Possible options for introducing quality aspects in Activity-Based Funding pricing

Background In 2011, all of the Australian governments committed to health care reform in which they agreed to use a nationally consistent “Activity-Based Funding” approach for public hospital services in Australia. This reform sought to increase the transparency of public hospital funding and improve the efficiency of public hospital services. As part of this reform, the Independent Hospital Pricing Authority (NIHA) was created, to determine the National Efficient Price (NEP) for public hospitals services, as well as the classification, costing, and counting standards used in setting the NEP. One criticism of Activity-Based Funding is that it fosters increases in hospital activity without measuring quality, safety, or outcomes. To address this criticism, in the last two years, the IHPA has begun to develop several options for introducing quality components into the NEP. The work has been carried out in partnership with the Australian Commission on Safety and Quality in Healthcare, and is overseen by a Joint Working Party (JWP) comprised of senior clinicians from across the country. This paper gives an overview of the timeconsuming and complex, but ultimately productive, work that has been carried out to date.