Activity-based funding: the elephant in the room

This article first appeared in the August 2013 edition of Pulse+IT Magazine.

At the 2013 Health Informatics Conference, held from July 15 to 18 in Adelaide, the dominant themes were digital service delivery and eHealth, with discussion revolving around the revolutionary benefits to be gained through the adoption of digital service delivery applications and eHealth. Yet there was no recognition of the introduction in 2013-14 of activity-based funding (ABF) and its implications.

The Commonwealth government’s hospital and health reforms are not working because of socio-economic factors outside of the health sector. That is the view of Martin Laverty, CEO of Catholic Healthcare Australia, who in his opening keynote speech at HIC 2013 argued that socio-economic factors are the main drivers leading to health outcomes.

Mr Laverty quoted research by the World Health Organisation from its report on social determinants of health, which has shown that the most disadvantaged groupings in education, employment and income suffer the highest incidence of poor nutrition, chronic disease, and lowest life expectancy. The adoption of eHealth and digital service delivery can break down traditional barriers, and reach into underprivileged and remote sectors of the population.

From Kaiser Permanente in the US, Jamie Ferguson showed how a team-based care approach is being combined with the provision of mobile and remote device technology. It gives consumers greater access to healthcare services and information, to deliver better healthcare in the community at a lower cost. Through its eHealth (Social Mobile) program, in recent years Kaiser Permanente has seen the fastest growth in its home and virtual care delivery streams. These mobile personalised health applications include care tracking, monitoring, diagnosis, testing, EKG, ultrasound, electronic and video consulting, and online chat.

Penny Dash from McKinsey & Co in the UK also sees the power of better consumer access and transparency powering an evolution in healthcare delivery. However, Dr Dash believes that the traditional and established institutions of health are obstacles to providing the personalised care of eHealth more effectively, along with constraining costs.

She sees a consumer revolution building, using the example of recent social media pressure which forced the UK government to mandate the publication of death rates of all NHS surgeons. The UK public is increasingly demanding that one should be able to make an appointment online, and communicate by email with a GP.

In the Q&A Panel discussion, ABC presenter Tony Jones put forward the very likely scenario that whoever wins the forthcoming election will be seeking budget cuts across all government departments including health. So under such pressure can investment in eHealth be sustained?

Greater use of eHealth and digital service delivery enables increased patient care and prevention outside of hospitals. By its nature eHealth promotes personalised care remotely, drives efficiency and quality, and assists with better outcomes. Digital service delivery can be used to constrain ever increasing health costs, and by its ubiquitous reach help to alleviate growing staff shortages.

ABF – the unseen elephant in the room?

One major initiative that was not discussed in any of HIC’s keynote or plenary sessions was the introduction of activity-based funding (ABF), which is currently being implemented with effect from July 1. Yet ABF is the single most important new development for sustaining and exploiting the benefits of eHealth and mobile technology.

From 2013-14 onwards, healthcare will be funded based upon the data that is reported under the new ABF reporting regime. Many health services are having difficulty in establishing their reporting systems for patient care activity, particularly for non-admitted patients, which has grown rapidly in recent years.

With the emphasis on enhancing preventative care in the community, and the adoption and advocacy of eHealth and mobile technology devices, non-admitted patient (NAP) care is the area which is widely supported to continue to grow faster than in institutionalised care facilities.

Comprehensive and accurate ABF reporting of NAP care is critically essential to support the continued growth of eHealth, to enable increased innovation in personalised healthcare outside of hospitals.

ABF reporting systems, in their entirety but especially for NAP activity, can:

  • Ensure the effectiveness and maintenance of efficient clinical costing systems, and the appropriate funding of healthcare services, particularly for those which are providing care for non-admitted patients
  • Identify where NAP activity is inefficient, and not appropriate
  • Inform the cost benefit analysis of the use of eHealth and digital service delivery, where NAP services can be grown to replace or avoid hospital inpatient care
  • Drive the rationalisation and standardisation of many small ‘orphan’ information systems used for NAP care services, which are unable to collect the required NAP data for ABF reporting
  • Encourage the introduction of improved clinical information systems so that effective clinical information systems can capture NAP data to feed into ABF reporting
  • Create a re-energised demand for strategic eHealth planning. All information systems should become compliant with requirements for data extraction, and integration with ABF reporting.
  • Provide seamless access to patient activity information across the patient journey.

Where NAP information systems are unable to effectively integrate with ABF reporting, or where NAP data is missing, or not captured, there will be the following consequences:

  • NAP clinical activity will not be accurately reported, and as a consequence will lose funding
  • If a NAP clinical service cannot be effectively measured and reported, it cannot be properly managed, and any justification for the service’s continuation will be questioned
  • New and innovative clinical services, which introduce eHealth and digital service delivery to enable NAP activity, will be unable to cost justify such a new eHealth approach, and be discontinued.

Some conclusions

The introduction of ABF reporting of NAP activity is an opportunity not yet recognised to drive the uptake of eHealth and digital service delivery. Where it can be demonstrated that new ways of delivering healthcare to the individual outside of hospital can produce better outcomes and at a lower cost, eHealth and its effective applications will be increasingly adopted.

Those eHealth projects that embrace the need to capture NAP data to feed into ABF reporting, and show improved quality outcomes and lower costs, can only gain. Both appropriate ABF funding and widespread acceptance of digital service delivery will ensue.

Simply put, ABF funding and reporting has the potential to be eHealth’s greatest supporter.

Author details

Bryn Evans
Director, JEMS Consulting
This email address is being protected from spambots. You need JavaScript enabled to view it.

Bryn Evans is a management consultant with many years’ experience as a CIO in healthcare, and as chief executive of a clinical software supplier. He writes extensively across a range of categories and genres, notably in the areas of management, information technology, sport, travel, history and fiction.

Posted in Australian eHealth


0 # Adam Silva 2013-09-24 12:24
How would I be able to create my own clinical costing system or framework for my business?
0 # Terry Hannan 2013-09-25 16:50
Activity-Based Funding (ABF) can also be perceived as an inherently flawed model and will not improve health care delivery nor costs. I have presented a different perspective in a newsletter in February 2011 ( with the link to the specific ABF newsletter commenting on the Roxon-Gillard proposals on ABF. The use of this measure like DRGs and Case-Mix are being shown to have low specificity in measuring health care (see recent publications on variation from J Wennberg of the Darmouth Institute.

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