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Safety and quality

In 2017, all Australian governments signed the Addendum to the National Health Reform Agreement (the Addendum). Under the Addendum, IHPA is required to advise on an option or options for a comprehensive and risk adjusted model to determine how funding and pricing could be used to improve patient outcomes across three key areas:

  • Sentinel events
  • Hospital acquired complications (HACs)
  • Avoidable hospital readmissions 

The commitment by Australian governments to safety and quality follows a four-year program of collaborative work between IHPA and the Australian Commission on Safety and Quality in Health Care (the Commission) to consider the incorporation of safety and quality measures into the determination of the National Efficient Price (NEP).

Sentinel events

Sentinel events are adverse events that result in death or serious harm to patients.

In 2002, Australian Health Ministers agreed on the first version of the Australian Sentinel Events List. Since 2007, states and territories have reported annually on sentinel events in the Productivity Commission’s Report on Government Services. Public reporting of sentinel events is intended to facilitate a safe environment for patients by reducing the frequency of these events.

In July 2017, IHPA introduced a funding approach for sentinel events whereby no funding is provided if an episode of care includes a sentinel event. A zero National Weighted Activity Unit (NWAU) is assigned to these episodes. This approach is applied to all hospitals, comprising services funded on an activity basis or a block funded basis.

The Australian Commission on Safety and Quality in Health Care (the Commission) is responsible for managing the Australian Sentinel Events List

In 2018, the Commission completed a review of the Australian sentinel events list to ensure that each sentinel event meets the definition and criteria of a sentinel event.

Hospital acquired complications (HACs)

Hospital acquired complications (HACs) are complications which occur during a hospital stay and for which clinical risk mitigation strategies may reduce (but not necessarily eliminate) the risk of that complication occurring.

A list of 16 HACs was developed by a Joint Working Party of the Australian Commission on Safety and Quality in Health Care (the Commission) and IHPA. The Commission is responsible for the ongoing curation of the HAC list to ensure it remains clinically relevant.

In July 2018, IHPA introduced a funding adjustment for HACs whereby funding is reduced for any episode of admitted acute care where a HAC occurs.

The reduction in funding reflects the incremental cost of the HAC, which is the additional cost of providing hospital care that is attributable to the HAC. This approach recognises that the presence of a HAC increases the complexity of an episode of care or the length of stay, driving an increase in the cost of care.

The HAC funding approach incorporates a risk adjustment model that assigns individual patient episodes with a HAC complexity score (low, medium or high). This complexity score is used to adjust the funding reduction for an episode containing a HAC, on the basis of  the risk of that patient acquiring a HAC. Factors like patient age, gender and major diagnostic category are accounted for in this model.

IHPA has also included risk adjusted HAC rates to its National Benchmarking Portal to enable hospitals to benchmark and assist in driving improvements to patient outcomes.

Avoidable hospital readmissions

Unplanned hospital readmissions are a measure of potential issues with the quality, continuity and integration of care provided to patients during or subsequent to their original hospital admission.

In June 2017, the Australian Health Minister’s Advisory Council (AHMAC) approved a list of avoidable hospital readmissions and readmission diagnoses developed by the Australian Commission on Safety and Quality in Health Care.

As outlined in the Pricing Framework for Australian Public Hospital Services 2019‑20, IHPA will analyse three funding options intended to assist in preventing avoidable hospital readmissions from 1 July 2019, for a 24-month period.

The shadow period will incorporate the following three funding options:

  • Option 1: Do not fund the readmission episode;
  • Option 2: Combine the index and readmission episodes and recalculate the funding of the combined episode; and
  • Option 3: Adjust funding at the hospital level where their actual rates of avoidable readmissions exceed their expected rates of avoidable readmissions.

IHPA will use the Commission’s AHMAC approved list of avoidable hospital readmissions as the basis for trialling the funding options.

As outlined in the Addendum, in addition to developing a funding approach to avoidable hospital readmissions, IHPA is also required to develop a risk adjustment model. IHPA is in the process of developing a risk adjustment model for avoidable hospital readmissions. The risk adjustment model aims to use patient characteristics to predict the risk of an avoidable hospital readmission, initially using the same methodology as the HAC risk adjustment model.