incorporating safety and quality measures into pricing and funding models signalled the value Government attached to high quality care.

“Financial incentives can encourage a strengthened focus on identifying and reviewing ways in which the safety and quality of public hospital care can be improved. This can ensure that pricing and funding approaches are aligned with other strategies to improve safety and quality,” the Authority said.

It said activity-based funding was often criticised for emphasising the volume of services rather than their quality or appropriateness, and increasing attention on sentinel events and avoidable readmissions could counter this.

Ms Ley has asked IHPA to present its options to the COAG Health Council by 30 November.

This would mean they could be incorporated into a new funding model for sentinel events and preventable hospital-acquired conditions that has been foreshadowed to come into effect from 1 July next year.

But hospital funding remains a huge political football between the Federal and State levels of government.

Although a pledge by Prime Minister Malcolm Turnbull of an additional $2.9 billion in Commonwealth funding to 2020 helped mute public hospital services as an issue during the Federal election, long-term funding arrangements remain unresolved and are a point of tension between the two levels of government.

It makes a challenging setting for preliminary Productivity Commission (PC) proposals to increase information disclosure by hospitals and doctors and greater contestability between human services, including public hospitals.

While Australian public hospitals performed well by international standards, “there is scope to improve”, the PC said, including by matching domestic best practice and publicly disclosing more information.

“Public patients are often given little or no choice over who treats them or where. Overseas experience indicates that, when hospital patients are able to plan services in advance and access useful information to compare providers (doctors and hospitals), user choice can lead to improved service quality and efficiency,” the PC said.

It said that any reforms to boost user choice would have to be supported by “user-oriented information”, and suggested the English model in which increased choice is offered at the point where GPs refer patients to a specialist.

The Commission said experience in England had shown that patients given a choice of hospital and consultant-led team sought out better performing providers, and hospitals in locations where competition was most intense recorded the biggest improvements in service quality.

In order to exercise their choice, patients had access to web-based information enabling them to compare providers according to waiting times and mortality rates, and could use an online booking service.

“Greater competition, contestability and informed user choice could improve outcomes in many human services,” the PC said. “Well-designed reform, underpinned by strong government stewardship, could improve the quality of services, increase access…and help people have a greater say over the services they use and who provides them.”

Treasurer Scott Morrison said he had ordered the review to improve the efficiency and cost effectiveness of human services.

But Opposition leader Bill Shorten, reprising Labor’s scare campaign during the Federal election on the privatisation of Medicare, said he feared it would be used to justify the wholesale handover of human services to the private sector.

“We’ve all seen this move before,” Mr Shorten said. “When Malcolm Turnbull and the Liberal Party start talking about changing human services it means that poor people get it in the neck.”

The Commission said that not all human services were amenable to increased competition, contestability and choice, but identified public hospitals and palliative care services among six priority areas targeted for reform.

The enormous variety of Australia’s public hospitals, including big differences in the populations they serve, workforce arrangements and characteristics and the complexity of their links to the rest of the health system, militate against like-for-like competition – something the Commission admitted.

If such issues or political considerations made fostering direct competition unfeasible, the Commission instead suggested exerting pressure for improved performance by making the position of senior hospital managers more precarious.

“There have been difficulties in the past commissioning non-government providers, and lessons from these attempts should not be forgotten,” it said. “As a result, it may be more feasible to implement contestability as a more transparent mechanism to replace an underperforming public hospital’s management team (or board of the local health network) rather than switch to a non-government provider.”

The PC’s preliminary report is open for submissions until 27 October, and the Commission is due to deliver its final report by October 2017.

 Adrian Rollins