As the year winds to a close, it's a perfect time to reflect on the last twelve months and to spend time envisioning what public hospital services reform lies ahead in 2017.

The Productivity Commission has released its Reforms to Human Services Issues Paper seeking comment and information by 17 February. The Issues Paper poses four Requests for Information on reform of human services and seven Requests for Information on reform of public hospital services. The Commission's requests are wide-ranging and open-ended providing every opportunity to address the public hospital reform agenda.

CARROT AND STICK

The Commission is focused on creating a more effective system by taking into account quality, equity, efficiency, responsiveness and accountability. Likely reform options will include the introduction of incentives in system design – the 'carrots and sticks' that impact the way users, providers and governments behave – to ensure that providers and governments are responsive to the changing needs of users and there is accountability to those who fund the services.

We have previously commented on the rise of the importance of the patient experience and on the potential augmentation of the My Hospitals website. In the current Issues Paper, the Commission notes: "greater user choice in Australia would need to be supported by more user-oriented information than is currently available, particularly on clinical outcomes achieved by individual hospitals and doctors."1 Concerning the need for publicly reported data, the Commission asks:

  • how does the information patients need to make informed choices differ from what is currently available publicly (including through the My Hospitals website) and what changes are required to address this?2
  • what performance indicators should be published to facilitate service improvements through benchmarking?3

INSIGHTS-BASED REFORM

The Commission is interested in evidence-based information and to obtain insights from previous reforms both in Australia and overseas. This may result in clear policy that certain information is not to be made available for particular hospital services - particularly where implementing user choice could make users dissatisfied, overwhelmed, and confused about their choices.

Information is also required to avoid the risk that performance indicators produce perverse incentives. As was noted in research commissioned by the COAG Reform Council4 this requires careful planning to ensure that:

  • data is available for collection;
  • the focus is on performance improvement and not mere compliance; and
  • the right indicators are selected to avoid gaming or perverse outcomes.

High-quality data, and effective use of data, is crucial to the government's stewardship role. When designing the systems to provide public hospital services, government needs to consider the data required to effectively monitor the provision of the service. Data collection can impose costs on users, providers and governments. The Commission seeks specific information on:

  • the design of government's monitoring, evaluation and feedback functions;
  • the data needed to support those functions; and
  • mechanisms for sharing data across services and governments.

BENCHMARKING

The importance of being able to collect and share information cannot be overstated. The Commission notes that "benchmarking within Australia suggests that many public hospitals could increase their service quality and efficiency by matching best practice among their domestic peers. Greater public reporting of service quality could bolster accountability."5

Certainly, the Grattan Institute reports6 that hospitals need to know a lot more about where they stand, including detailed information about where their avoidable costs are and how they compare to their peers. The report states that "giving hospitals the tools and motivation to improve, can free up a billion dollars each year"7. Routine collection of patient-reported outcomes was seen as potentially valuable but an option that will take longer to research, design and test.8 However, this aspect may be accelerated depending on the reform recommendations of the Commission.

A one-size-fits-all approach to reform is unlikely to be appropriate and the Commission identifies that only certain types of public hospital services may be suited to greater user choice, competition and contestability. As has been the case in England, Victoria and Queensland9, elective surgery is likely to present as one such hospital service.

But in order to evaluate reform options, the Commission needs to know:

  • likely changes in the use of other parts of the health system (including services for private patients) and how to minimise unintended consequences; and
  • whether there should be policy trials to test alternative approaches to introducing greater user choice, and a phased implementation of reforms.

Where there is potential to introduce greater contestability, the Commission is interested to learn about:

  • what has been working well and how could contestability arrangements be improved; and
  • the design of tender processes and management of contracts (for example, contract duration, minimum market size for contracting to be worthwhile, and how to define services and monitor quality to avoid gaming).10

CLEAR AND CONSISTENT

These are important questions because the research shows that better organisation is required when outsourcing public hospital care. The Deeble Institute11 found that governments need to develop clear and consistent policies on contracting in the hospital sector. It notes Australia's health system has a complicated mix of public and private funding and service delivery, the lines between public and private hospital services are blurred, and past health reforms have avoided dealing directly with the mixed economy of hospital provision.

Further, Cutler12 notes reforms within England's National Health Service enabled private hospitals to compete for NHS funded elective care patients. They also allowed for patients undergoing elective surgery to be offered the choice of up to 5 hospitals (including 1 private hospital) by their GP. Cutler believes this offers us insight into a framework for greater competition in Australia. He opines that "the question is not whether competition should be introduced... but what level of competition is appropriate, and what needs to change within our regulatory and institutional environment, and our contractual and funding landscape to facilitate that level of competition".

The review of public hospital services by the Productivity Commission needs to involve a review of both public and private hospital services. It is time to think with originality and beyond conventional wisdom so that the Commission receives the inputs required to evaluate and recommend appropriate reform. We need reform to deliver real and lasting benefits to improve society's wellbeing. After all, it is in all our interest to have a safe, effective, high-performing public hospital system.

Footnotes

1 Issues Paper, Page 22

2 Issues Paper, Page 22

3 Issues Paper, Page 23

4 Nous Group, Perspectives on the use of performance frameworks in the Australian federation, 3 April 2014

5 Issues Paper, Page 19

6 Duckett, S.J., Breadon, P., Weidmann, B. and Nicola, I., 2014, Controlling costly care: a billion-dollar hospital opportunity, Grattan Institute, Melbourne

7 Ibid, page 1

8 Id, page 40

9 England: https://www.gov.uk/government/publications/liberating-the-nhs-white-paper; Victoria: Competitive Elective Surgery Funding Initiative; Queensland: Surgery Connect

10 Issues Paper,Page 24

11 Boxhall, A., Tobin, P., Gillespie, J., 2014, Public problems: Private solutions? Short-term contracting of inpatient hospital care, Deeble Institute, Australian Healthcare and Hospitals Association

12 Cutler, H, 2015, The case for competition in Australian healthcare, Centre for the Health Economy, Macquarie University (first published in Business Spectator on 10 November 2015)

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