Funding Healthcare System in Australia

The Australian public hospitals are directed and governed by the state-run healthcare system but are financed by the government. The Australian government developed different mechanisms for funding the health care systems so that to enhance the quality of the patient outcomes reduce the complications and improve the quality of healthcare services.

Running head: FUNDING MODELS 1
Funding Healthcare System in Australia
Student’s Name
Professor’s Name
Institution Affiliation
Date

FUNDING MODELS 2
Questions one. Identify which of the four funding models defined by Egar et al.
(2013) are used by the public hospitals in Australia and briefly describe its use.
The Australian public hospitals are directed and governed by the state-run healthcare
system but are financed by the government (Agarwal, Green, Agarwal & Randhawa, 2016).
According to the researches done by Robinson and Norman, the Australian healthcare system is
funded by both the territory and federal funds (Norman & Robinson, 2015). The territory funds
are used for the hospital care while the federal funds are useful for the primary care. The
Commonwealth funds the health services for the emergency department and the inpatient. The
IHPA coordinate other healthcare services such as mental health services, community programs,
outpatient clinics, and rehabilitation. The Australian government developed different
mechanisms for funding the health care systems so that to enhance the quality of the patient
outcomes reduce the complications and improve the quality of healthcare services. Some of the
best-implemented funding and pricing models include; normative pricing model, pay as per the
performance model and quality structures pricing model (Activity-based funding for Australian
public hospitals: Towards a pricing framework, 2012).
The best pricing practice considers placing practice for the best clinical practice. In the
domain of stroke myocardium infarction and in the broken Hip, the Western Australian
established the inventiveness of best practice as the user program of premium payment
(Department of Health Western Australia, 2016). The standard model of pricing was helpful for
the Independent Hospital Pricing Authority (IHPA) that affected the healthcare delivery like
pricing the particular procedure to inspire on a daily basis as an alternative of patient’s admission
(Dowine, 2017). Quality pricing structures connect the safety and quality methods by financing
the attributed hospitals more than the hospitals that are not accredited. All the government

FUNDING MODELS 3
hospitals certified the National Quality and Safety Health Standard Services (NQSHSS) to
ensure quality and safety services of the system (eager et al, 2013). A performance-based
financing scheme enables the smooth delivery of healthcare and services that are provided by the
healthcare center using positive incentives to ensure achieving of the defined goal of
ameliorating the quantity and quality of the health facilities (Bonfrer et al, 2014).
Moreover, it was recommended that the primary purpose of establishing the pay for
performance in the in all the healthcare systems around the world such as in Australia, Canada,
United Kingdom and USA is to raise the quality of the healthcare services provided to the
patients that are significant for better health outcomes (Mason, Yiu-Shing Lau & Sutton, 2016).
There are reports of sham activities as a result of Australian hospital financing incentives. The
hospitals in Victoria and NSW manipulates and reclassifies data including the patient’s number
for the patients who are in the list waiting for the elective surgery so that to avoid penalties and
enable the amounts of performance funding bonus. The effects of financial incentives and
performance-based funding scheme have both negative and positive impacts (Ashcroft, Menear,
Silveira, Dahrouge, & McKenzie, 2016).
A new basis for the funding of public hospitals was implemented on the basis of
organizing for the introduction of the case mix (Duckett,1998). The case mix funding was
established in Victoria government hospital in 1993 which received variable and fixed payments
rendering to the number of patients’ in the particular hospital, the severity of the treated cases
and the emergency department performance (Nocera, 2010). These types of payment were used
for budgeting processes by several Australian states. The Australian pricing Authority was
responsible for the determination of the effective prices of the reports from the public hospitals
around all the states (Hall, 2015).

FUNDING MODELS 4
Question two. To what extent do you agree or disagree that the National Efficient
price may provide an incentive to improve the health status of any selected segment of the
Australian population. Remember to use relevant references to back up your arguments.
The Australian healthcare system experienced the unpredictable inequities in the
accessibility of the health services and their outcomes in the past. Some of the challenges faced
by the healthcare services include; increase of the health care cost, the increase of interest of
quality and safety services, complex health issues, high consumers expectations, chronic
illnesses, the stress of health manpower and demand escalations of healthcare as a result of the
aging population (Bennett, 2009). The government of Australia developed the new law of
National Health Reform Act in 2011 that recommended for the activity-based financing scheme
through the use of case mix. The scheme was meant for paying on the basis of the outcomes
through the provision of health care to outpatients and the inpatient and also for the emergency
department care. This activity-based funding scheme provides funds for the appropriate services
as provided by public hospitals by enhancing the funders to associate the price of various health
services that are offered by different hospitals. The (IHPA) recommended for the efficient
national price for the activities run in the hospital such as treatment and procedures that
sometimes substitute the grants block provided to the local and public health networks. The
activity-based scheme of funding assigns the health funds through the provision of a set of prices
for every clinical activity such as surgery, knee and hip replacement and other diagnostic related
groups while the funds are controlled by a partnership with the state government and
Commonwealth (Rosen, Mcgorry, Hill & Rosenberg, 2012).
The main aim of the efficient national price in the public hospitals which was newly
implemented in healthcare reforms was to increase the service accessibility and to improve the

FUNDING MODELS 5
competence in the public hospital through the activity-based funding. The effective price such as
cost, benefits, and outcomes of the services that determine the crucial funds in the public
hospitals are estimated by the approaches of the risk-adjusted cost-effectiveness (RACE)
(Karnon et al, 2011). The activity-based funding scheme uses the system of classification for the
patient together with the effectual national price to evaluate the process of financing in regard to
the inteded activities. This system of classification is related to the Australian advanced group,
Classification of Australian both non-Acute and sub-acute patients, classification of the
emergency care, Teaching, Training Tier 2 non-admitted service, and research (I. H. P.A. 2015).
The ABF acts as inducements in all hospitals to reduce cost and admission period whereas the
uplifting number of patients’ admissions generate more profit which can be useful for buying
equipment and hiring new staffs for enhancement of the accessibility (Sutherland, Crump, Repin
& Hellsten, 2013).
Through this act, the hospitals will minimize the long waiting list for elective treatments
which will be of more profit to the public hospitals. The act gives a strong incentive for the
hospital to expand and evaluate its services more efficiently from the funds they get. Funding
provides useful info4mation concerning the services delivered and the cost in different hospitals
encouraging the understanding of the hospitals. Also, funding increases the hospital's
transparency by showing clear criteria used in funding of the distribution of care facilities and
the autonomy in the care provision within the agenda of responsibility (Activity-based funding
for Australian public hospitals: Towards a pricing framework, 2012).

FUNDING MODELS 6
Reference
Activity based funding for australian public hospitals: Towards a pricing framework. (2012). The
Queensland Nurse, 31(2), 7.
Agarwal, R., Green, R., Agarwal, N., & Randhawa, K. (2016). Benchmarking management
practices in australian public healthcare. Journal of Health Organization and
Management, 30(1), 31-56
Ashcroft, R., Menear, M., Silveira, J., Dahrouge, S., & McKenzie, K. (2016). Incentives and
disincentives for treating of depression and anxiety in ontario family health teams:
Protocol for a grounded theory study. BMJ Open, 6(11
Bonfrer, I., Soeters, R., Van, d. P., Basenya, O., Longin, G., van, d. L., & van Doorslaer, E.
(2014). Introduction of performance-based financing in burundi was associated with
improvements in care and quality. Health Affairs, 33(12), 2179-2187
Bennett, C. C. (2009). A healthier future for all Australians: an overview of the final report of the
National Health and Hospitals Reform Commission. Medical Journal of Australia,
191(7), 383.
Department of Health Western Australia (2016) WA health funding and purchasing guidelines
2016.
Duckett, S. J. (1998). Casemix funding for acute hospital inpatient services in Australia. The
Medical Journal of Australia, 169, S17-21.

FUNDING MODELS 7
Downie, J. (2017). More than just activity: pricing and funding for quality and safety.
Eagar, K., Sansoni, J., Loggie, C., Elsworthy, A., McNamee, J., Cook, R., & Grootemaat, P.
(2013). A literature review on integrating quality and safety into hospital pricing systems.
Hall, J. (2015). Australian health care—The challenge of reform in a fragmented system. New
England Journal of Medicine, 373(6), 493-497.
I. H. P.A., (2015). The Pricing Framework for Australian Public Hospital Services 2016-17.
Karnon, Jonathan, BA,M.Sc, PhD., Ben-Tovim, D., Pham, Clarabelle T,B.Sc, G.D.P.H., Caffrey,
Orla,B.A., M.Sc, Hakendorf, Paul H,B.Sc, M.P.H., Crotty, Maria, MPH,
PhD,F.A.F.R.M.(R.A.C.P.), & Phillips, Paddy A, MBBS, DPhil,F.R.A.C.P., F.A.C.P.
(2011). The efficient price: An opportunity for funding reform. Australian Health
Review, 35(4), 501-6.
Mason, T., Yiu-Shing Lau, & Sutton, M. (2016). Is the distribution of care quality provided
under pay-for-performance equitable? evidence from the advancing quality programme
in england. International Journal for Equity in Health, 15.
Norman, R., & Robinson, S. (2015). Lessons from albion. Journal of Health Organization and
Management, 29(7), 925-932
Nocera, A. (2010). Performance-based hospital funding: a reform tool or an incentive for fraud?.
Medical Journal of Australia, 192(4), 222.
Rosen, A., McGorry, P. D., Hill, H. R., & Rosenberg, S. P. (2012). The Independent Hospital
Pricing Authority and mental health services: It is not a case of" one size fits all".
Medical Journal of Australia, 196(11), 675.

FUNDING MODELS 8
Sutherland, J. M., Crump, R. T., Repin, N., & Hellsten, E. (2013). Paying for hospital services: A
hard look at the options. Commentary - C.D.Howe Institute, (378), 0_1,0_2,1-28.