Victoria - Public Hospitals Policy and Funding Guidelines 1997-1998
Section A: Policy

4.1 Victorian Ambulatory Classification System - Group A Hospitals

The Victorian Ambulatory Classification System (VACS) was introduced in a phased manner from 1 July 1996 for Group A hospitals. Participation is mandatory for all Group A hospitals from 1 July 1997, and compensation grants have been introduced to smooth the transitional process.

The system has been designed to be relatively neutral in its impact on existing services. Budgets will be capped for the first year, meaning that hospitals will be allocated a specified maximum budget. Funding in 1997-98 is guaranteed up to the budget ceiling. However, where activity fails to reach target levels across the agreed profile of services, the variable growth will be adjusted accordingly.

VACS is based on patient/clinic data in 43 clinical categories as identified in two studies on the Development of Resource Weights for Non-Admitted Patients undertaken by Jackson and Sevil of the Centre for Health Program Evaluation. These categories were found to be clinically meaningful in major areas of clinical practice, and to achieve levels of resource homogeneity comparable to those found for inpatient DRGs. They can and will be improved over time. The initial assignment of clinics to the categories defined under the classification system is completed by hospital staff. The clinic assignments are then evaluated by a clinical panel established through the Victorian Casemix Clinical Sub-Committee.

The funding model includes an emergency services grant, the VACS variable grant, a base grant, specified grants and a compensation grant. Teaching and training costs for ambulatory services are also separately identified and funded as specified grants.

During 1996-97 work was undertaken to examine the difficulties in attributing an emergency grant that, by definition, incorporates a high ratio of fixed to variable costs. This has resulted in a better estimate of the fixed cost of non-admitted emergency services which will be allocated as a block grant in 1997-98. This Grant does not reflect the full costs of emergency department funding which also occurs through inpatient WIES payments, the Emergency Services Enhancement Program and Training and Development Grants.

Reporting under the new system occurs through the Agency Information Management System (AIMS). All hospitals funded under VACS during 1997-98 have an agreed schedule of services which forms the basis of funding during the year. Significant variation from this schedule, in terms of estimated activity levels and mix of services, will be audited and payments adjusted accordingly where hospitals do not meet the targets specified.

The new system has been designed to capture existing data items as recorded by the majority of hospitals in the first year, with the potential to expand and improve the classification system and funding allocation in subsequent years. The intention is to maximise use of existing data and to avoid, as much as possible, any increase in administrative overhead.

The new arrangements may be adapted in subsequent years according to national developments. As part of the funding arrangements, compensation grants will be available to provide a cushioning effect during the transition to the new system. In 1997-98, 40 per cent of both positive and negative compensation grants will be funded.

4.1.1 Clinical Groupings

Forty clinical specialties were identified in the first study The Development of Relative Weights for Non-Admitted Patients by Jackson and Sevil. These categories were found to be clinically meaningful in major areas of clinical practice, and to achieve levels of resource homogeneity comparable to those found for inpatient DRGs. The number of clinical specialties was extended to 43 from the second study and a further three categories will be introduced for reporting purposes from 1 July 1997. The categories may change further as a result of the findings of subsequent cost weight studies. For example it may be necessary to expand or collapse the number of categories to reflect greater resource homogeneity and clinical meaningfulness.

The VACS clinical specialties for reporting purposes from 1 July 1997 are:
Medical Categories
01 General Medicine
102 Allergy
103 Cardiology
104 Diabetes
105 Endocrinology
106 Gastroenterology
107 Haematology
108 Nephrology
109 Neurology
110 Oncology
111 Respiratory
112 Rheumatology
113 Dermatology
114 Infectious diseases
115 Developmental Neurological Disability
116 Complex Nephrology and Renal Failure

Surgical Categories
201 General surgery
202 Cardiothoracic
203 Neurosurgery
204 Ophthalmology
205 Ear, nose and throat
206 Plastic surgery
207 Urology
208 Vascular
209 Pre-admission

Dental
301 Dental

Orthopaedics Categories
310 Orthopaedics
311 Orthopaedic Application

Psychiatric Related Services (Program 306)
350 Psychiatry & Behavioural Disorders

Obstetrics & Gynaecology
401 Family Planning
402 Obstetrics
403 Gynaecology
404 Reproductive Medicine
405 Dysplasia and Colposcopy

Paediatrics
501 Paediatric surgical
502 Paediatrics medical

Emergency Medicine
550 Emergency Medicine

Allied Health
601 Audiology (otoneurology)
602 Nutrition
603 Optometry
604 Occupational Therapy
605 Physiotherapy
606 Podiatry
607 Speech Pathology
608 Social Work
609 Other Allied Health Services

The initial assignment of clinics to the categories defined under the classification system is completed by hospital staff. The clinic assignments are then evaluated by a clinical panel established through the Victorian Clinical Casemix Sub-Committee. All Group A hospital clinic schedules have been set and new clinics will be assessed by the Clinical Panel on an annual basis. Hospitals will be advised of changes to their individual clinic schedule by July 1997.

4.1.2 Encounters

The encounter forms the basis for activity reporting. For funding purposes resource weights have been developed which incorporate not only the clinic visit, but also associated ancillary services provided to the patient over a defined period. The period over which bundling occurs will be a window of thirty (30) days either side of the visit. The 30 day window has been chosen to encompass the majority of services associated with a particular visit and to enable a reasonable and practical time period for reporting and funding.

Some examples of bundling to form the encounter are:

Patient A

Encounter 1

04/06/97: Imaging examination conducted in preparation for clinic visit.
19/06/97: Visit to the Oncology clinic within the Oncology category.
20/06 & 21/06: As result of clinic visit pharmacy and pathology services ordered and occur.
03/07/97: Repeat pharmacy prescription.

All components of encounter are linked by 1) UR Number and 2) Clinic Code. If Clinic code is missing from patient record, UR number is sufficient to identify ancillary services.

In the first instance, if the referral date for the ancillary service is equal to the clinic visit date, a link is made. If there is no date match, services within the 30 day window will be linked to that clinic visit.

In this instance, all ancillary services will be linked to the Oncology visit.

Encounter 2 (new encounter)

08/07/97: Visit to the Nephrology clinic within the Nephrology category.

Patient B

Encounter 1

12/6/97: Visit to the ear, nose and throat clinic within the ear, nose and throat category.

Encounter 2 (new encounter)

27/6/97: Visit to the ear, nose and throat clinic within the ear, nose and throat category.

For reporting purposes only the clinic visit will be reported. These will, however, be paid on the basis of the cost weight that incorporates the ancillary services. Eventually most hospitals will be able to bundle the clinical visits with ancillary services. For 1997-98 hospitals do not need to bundle ancillary services to be funded on clinic visits.

4.1.3 Funding Components

For all Group A hospitals the Non-Admitted Patient Grant will comprise the following components.

Emergency Services Grant

The non-admitted Emergency Services Grant will be allocated separately to account for the fixed cost of emergency services. Details on the establishment of this grant are provided in section 4.3.

Base Grant

The Base Grant will ensure stability and continuity over the implementation period. As with inpatient payments the ratio between fixed and variable payments may change over time. In 1997-98 the Base Grant will comprise approximately 13 per cent of the total 1996-97 outpatient budget (including the amount allocated for the Emergency Services Grant).

Variable Grant

The new funded unit encompasses the basic service pattern or range of care provided to a patient. This actual pattern of treatment is expressed through a new concept of the Encounter. For non-admitted throughput up to target the case payment will be $105 per weighted encounter. Targets will be set at 1996-97 activity levels and are given in appendix 2. Case payments will only be paid for public encounters. Where activity varies significantly from the agreed profile of services, or fails to reach target, adjustments will be made.

Teaching Grant

In recognition of the importance of non-admitted services for teaching and training a specified grant will be allocated as a teaching grant. For Group A hospitals the Teaching Grant is calculated on the basis of 8 per cent of the existing outpatient grant.

Allied Health Services Grant

Allied health services will also be funded through a specified grant in 1997-98. This grant will be determined on the basis of occasions of service as reported by hospitals to the Department.

Other Grants

A number of services to non-admitted patients have either a relatively specialised function or are provided in a manner that cannot be readily funded in terms of patient encounters. Such services are however an important part of hospital services. Areas nominated by hospitals for specified grants have been reviewed by the clinical panel to determine whether they should be incorporated in the VACS clinical categories.

Compensation Grant

To ensure a smooth transition to the new system, a compensation grant will be available to hospitals in the first year. In 1997-98 hospitals will receive 40 per cent of compensation grants, both positive and negative.

4.1.4 Reporting and Audit

Standard collection and reporting methods have been developed to ensure comparability across hospitals. To establish standard measures there will be a minimum workload placed on hospitals and staff. It is not intended that new data items be developed for 1997-98, although for some hospitals there may be modifications in data collection and reporting. There will, however, be scope for increasing the number of data fields as the classification system develops in future years.

Reporting under the new system will continue through the Agency Information Management System (AIMS). Reports on occasions of service need to continue as part of State responsibilities under the existing Commonwealth/State Medicare Agreement. The AIMS S9 form will be used for reporting data as part of the Victorian Ambulatory Classification System for non-admitted patients funded by Program 111.

In the case of a new clinic commencing during the year, or changes to existing clinics, assignment to a VACS category will be made by the hospital. The hospital will be required to advise the Department on any changes occurring during the year. An annual review by the Clinical Panel will assess the assignment of all new and reviewed clinics.

During 1997-98 an audit will be undertaken to verify the clinics currently approved by the Department of Human Services and a series of random audits will be undertaken to determine the level of accuracy of recording activity in the VACS categories. The project will also review existing systems.

The audit details include:

  • Verification of clinics currently approved by the Department at each of the 16 Group A hospitals in terms of clinic existence, service provider, frequency and proportion of public patients treated.
  • Review of systems for recording patient encounters and submitting activity data via AIMS.
  • A series of random audits at selected hospitals to check adherence to counting rules in terms of patient encounters, diagnostic services, clinics funded by specified grants and public/private status.

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