Quality of care in current healthcare reform
The establishment of the National Health Performance Authority (NHPA) and Independent Hospital Pricing Authority (IHPA) has highlighted the need for joint consideration of quality and efficiency in extending activity based funding in current healthcare reform.
Norman Swan: We're going through a major period of reform in the healthcare system at the moment and it needs all the help it can get. The reason for reform that's repeatedly stated by ministers and bureaucrats is that without major changes, the universal healthcare that we know and cherish in Australia as part of living in a fair society, will be threatened by becoming unaffordable.
So they've changed the way they fund hospitals and created new national agencies to decide on the most efficient price that the government will pay for services and the performance expected of the health system.
Trying to make sure that care is safe—in other words doesn't injure you—and is of high quality, meaning it's informed by the best evidence, is part of the National Health Performance Authority's work. But at the moment it's a bit retrospective and tends to be focused on how hospitals have performed after the event.
A leading health economist has come up with a way of valuing safe, high quality care up front and building it into the price being paid per service and in so doing creating powerful incentives for systems to lift their game.
Simon Eckermann is professor of health economics at the University of Wollongong.
Simon Eckermann: The problem is that we don't incorporate the value of quality in efficiency measures. We have efficiency measures which tend to measure the cost of service but don't incorporate the quality of service. And for years that's been sold to us as a way of having efficiency measures which are clinically neutral. In reality what it means is we've included the cost of quality but we haven't included the value of quality.
Norman Swan: So that sounds very complicated. When you say quality, you're talking about providing the best-evidence care safely, without complications, so that people don't bounce back into hospital, they don't get infections, they don't get bedsores and stuff like that.
Simon Eckermann: Yes. Typically in health technology assessment we look at mortality, morbidity, re-admission rates as quality indicators. But if you're looking at the process of care, then quality can be about communication, it can be about diagnostic build-up, it can be about the way information's used, as well as the technical ability with which procedures are used.
Norman Swan: So there's a whole package of stuff that you get in your healthcare system, in your personal healthcare.
Simon Eckermann: Evidence-based medicine has this underlying objective for quality of maximising that benefit. And that objective, basically, is taking the value of quality and comparing it with the cost. When we come to efficiency measures, however, the value is not included, and there's been, over the last...
Norman Swan: So in other words, when this national pricing authority that we've got now—and most people have never heard of it but this is the way they're trying to get what's called the 'efficient price' that the federal government is willing to pay for, say, having your appendix out or your heart operated on or your varicose veins done, quality is not part of that process. It's the cost of bandages, coming in to care, being in a hospital bed, having your breakfast, and the anaesthetist and everything else.
Simon Eckermann: There's an attempt, with the creation of those bodies, to try and incorporate quality. So activity based funding has faced essentially three problems...
Norman Swan: Just to explain here, these are terms that are really important for people to know but again, are not well known. So this is the...it's been used a lot in Victoria for many years, but essentially it's rather than funding hospitals historically for a bundle of stuff that they do, they're now getting funded for each element of activity, and the states purchase elements of activity which have funding attached to them. So there's an amount of money attached to having your appendix out.
Simon Eckermann: Yes, indeed. And indeed there's about 650 of these activities they identify within hospitals, and they fund based on each one of those. When they come to do performance measures what they try and look at—and indeed it's the basis on which they determine those prices, if you like, for each of those activities, is what was the cost on average across the hospitals in Australia for those individual services at a clinical activity level. The technical term is diagnostic related group, but it just means a particular clinical activity within a hospital.
Norman Swan: And again, just to explain, you might have an appendix out and then get an infection, and there'll be a number for that, there'll be a diagnostic related group for that. So it's not just all appendectomies, you're divided up into different areas according to the pattern of care that you might flow through.
Simon Eckermann: Yes, and indeed they divide them up also into age groups, and a whole series of diagnostic factors often as well. Having said that, the measures which are used in efficiency measures in practice are still cost-per-service based measures. So regardless if they're adjusted for case-mix, if they're adjusted for these individual activities, they're still cost-per-service based measures.
And the critical difference between that and what occurs in health technology assessment is that they haven't included in their efficiency measures the quality aspects. And we normally measure quality by things like mortality, morbidity, readmission. There's also a technical term, iatrogenic events, which basically means anything bad which occurs to you in hospital.
Norman Swan: Which to the average person would sound extraordinary, that a very important part...you would hope that they're buying quality. And to be fair to the government, they're trying to buy quality. You've got this thing called the National Performance Authority which is saying we want quality, and we're going to penalise you, for example, if you have more bedsores than we've paid for or more blood reactions. I can't remember exactly what the elements are but there are three or four things that they're really focusing on. But that's kind of a retrospective thing.
Simon Eckermann: Yes, and in terms of creating the appropriate incentives across all hospital activities and for all quality of care, what you really want to be doing is allowing particularly for the main things that you measure. The main things which are measured are mortality, morbidity, and indeed readmission rates. And a whole series of those other events which you've talked about which are put under the rubric of iatrogenic events but can be all sorts of things as you say, like bedsores, like drug reactions, et cetera.
Norman Swan: Like falling out of bed.
Simon Eckermann: Falling out of bed, indeed. Many of those things. And the reason that they haven't been included, and it's not just in Australia, it's internationally, is people hadn't worked out a way to incorporate quality into the efficiency measures.
Norman Swan: So this is a mathematical issue.
Simon Eckermann: It is a mathematical issue. And there's a series of paradoxes which people had tried to solve for many years, decades, and there's efficiency paradoxes and there's quality paradoxes. And indeed I spent about ten years even just trying to formulate what the real question was, the problem that we really had to address. And I formulated it basically by saying, well, we want to have the same objective we have in evidence-based medicine, so we want to have this objective of maximising net benefit. And net benefit there is the value of effects less the cost of care. In doing that, we need still to have an efficiency measure consistent with maximising that benefit.
The quality paradox is the fundamental one that people had been struggling with. How do we incorporate quality in a service industry such as healthcare where, if you change quantity, quality changes? So if I changed the number of admissions and I looked at mortality, for instance, then the mortality rate changes and quality changes. So quantity and quality are inextricably mixed, or related...
Norman Swan: Sometimes it's good, sometimes it's bad. But the more open-heart operations you do you're probably getting better at it. But sometimes if you're too busy in a hospital you might get more infections. It's complicated.
Simon Eckermann: Indeed. Mathematically people hadn't worked out a way to incorporate quality which was consistent with the objective we have, which is maximising net benefit.
Norman Swan: And just again to recap, because this is really tough stuff to get into your head, is that when you calculate the efficient price it's still hard, but you can measure how many nurses you've got and the costs of them and you can measure your electricity bill. You can measure how much you're paying your surgeons and your junior doctors, etc. But this is just much more complicated to grab on to and put a money figure on to.
Simon Eckermann: In part that's true. However, in reality what has occurred and increasingly is occurring both in Australia and internationally, is we do measure quality. We measure quality with mortality rates, morbidity rates. And importantly we're starting to measure it not just within the hospitalisation but over time. So we might be able to get 12 months mortality rates for each procedure and indeed morbidity rates which extend beyond the hospital point of separation to 30 days or ideally up to a year.
Norman Swan: And we've moved quite far down the track on that in Australia. Western Australia has always been able to do that with what's called hospital linkage, where you know what's happening to people through the community. And now almost every jurisdiction in Australia does link their records. So you do to some extent know what's happening to people.
Simon Eckermann: Indeed. So we have a whole series of data linkage processes which, as you said, started in Western Australia and are now increasingly becoming national, and each of the states have adopted the same sort of mechanisms and methods that Western Australia adopted. And so you've got that ability to look at things over time. What that linkage doesn't allow you to do, however, is to say how we're going to include that into an efficiency measure. And that's the key thing, I suppose, which my research has addressed. So for years people tried to incorporate quality in all sorts of very technical ways and very sophisticated ways, but none of them actually were consistent with the objective function we wanted.
So after ten years I finally worked out that we had to get efficiency measures consistent with maximising the net benefit. And there were two other things also, because the problems at the moment aren't just cost-minimising quality as being an incentive, but also incentives for cost shifting. And cost shifting normally manifests in what people have labelled as quicker, sicker care in hospitals where people then may have readmissions or they may need to…
Norman Swan: Cost shifting is most things that happen inside the hospital are paid for by the state, and most things that happen outside the hospital are paid by the Commonwealth, and therefore the quicker that you can shift people back to home, it might be nice to be back home but in fact the Commonwealth's footing the bill.
Simon Eckermann: Yes, so the cost-shifting incentives certainly do occur at a state-Commonwealth level. What I think's been slightly less emphasised in the literature and lost to some extent in that debate, is that it's also an incentive for each hospital. So each hospital has an incentive to cost-shift if they are being measured on things like cost per separation, regardless of whether that's case-mix adjusted or not. So really the incentive has to be for the individual hospital, not just the Commonwealth and the states to have an appropriate incentive to prevent cost-shifting.
Norman Swan: And when you say a separation, that's really one person being admitted and then discharged from a hospital.
Simon Eckermann: Yes, the separation is the same as admission in terms of the number of people going through the hospital, the activity within the hospital. So the problem really was that we have…if you want to consider the activity based funding model as a bucket, we've got a couple of holes in that bucket: one related to cost-minimising the quality of care, and another related to cost-shifting. To some extent there's also another hole related to something called cream skimming, and that cream-skimming activity is basically hospitals selecting patients who are less severe or have lower levels of complexity.
Norman Swan: Which is what the private sector has been accused of, so you make more money per patient.
Simon Eckermann: Indeed. A lot of comparisons between the private and the public sector, and there's an incentive obviously, a very active incentive in the private sector because of a profit motive. In the public sector you'd hope that would be allayed to some degree, but there still is an incentive for each of the hospitals even if it's slightly weaker than… Now, case-mix funding does address that to some degree in that it's…
Norman Swan: So you're having more funding to do more complex cases.
Simon Eckermann: Indeed. But what it doesn't control for is complexity within admission. So for a given type of DRG you're still going to potentially get quite a lot of variation. And there's quite a lot of evidence to say that in fact may explain maybe 40% to 50% of the variation in costs.
Norman Swan: So something unexpected might happen in your particular case.
Simon Eckermann: Yes, or you might have certain factors that patients have when they're admitted to the hospital which means they're likely to be less severe for that given type of DRG. It's less of a problem with the current model. At least there's an attempt to plug that hole, but we still have the two other holes. We've got the hole of cost-minimising quality incentive and a cost-shifting incentive.
So really the solution or a robust solution to this requires that we get an efficiency measure consistent with maximising net benefit, the underlying objective from evidence-based medicine but also address cost-shifting and cream skimming. And that was really…after ten years I reached the point where I said this is…
Norman Swan: Now, Simon, I'm going to ask you to distil ten years of research in a highly technical, mathematical area, to a language that I've got a hope of understanding in terms of how you've done this. And you've got 30 seconds to do it.
Simon Eckermann: (Laughs) Yes. I read Douglas Adams…
Norman Swan: Oh, so the answer's 42…
Simon Eckermann: And indeed Douglas Adams talks a lot about wrestling with paradoxes and these are really a couple of paradoxes that we're wrestling with. Once I'd actually specified what the problem was it in fact took me five minutes to work out the algebra to get a correspondence which allowed efficiency measures consistent with maximising net benefit. And in very simple terms, maximising net benefit I showed has a one-to-one correspondence, which means it's the same thing as minimising quality inclusive cost.
Norman Swan: And that means minimising the cost due to poor quality.
Simon Eckermann: Indeed. So what we want to be minimising is not just the traditional costs that you've described, the cost of nurses, et cetera, within the hospital, but also the cost associated with those quality effects. And essentially we just need to include the outcomes of care: the mortality, morbidity, readmission, iatrogenic event rates, but essentially as inputs in the model.
Norman Swan: Professor Simon Eckermann.
I realise this is complicated but it's the kind of thing that can profoundly change the standards of healthcare we receive. For instance, if you look at the new, the reformed system of paying for each item of activity, even without this value for quality built in, it's creating all sorts of changes already.
The price being paid has been based in part on the cost that the most efficient public hospitals in Australia can deliver that service. Some states are finding themselves significantly less efficient, sometimes by over 10%, and that's driving efficiencies that might otherwise not have occurred.
Similarly if Simon Eckermann's proposal is taken up, they'd have to measure the extent to which hospitals truly value quality and then create a benchmark based on the best performers. The question is whether the price the Commonwealth sets would have to go up.
Simon Eckermann: It shouldn't go up, and indeed I've shown various versions of the method I've developed to show that no, it doesn't need to go up at all.
Norman Swan: Just finally, then, let's say somebody waves a magic wand or an algebraic wand and puts your equations in, and it's going to be a complicated process requiring quite a lot of work to actually feed in the data and get it right, but let's say they do that. What behaviour changes can then the hospital drive? Because some of these things don't necessarily happen in hospital. There might be miscommunication with the GP who doesn't realise that he or she has got to repeat a prescription and therefore the person doesn't get their repeat antibiotic and their infection comes back and they go back into hospital, or their heart failure gets worse. And that stuff is kind of outside the hospital's control. What behaviour change will you see in the system if you do this?
Simon Eckermann: What happens in practice is you're measuring the outcomes, you're measuring the costs, and when you put them into efficiency measures you are then allowing for those over time. So absolutely those effects beyond point of separation, you need to allow for. And typically in cases where I've used the method I've allowed for 12 months.
Norman Swan: So this means then that you're really forcing hospitals to go beyond their boundaries, manage the whole process of healthcare, and acknowledge that it's not a post-hoc activity of quality, they've got to build it in up front. So this could drive a change of behaviour. It's not that hospitals don't care about safety and quality, but it's not a post-hoc thing, it's actually part of the process from the beginning and they've got to think of the whole process right to the patient's home, not just from the doors of the hospital.
Simon Eckermann: Yes. So to overcome the cost-shifting incentive you need to allow for things over time. To overcome the cream skimming types of incentives which are out there you need to be adjusting for the risk factors at point of admission, what patients are coming in and their type of complexity. If you appropriately value quality, in other words say the outcomes which are quality indicators or quality measures, if you're evaluating those consistently with maximising benefit then you'd be creating incentives for improved communication, both at admission, in other words when people are admitted to hospital, within the admission in terms of the passing on of case notes et cetera, and at handover, critically at handover, because it's then when they may go back into a community setting, into an aged care setting, many potential settings, often back into the home setting as well with carers, they actually have appropriate information and incentive to provide care beyond, if you like, via those other services.
Norman Swan: So something radical might happen, like we've got a healthcare system.
Simon Eckermann: Indeed. You also get incentives obviously for more effective use of diagnostic information. So gathering information and communicating that is one aspect, but also actually getting more appropriate use of diagnostic information. And they'd have to be considering the cost and the value of that. This is not about saying we're going to have infinite value quality care or, as we currently have with economic efficiency measures, zero value quality care, it's about the trade-off between the value and cost of quality. But the bottom line is that that actually allows you to create incentives for evidence-based medicine in practice.
Norman Swan: Simon Eckermann is professor of health economics at the University of Wollongong.
References: Simon Eckermann and Tim Coelli Including quality attributes in efficiency measures consistent with net benefit: Creating incentives for evidence based medicine in practice. Social Science & Medicine 2013;76:159-168
Norman Swan: Next week, the Health Report summer season begins with another chance to hear Lynne Malcolm's series, made with the BBC, called The Global Body.
Montage: My friends call me Tarzan. I mean I definitely work really hard on just being the best optimal fitness I can possibly be.
My name is Pushparani. I am a tea plucker in Sri Lanka.
Angelo works for the call centre agent.
Yes. I've been working for almost ten months here in Manila.
My name is Juliano, chef extraordinaire, inventor, genius.
Lynne Malcolm: At first glance humans are incredibly diverse. But on closer inspection, we share far more similarities than differences. And as the rise in international travel and instant communication seems to draw us closer together, are we becoming a global body, a world population? We'll explore how the human race is adapting to worldwide change, how shifts in the environment, the economy and society are affecting our bodies. What impacts do changes in lifestyle have on our health and what might the human race look like in the future?
In this first program of the series we'll be looking at how over tens of thousands of years humans evolved to be suited to a rural life, living on and off the land. Many of us moved out of Africa in various waves and we changed our way of life from hunting and gathering to settling down and cultivating the land. This new lifestyle impacted on our bodies in some surprising ways.
We started to cook our food which changed our digestive system. We domesticated animals for meat and milk but we also got diseases from them like tuberculosis and malaria. These adaptations apply to life on the land. We look at one example of how the human body, which has been adapting to rural life for tens of thousands of years, is coping in the modern world. We're going to a country which has a large rural population; the tropical island of Sri Lanka.
Sri Lanka is partway through its demographic transition. This happens in stages as the gap between birth and death rates change, the country moves from a predominantly youthful population to one where the elderly outnumber the young. Dr Firdosi Metha is the World Health Organisation's representative in Sri Lanka and he explains where they are on the demographic transition scale.
Firdosi Metha: Sri Lanka is just now going through a rapid demographic transition where the population above 60 years is said to double by about 2040. There are various causes for it; better healthcare, better maternal and child health facilities, people are not dying of preventable disease. The usual diphtheria, tuberculosis, polio, measles has drastically come down and this is because of a very good immunisation program, and as such generally the socioeconomic status and the quality of life, once it improves, these contribute to the demographic transitions.
Norman Swan: That's The Global Body, next on the Health Report. I'll see you then.
- Professor Simon Eckermann
- Professor of Health Economics
University of Wollongong
- Dr Norman Swan
- Brigitte Seega