Risk-adjusted capitation funding models for chronic disease in Australia: alternatives to casemix funding |
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Authors: | K M Antioch MK Walsh |
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Institution: | (1) Faculty of Medicine, Monash University, and Bayside Health Services, Melborne, Australia, AU |
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Abstract: | Under Australian casemix funding arrangements that use Diagnosis-Related Groups (DRGs) the average price is policy based,
not benchmarked. Cost weights are too low for State-wide chronic disease services. Risk-adjusted Capitation Funding Models
(RACFM) are feasible alternatives. A RACFM was developed for public patients with cystic fibrosis treated by an Australian
Health Maintenance Organization (AHMO). Adverse selection is of limited concern since patients pay solidarity contributions
via Medicare levy with no premium contributions to the AHMO. Sponsors paying premium subsidies are the State of Victoria and
the Federal Government. Cost per patient is the dependent variable in the multiple regression. Data on DRG 173 (cystic fibrosis)
patients were assessed for heteroskedasticity, multicollinearity, structural stability and functional form. Stepwise linear
regression excluded non-significant variables. Significant variables were ‘emergency’ (1276.9), ‘outlier’ (6377.1), ‘complexity’
(3043.5), ‘procedures’ (317.4) and the constant (4492.7) (R2=0.21, SE=3598.3, F=14.39, Prob<0.0001. Regression coefficients represent the additional per patient costs summed to the base
payment (constant). The model explained 21% of the variance in cost per patient. The payment rate is adjusted by a best practice
annual admission rate per patient. The model is a blended RACFM for in-patient, out-patient, Hospital In The Home, Fee-For-Service
Federal payments for drugs and medical services; lump sum lung transplant payments and risk sharing through cost (loss) outlier
payments. State and Federally funded home and palliative services are ‘carved out’. The model, which has national application
via Coordinated Care Trials and by Australian States for RACFMs may be instructive for Germany, which plans to use Australian
DRGs for casemix funding. The capitation alternative for chronic disease can improve equity, allocative efficiency and distributional
justice. The use of Diagnostic Cost Groups (DCGs) is a promising alternative classification system for capitation arrangements. |
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Keywords: | Capitation funding model Casemix funding Diagnostic Cost Groups Diagnosis-Related Groups Health Maintenance Organization |
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