Healthcare Funding Models Question Answer 2022

Running head: HEALTHCARE FUNDING MODELS 1
Healthcare Funding Models
Name
Institution

HEALTHCARE FUNDING MODELS 2
Healthcare Funding Models
1. Identify which of the four funding models defined by Egar et al. (2013) are used
by the public hospitals in Australia and briefly describe their use.
Eagar et al. (2013) propose four essential funding models that the IHPA could adopt. The
models are part of the health sector’s significant shift from fixed service fee payment modes.
Instead, as Magid et al. (2018) point, there is a shifting towards value-based payment models that
rewards health safety and quality. Notably, IHPA (2017) recognises the significant potential of
such innovative funding models in enhancing efficiency in health service delivery. Thus, the
organisation has adopted and implemented some of these models in its pricing framework.
Best practice pricing
Notably, this is one of the essential pricing models that the IHPA has incorporated in its
pricing framework. The primary use of this model is to promote the adoption of best treatment
pathways. The best treatment pathway entails the best treatment practice for a particular
condition (Eagar et al., 2013). Therefore, in this model, premium tariffs and additional income
incentives are given to institutions who adopt and show evidence of meeting the best treatment
practices (Hinterhuber & Liozu, 2013). Notably, the critical basis of this funding model is
evidence-based practice. Whereby, as per Hughes (2008), there is a strong emphasis on the
research and identification of the best treatment practice of a particular condition.
The application of this model is well evident in IHPA’s pricing policies. Crucially, IHPA
(2017) recognises the vital role that data and evidence play in improving treatment practices.
Thus, in cases where evidence indicates that a particular treatment path leads to better outcomes,
this specific treatment path is incentivised. A key example is the special attention given to the

HEALTHCARE FUNDING MODELS 3
new Australian Mental Health Care Classification in the pricing framework for the year
2016/2017. According to IHPA (2017), data indicated that the new classification contributed to
better patient outcomes. Thus, this example suggests the prominence that the IHPA gives to
research and innovation across the health sector. Whereby, the IHPA is continually looking to
provide incentives to new treatment discoveries that produce better patient outcomes.
Normative pricing
According to Eagar et al. (2013), the primary use of this model is to influence how care is
delivered. Normative pricing is based on the fact that specific patterns of care produce better
outcomes as compared to others. Thus, the desirable patterns of care are incentivised, whereas
non-beneficial care activities are discouraged. Notably, this model is similar to the Best practice
pricing in that both models focus on improving the practices adopted by health personnel in
treatment. However, according to Eagar et al. (2013), there is a significant distinction between
the two models. Best practice pricing focuses on promoting a set of procedures directed towards
a particular condition. Normative pricing, on the other hand, focuses on just a few distinct
activities that carry either a positive or negative patient outcome.
A vital example of the application of Normative pricing in Australia’s healthcare is in regards
to Australia’s indigenous population. IHPA (2017) recognized the need for interpreter services
for patients from indigenous communities such as the Aboriginal. The realization as per Biddle
et al. (2014), is that individuals from these cultures usually face culture and language barriers as
they attempt to access health services. Thus, an indigenous adjustment was included in the 2018-
2019 pricing framework to encourage institutions to appoint interpreters. Therefore, the
incentivization of this practice will remove the various barriers that indigenous communities