Independent Hospital Pricing Authority

I spoke in parliament yesterday about the Independent Hospital Pricing Authority.
National Health Reform Amendment (Independent Hospital Pricing Authority) Bill 2011
31 October 2011

Public hospitals are the cornerstone of Australia's healthcare system. In Australia, if you are seriously sick or badly injured, you can go to your local public hospital and be sure you will be afforded a high standard of care from well-qualified professionals. Australians do not live in fear of medical bankruptcy.

Looking after the wellbeing of Australians is what the Labor Party does. We are, after all, the party that introduced Medibank, under the Whitlam government in 1975. Recreated as Medicare under the Hawke Labor government, it is an everyday reminder of the commitment Labor has to affordable, accessible and quality health care for all Australians. Recently the government reached agreement with all the states and territories for a national healthcare agreement. This followed a comprehensive process to make sure we got health reform right—a process that involved an independent inquiry, an extensive consultation with states, territories, healthcare providers and health experts—because this government cares for the issues that matter most to Australian families.

Australian families want to know that when a member of their family falls sick they can get the help they need from a public hospital irrespective of their circumstances or location. But in meeting that goal we have to continually improve health care. Labor is the party of reform in Australia and this includes making the healthcare system of tomorrow better than the one we have today. Australians need to have the confidence that if they are badly hurt the public hospital system will be there as their safety net.

I was stunned on 12 September this year by an incident in the United States. At a Republican presidential candidate debate, hosted by CNN and the Tea Party Express, debate moderator Wolf Blitzer asked a hypothetical question about a young man who had failed to buy health insurance. He asked congressman Ron Paul whether the young man should be provided government financed medical care in the event of a serious accident. Blitzer asked Paul: 'Are you saying that society should just let him die?' While Paul hesitated, a number of audience members shouted out, 'Yeah!'

We are fortunate to live in a country where this type of outburst is unthinkable, where there is no question about the role of government in the provision of health care. We know it is the right thing to do and we know it is something we need to get right. Labor's introduction of Medicare has now ensured, decades on, that it is part of the Australian social fabric.

Under the new health agreement, the Commonwealth government will commence by paying 45 per cent of the growth in hospital costs from 2014 to 2015. From 2017-18 that figure will be increased to 50 per cent. There will be a national funding pool so all hospitals will be paid in the same way, whether they be in Bourke or in Ballarat. This will deliver unprecedented transparency to hospital funding arrangements. This transparency will be furthered by the introduction of activity based funding. As one of the key recommendations of the National Health and Hospitals Reform Commission report, activity based funding will increase the efficiency of public hospital funding.

This will be a departure from current arrangements. The Commonwealth provides public hospitals with block grants through state and territory governments. These grants are not tied to service provision. Under the new arrangements, they will be overseen by the Independent Hospital Pricing Authority, a key institutional reform under the National Health Reform Agreement. It will operate alongside the Australian Commission on Safety and Quality in Health Care and the National Health Performance Authority to ensure that greater transparency drives reform. In practical terms this will mean more beds, more local control, more transparency, less bureaucracy, less waste and less waiting.

As the dad of two little boys who always seem to be falling and hitting their heads, I have spent many hours sitting in emergency departments dealing with everything from concussion to gastro problems. I know the stress that builds up while you are sitting in that emergency room waiting for service. It is imperative that we do what we can to cut hospital waiting times, to make sure that those who are in urgent need of attention get it. Equally important is ensuring that those people whose requirements are less pressing are provided with quality care outside the hospital system. We should get the people who need quick access to hospitals in as quickly as we can but also ensure that those who do not need a hospital are not using the hospital facilities and putting pressure on them.

The Independent Hospital Pricing Authority will operate as an umpire, setting a price for the growth in hospital services and providing the government with advice on their implementation. As agreed at COAG, the new national approach to activity based funding will commence from 1 July 2012. The record investment in public hospitals of an additional $19.8 billion over 10 years will see the Commonwealth paying 50 per cent of the efficient cost of growth in hospital costs.

The key here is that the Commonwealth funding will be based on the nationally efficient price, not a blank cheque to the states and territories. Finding efficiencies to healthcare delivery can have real results. In his book Super CrunchersIan Ayres tells the story of American paediatrician Don Berwick who set out to save 100,000 lives. He based his grand aim on the fact that about that many people died each year in the United States due to preventable medical errors. Berwick did not go looking for radical changes or surgical advances. He simply looked at common complications and procedures—procedures such as preventing lung infections from ventilators by elevating the head of a hospital bed, cleaning a patient's mouth to reduce the spread of infection and using rapid response teams to rush to a patient's bedside at the first sign of trouble. Surprisingly, his most effective suggestion was to introduce systematic hand washing. Systematic hand-washing campaigns in hospitals reduce the risk of certain infections by more than 90 per cent. This statistic guided Berwick's pathway to save these lives.

I commend the Minister for Health and Ageing for last week announcing that the MyHospitals website will now publish infection rates. That will be another way of ensuring that transparency drives local reform. In addition, a nationally efficient price means that those types of medical errors—errors that inevitably require patients to get additional care, to use precious hospital beds for longer—will become even more costly for hospitals. There will be a financial incentive for hospitals to reduce the rate of medical errors because they will become a real cost burden on hospitals that do not tackle medical errors.

By providing independent advice to the government on the efficient costs of such services as well as developing systems to support activity based funding for such services, the Independent Hospital Pricing Authority will significantly improve the monitoring of the performance of our healthcare system. Under this bill the authority will also calculate block funding amounts for hospitals not subject to activity based funding—something that is especially important for the delivery of health care in regional and rural areas. Small regional and rural hospitals will be protected under the new financing arrangements proposed in the bill.

This government is committed to funding health services so that all Australians, regardless of where they live, have access to great health care. Where activity based funding is not appropriate, the block funding system will continue. We will make sure that rural and regional hospitals are able to continue to meet their obligations and can deliver high quality patient care. These are the Labor values of equality and fairness in action.

While the Independent Hospital Pricing Authority will provide advice to state and territory governments on the efficient price for procedure and operation of public hospitals, it will not determine the payments made by those governments. The advice will not be binding, and the states and territories will maintain their discretion. The move to activity based funding is a vital reform because it helps ensure that hospital financing can adapt and adjust to changes in service demand. As the demographics of our population change, we have to equip public hospitals with the tools to deliver the appropriate services to the people who need them at the right time. The funding system has to reflect the needs of the community, to be targeted, flexible and responsive to technological advances in the detection and management of illness and injury.

The authority will enable activity based funding to have hospitals adjust to the needs of shifting populations, local demographic characteristics, changing costs of delivering medical services through innovation, and the complexity and location of delivering hospital services. To help public hospitals meet the challenge of shifting demands, the authority will play a role in determining what constitutes a public hospital service. It will provide assessments and recommendations in relation to the resolution of disputes between governments over cost-shifting and cross-border funding arrangements. Cross-border issues are a major challenge for the ACT, with Canberra Hospital serving a much wider region than the ACT.

In the interest of openness and transparency the Independent Hospital Pricing Authority will be required to publish its advice and other information. That will help inform decision makers in relation to the funding of public hospitals. In establishing national governance agencies and a performance and accountability framework, this government has shown that it is are serious about delivering an effective and efficient public hospital system—one that meets the demands of the future and gives Australian taxpayers value for money.

To support the work of the authority two advisory committees will be established: the clinical advisory committee and jurisdictional advisory committee. Those committees will provide advice to the authority on developing and specifying classification systems for healthcare and other services. The clinical advisory committee will consist of a chair and eight members, all of whom are clinicians. The jurisdictional advisory committee will also provide advice to the authority on a range of matters, including: adjustments to the nationally efficient price to account for variations in delivering health care, advice on the standards and requirements in relation to the provision of data by state and territory governments, and funding models for public hospitals. Under the guidance of the nine members of the authority and the support provided by the authority's advisory committees, it will be well advised by people with extensive clinical and professional expertise in the vital role it will fulfil.

The public hospital system is something we almost take for granted in Australia. We take it for granted that it is our right as Australians that if we are sick we can go to hospital and we will get that treatment. It is a right that Australians have come to expect and do expect, but it is something that does not come easy. Through the authority and other reforms under the National Healthcare Agreement, this government is taking an active role in ensuring healthcare providers deliver quality health care. The reforms have not been easy and we have had to make some tough decisions along the way, but we have taken the responsibility for bringing about a landmark agreement.

It is important to recognise healthcare reform in context. This is not just great healthcare reform, it is also great economic reform. Just as the Labor governments of the 1980s put in place macroeconomic reforms, such as floating the dollar and tariff cuts, and the Labor governments of the 1990s put in place vital microeconomic reforms, such as competition policy and enterprise bargaining, so too the Labor government of today is putting in place the next wave of reform—that is, reforms of public sector productivity, making sure that schools and hospitals work better. We are not only ensuring this is done transparently through the My School and My Hospital websites, but we are also ensuring that Australians get the best deal out of their public services. In the case of health we want to know that when we become sick, the dedicated staff from our local public hospital can do their job to provide the care our family and friends need at the time when it is needed most. I commend the bill to the House.

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Cnr Gungahlin Pl and Efkarpidis Street, Gungahlin ACT 2912 | 02 6247 4396 | [email protected] | Authorised by A. Leigh MP, Australian Labor Party (ACT Branch), Canberra.