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ACT 1982
HEALTH AND AGED CARE
INFORMATION
FREEDOM OF
THIS DOCUMENT HAS BEEN RELEASED UNDER
THEBY THE DEPARTMENT OF
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Next steps
All the submissions to the consultation paper will be published (where material is not
identified as confidential) and the concerns raised, including alternative options, will be
considered by the Department along with other feedback received from stakeholders.
Key feedback
The following sections summarise the key feedback against these five matters.
Preferred bundle variant
• Most hospitals and their peak bodies assert:
o data used to determine the bundles is not complete or is in some way inaccurate
o none of the bundle variants are suitable due to benefit variation across
procedures, specialties and hospitals and no further refinemen
t will address this
o risk sharing across procedures/specialties/hospitals is not possible
o some procedures may become financially unviable, incl uding
:
▪ more complex procedures
▪
some specialties such as bariatric surgery and chemotherapy
o may require hospitals to limit services or charge patients out of pocket fees
o maintaining the current prostheses list (PL) Part D arrangements is preferable
• A mix of stakeholders suggested maintaining elements of the PL Part D arrangements
including for:
o
items used by day hospitals
o staples and tackers
o arterial closure devices
o gastro-intestinal staplers
• Insurer peaks support moving
directly to contracting between insurers and hospitals
• Of those stakeholders which indicated a preference:
o the majority preferred variant C (Major Diagnostic Category) as best accounting
for benefits variability
o the second most preferred was variant B (facility type)
The use of AR-DRG version 10 in bundle variant C
• A number of stakeholders across device, insurer, medical and hospital organisations
supported using AR-DRG version 10 as:
o supporting a more detailed variant such as variant C that reduces benefit variation
o standardising classification across the sector, including to support contracting.
• The majority of hospital stakeholders indicated that, while it is feasible to use
AR-DRG version 10, it will be administratively burdensome, particularly for those
stakeholders not already using it for contracting or other purposes.
Prostheses List Reform Taskforce, Technology Assessment and Access Division
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Proposed settings across all bundle variants
• No gap requirement:
o Majority of hospital organisations did not support this due to the potential need for
hospitals to charge patients where bundles do not adequately cover costs
o Majority of other organisations supported this as protecting patients from
increased costs
• Excesses can apply:
o Majority of all stakeholders considered excesses should be able to apply as they
do to the rest of private health insurance benefits
• Contracting permitted, including to override bundle benefits:
o Majority of hospital organisations assert contracting below the mandated benefit
should not be permitted due to the perceived power imbalance with device
organisations and insurers
o The majority of other organisations support contracting
• Transitional arrangements:
o Majority of hospital organisations do not support the mandated minimum benefits
being transitional and indicate they need to be per
manent although some support
a longer transition period, for example to align with three-year contract cycles
o Insurers did not support a transition period prefer
ring a direct move to contracting
• Fixed bundle benefits:
o Majority of all stakeholders sup
ported regular updates to the bundle benefits to
reflect changes in utilisation volume/mix, cost and new products
Sector business readiness implications
• Majority of hospital stakeholder organisations indicate:
o
changes required to multiple hospital and other non-payer software and
manual system
s will take up to 12 months to implement and may require
additional expertise/training
o manual claiming will result in additional administrative burden and delays
o will take some time to consider the effects of bundled benefits
on viability of services including reviewing contract benefits and product pricing
• Insurer organisations indicate implementation possible by 1 July 2023 if existing
PL Part D item codes are replaced with bundle codes
• Substantial number of submissions across a range of device, insurer and hospital
organisations indicated more detailed specifications would be required to progress
implementation
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Defined terms used
• Product class
o Majority hospital and device organisations assert the product classes are high
level so may result in disputes with insurers or delays in claims, particularly for
new products not previously listed on PL Part D
o Small number of submissions querying the roles of hospitals, insurers and device
organisations in determining the appropriate product class for claims
o A range of device, insurer, medical and hospital organisations
▪ most indicated need for item utilisation data collection to inform updates
▪ some suggesting IHACPA would need to review them regularly for
appropriateness
o Small number of device, insurer and hospital organisations indicated the need for
clear supporting documentation
o Small number of submissions across all organisation types indicated the product
class descriptions would encourage product substitution although differed on
whether this would maintain or restrict clinical choice/ef fectiven
ess
o Device and medical organisations indicated some potential improvements to
product classes including consideration of
▪
Narrowing/splitting scope
▪ Eligibility of some items
▪ Accessories coverage
▪ Product size coverage
•
Episode of admitted care
o Device and hospital organi
sations assert the definition does not account for
multiple theatre admissions or procedures
o Broad range of hospital, insurer and device organisations
▪ support the use
of the AIHW METeOR definition
▪ smaller number indicating some incentive for use of more bundles
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Attachment C
In December 2022, IHACPA provided its advice on Bundling Arrangements for General Use Items on
the Prostheses List report to the Department, outlining three options for implementing an alternative
funding arrangement that uses bundled benefits for these items:
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16 November 2021
The Hon Greg Hunt MP
Minister for Health and Aged Care
PO Box 6022
House of Representatives, Parliament House
CANBERRA ACT 2600
By email:
xxxxxxxx.xxxx@xxxxxx.xxx.xx
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@health.gov.au
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Dear Minister,
We are writing to you to provide an update on discussions relating to the Department of Health’s
request that private health insurers and private hospitals negotiate a path forward for reform of the
General Miscellaneous Category of the Prosthe
ses List.
On 12 November 2021, the chief executive officers of Catholic and non-Catholic private hospital
providers met with the Australian Health Service Alliance (AHSA) to discuss options for reform of the
Prostheses List. AHSA represents 24 small and medium-sized health funds. Hospital attendees
included the CEOs of Ramsay Healthcare, Healthscope, and St Vincent’s Hospital Network.
The parties had a productive
, high-level discussion on the current reform efforts and identified a
number of areas of in-principle agreement. While further discussions will be required to clarify and
agree detail, we view the below principles as a more feasible and beneficial basis of reform than the
current approach.
Reference pricing for General Miscellaneous Category items
There was collective support for a shift to public and international sector reference pricing (reference
pricing) for the General Miscellaneous Category (GM), commencing from 1 July 2022. This approach
has several key benefits, including:
-
An immediate saving delivered to health insurers;
-
Maintaining clinician choice; and
-
Avoiding near term increases in out-of-pocket costs for patients resulting from GM reform.
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We understand that the Independent Hospital Pricing Authority (IHPA) is already working on some
form of reference pricing for GM products. We believe IHPA is best placed to implement reference
pricing for GM products by 1 July 2022.
Developing an approach to bundling for products in the General Miscellaneous Category
The parties agreed that after the implementation of reference pricing for GM products, options for
bundling these products should be explored. Again, IHPA is best placed to lead development of these
bundling models, with the intention that bundling be in place by 1 July 2023.
If bundling arrangements can be agreed, it would allow for the removal of some General
Miscellaneous products from the Prostheses List, if recommended for removal following a bona-fide
process of clinical review.
Removal of topical adhesives from the General Miscellaneous Category by 1 March 2022
As you are aware, the Department has proposed the removal of eight products (topical adhesives)
from the GM from 1 March 2022. Both private hospitals and the AHSA hav
e concluded that it is not
practical to negotiate alternative funding arrangements for these products by that date. It was agreed
that maintaining these items on the Prostheses List and subjecting them to reference pricing as
outlined above is a preferable approach.
Next steps
The parties agree that a new approach to GM reform is required . We propose reform of the General
Miscellaneous Category based on the principles outlined in this letter. Reference pricing presents an
opportunity to provide significant savings to health funds whilst maintaining clinical flexibility and
patient choice. This contrasts to the current
approach which threatens the financial viability of
hospitals, will likely lead to increased out-of-pocket costs for patients, and increases the complexity
and cost of negotiating arrangements betwe
en hospitals and health funds.
IHPA is well placed to support implementation of reference pricing and bundling for General
Miscellaneous products. IHPA already works with a number of the stakeholders involved in the private
hospital sector and is developing bundling for models of care in the public system with states and
territories. Private hospitals are in the process of seeking meetings with other health insurers to
discuss these proposals.
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Three MoU implementation issues
The removal of general use items will not proceed as planned on 1 July 2023. The government’s
preferred policy decision to remove generic, general use items from the Prescribed List (PL) will not
proceed as planned. As you noted on 14 December 2022, “These general use and consumable items
are the kind that could be used in any surgery performed in Australia, and the inclusion of separate
entries for each on the Prostheses List appears to have been contributing to inflated costs for private
patients.”
It is now four years since the government announced this decision, and it is very disappointing that
there will be further delays. Importantly, the poor practices identified by the department and the
Ernst and Young report will continue, costing consumers significantly more than necessary.
I am advised that the Minister is currently considering advice from the department on options for
delaying implementation. To ensure consumers and their health funds are not further penalised by
this delay, I ask you to consider dropping the price of general use items to the lowest available public
price from 1 July 2023, rather than the average public price. The department have these data to hand
and could quickly implement the price cuts. While this will cut into the mar
gins for the international
medical device manufacturers, it will still ensure the devices can be provided at a profitable level and
help ensure that consumers don’t have to pay more than necessary.
I further ask that you ensure this delay is as short as possible. Health funds have rarely experienced
hospitals being unable to bill for goods and services provided, and it se
ems incongruous that the
hospitals are reporting that it will take many months to change their systems to implement the
government’s preferred policy position.
The regrouping of the PL will not proceed as planned. The Government has sound policy advice to
regroup the PL based on function rather than device fea
tures. However, it has proven impossible for
the department to fit the best policy into the constraints of the Hunt MoU, which protects the
current, flawed approach preferred by the multinational device companies. The clash between
reducing the prices closer to the public s ystem, and that regrouping does not result in further
savings, highlights the flaws in the current grouping system.
PHA will work with your de
partment to provide advice on how to implement some regrouping in a
staged approach so as to parti
ally m
eet the policy objectives without disadvantaging consumers, but
the Hunt MoU makes it very difficult to deliver a good policy outcome. We note that the advice from
your department to Minister Hunt (FoI 4045) highlighted these concerns, but the previous Minister
acted against the advice of his department.
As it is impossible to meet good public policy objectives with the two conflicting clauses of the Hunt
MoU, we ask that the Minister consider directing the department to prioritise the price cuts for
consumers, while minimising any costs to the multinational device companies (rather than requiring
no net benefit changes). This will result in higher than necessary costs for consumers but will allow
the department to address clear structural problems.
The department should also prioritise addressing errors in the PL. PHA has highlighted a range of
errors in the PL over recent years (for example, knee revision suffix for devices not used for revisions,
screws in the wrong category, neuromodulation leads being used as trial leads), and while a handful
of these errors have been assessed and rectified, most have not. The department has told PHA that
these issues would be addressed along with the regrouping process, but as the regrouping is again
delayed, it is not reasonable for errors on the PL to remain in place any longer. This activity would not
breach the Hunt MoU.
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It is also imperative to act quickly and decisively on post-listing reviews. The draft review of surgical
guides and biomodels found significant problems with both the scope of use of these devices and
the number billed per procedure, yet six months later no action has been taken to protect consumer
interests. Interim steps such as limiting the number of devices and restricting usage should be
implemented on 1 July 2023, with full implementation to follow.
Savings promised for cardiac devices will not proceed in full on 1 July 2023.
On 4 May 2023, your department advised that the savings outlined in the Hunt MoU for cardiac
devices would not proceed in full. The department is yet to advise the exact amount retained by the
multinational device companies, but it is likely in the order of $20 million in 2023-24 (one off, not
recurrent).
This is particularly disappointing, as these cardiac devices in the private sector are well over double
the price in the public sector. For instance, for the most popular implanted defibrillator the PL benefit
is around $36,500 and the public price is around $14,500 (FoI 4045).
The Hunt MoU delayed savings by a year as the device companies argue that they provide
monitoring services to the private sector that require more funding. This is despite a report from a
cardiac industry working group set up by the previous government to examine the issue of funding,
which stated in 2020, “It is difficult to see how establishing a fund
ing stream with public or private
health insurers’ money to support current arrangements is justified,” and that currently only “3 per
cent of services are unfunded or unnecessary”.
On this premise, the Hunt MoU thus delayed $64 million in savin gs in 2022-23 and referred the issue
of cardiac monitoring services to the Medical Services Advisory Committee (MSAC). MSAC is yet to
publicly report on its findings, so your department has decided as an interim step to delay the full
price cuts, applying the 40% reduction to a proportion o
n the cost of the devices on 1 July 2023 (with
the current intent a “catch up” price cut ne
xt year).
PHA have yet to identify another comparable jurisdiction where cardiac monitoring services receive a
separated benefit payable to device companies, and nor have we identified a comparable jurisdiction
that pays anywhere near what Australians with private health insurance pays for these devices.
PHA recommends that you overrule
your department and implement the full $64 million in savings
for 2023-24. Even if the device companies’ ambit claims are entirely accurate, the price cuts required
by the MoU on 1 July 2023 would still ensure these devices were profitable; while noting the
department has reported that they “found insufficient evidence to support [the industry’s] costings
of cardiac technical support services” and that “estimates are inflated” (FoI 4045).
Private Healthcare Australia
8 May 2023
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