- 20 Mar, 2021
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Activity Based Funding For Hospitals
8.0 Administration Cost
ABF was intended to reduce administrative costs by establishing a framework so hospitals could effectively manage themselves. However, extra administrative costs can occur both in the hospital and in central administration.
8.1 Hospital administration
Those working in hospital administration are required to collect the relevant clinical data and report this information to receive the ABF. This includes coding, counting and reporting activity data (Bell et al., 2014). ABF is used in many countries around the world, but is relatively new for Australia. New funding systems are subject to changes and refinement of policy. Hospital managers will need to adjust their strategies in response to these changes. This becomes costly and disruptive to the internal operation of the hospital (Southon, 1994).
8.2 Central administration
The AR-DRG categories are maintained by the National Centre for Classification of Health, who maintain the suitable fee levels for each of the AR –DRG categories. The categories need to be regularly modified to consider inflation, costs of materials, staffing costs and changes in techniques. The job of maintaining the fee schedule can be contentious. There may be strong political pressures and debate can arise when interpreting the data (Southon, 1994).
In addition, irregularities will inevitably occur with individual hospitals and services, who will request for special considerations. The government will be coerced to provide these concessions due to the political nature of health care funding. If these concessions are made it can potentially effect the integrity of the ABF program. Each special consideration will have to be dealt with on an individual basis which will be expensive and require time (Southon, 1994)
ABF is emerging to be the most popular method of financing public hospitals, in Australia and globally. Prior to the implementation of ABF, a lump sum payment was used to finance hospitals known as a global budget. The introduction of ABF has endeavoured to provide greater transparency, provide high quality care, encourage efficiency and help to reduce wait lists. The economic objective for ABF is for public hospitals to provide services that maximise the wellbeing of the health consumer (allocative efficiency) and ensure the highest possible improvement in outcome for the consumer is achieved by effective use of resource inputs (technical efficiency). (Guiness & Wiseman, 2011).
Although ABF is currently used in many countries there are concerns that this type of funding method may in fact reduce quality of care and promote fraudulent behaviour. Several clinical areas have expressed concern they are not receiving enough funds to provide adequate care and fear the range of services may be reduced. Whilst the ABF system is to encourage efficiency, critics suggest the complexity of the system requires time and money spent on administration. Clinicians and mangers spend countless hours counting, coding and reporting activity data to receive the funding.
Although ABF has only recently been introduced in Australia, countries in Europe and the USA have seen efficiency improvements and support the ABF system (O’Reilly et al, 2012). The literature suggests time and further adjustments are required to refine the patient classification and costing model to help create a more accurate and transparent system. This will help to reduce administrative costs, fraudulent behaviour and ensure hospitals are able to retain critical clinical areas and expand their range of services for the health care consumer.
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