Time for change: Health funding models

There are growing calls from governments and the clinical profession to move toward a more individualised, patient-centric and value-based approach to health care. COVID-19 has highlighted the critical need for change.

Our research in Australia and Europe shows existing funding models are not helpful when overwhelmed with non-standard patients, like those requiring isolation, increased length of stay, or non-standard tests.

Increasing co-morbidities such as diabetes, heart disease, chronic lung conditions and obesity also confound standardised care models.

The integration of digital health, MedTech and value-based healthcare shifts are essential to reduce the burden on the healthcare system.

Olga Kokshagina
Olga Kokshagina: It is time for a rethink of funding models in healthcare

But our business models and performance measures are not set up to drive the transformation we need.

We continue to measure standard costs and reward treatment case volume, not patient outcomes. Our funding models struggle with the increasing “non-standard” patients.

A values-based approach measures the true value of health interventions, both financial and non-financial.

We know that multiple stakeholders like AHHA, have long been calling for that change.

For example, Choosing Wisely program launched in 2015 in Australia by NPS MedicineWise in partnership with Australia’s health professional colleges, societies and associations, “facilitates dialogue between health professionals and patients about improving quality of care through reduction in unnecessary tests, treatments and procedures”.

But the system remains like an untouchable black box, embroiled in individual interests and beneficiaries.

There are fragmented initiatives from government, hospital procurement, suppliers and clinicians, but these lack transparency. Our healthcare system suffers from multiple and complex funding arrangements (source: CSIRO, Future of Health, 2018).

CSIRO calls for developing outcome-based funding models that incentivise health professionals to adopt and engage with needed changes in the system (CSIRO, 2018).

No individual party is accountable for driving the healthcare transformation process. However, most agree it is time.

Time for new accounting in healthcare

This is where accounting leaders in the health system can contribute both operationally and strategically.

Accountants can help define a broader notion of value and transform the accounting practice away from outdated activity-based toward value-based approaches.

While accountants supported the earlier move away from centralised government block funding to activity-based funding (in the 1990s Victoria introduced Casemix and in 2012 the Australian Activity-Based model was introduced nationally it is now being recognised for its limitations.

It is again time for accountants to step up and support the value-based move toward a system built on human-centric outcome evaluations by addressing calls for greater collaboration between disciplines in the transformation to value-based management.

Together with healthcare practitioners and administrators, accountants can help develop funding models that support innovation and wellness, rather than continuing to promote out-dated volume-driven approaches.

And they can ensure accountability for the new performance measures is clearly defined in the new business models, to maximise value-based outcomes.

We need to seize the opportunity that the pandemic has given us, to not just talk the talk, but finally walk it.

Dr Olga Kokshagina is Vice Chancellor Research Fellow and Lecturer within the Graduate School of Business and Law at RMIT University. Dr Gillian Vesty is Associate Professor in the School of Accounting, Information Systems and Supply Chain at RMIT University.

Do you know more? Contact James Riley via Email.

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