2.7 Network and Regional Targets

The following table sets out the targets for 1998 - 99.

Table 3: Metropolitan and Rural Targets, 1998-99

	Target A WIES6 (excluding DVA)	Margin A WIES6 (excluding DVA)	Option WIES6 (excluding DVA)	DVA Targets WIES6	Total WIES6
Inner & Eastern	109,392	2,185	8,874	6,199	126,650
ARMC	41,569	831	3,842	7,801	54,043
Peninsula	26,832	537	2,163	1,427	30,959
Southern	75,249	1,503	6,536	2,157	85,445
North Western	107,598	2,151	9,561	3,162	122,472
Women’s and Children’s	47,675	953	1,432	23	50,083
Barwon Health	29,719	594	1,694	2,197	34,204
Denominational	53,690	1,074	2,537	1,516	58,817
Total Major Providers	491,724	9,828	36,639	24,482	562,673
Barwon-South Western	23,350	528	236	1,679	25,793
Gippsland	35,349	744	889	1,818	38,800
Grampians	31,375	698	1,585	2,129	35,787
Hume	36,419	785	1,475	2,422	41,101
Loddon Mallee	41,445	904	479	3,690	46,518
Kooweerup	1,120	32	187	43	1,382
Total Rural Regions	169,058	3,691	4,851	11,781	189,381
Grand Total	660,782	13,519	41,490	36,263	752,054

Note: Figures exclude Tender WIES

2.7.1 Metropolitan Targets (including Geelong)

Almost half of the projected throughput for the major providers is provided through the Inner and Eastern and the North Western Health Care Networks. This year DVA WIES have been identified separately from public targets. In 1998 - 99, there have been major increases for the Peninsula Health Care Network, the Southern Health Care Network, and Barwon Health. Details are provided in Appendix 2.

Campus level activity will be monitored to ensure consistency with the principles of the Metropolitan Health Care Services Plan. Any significant departure from the agreed service plans or indicative levels will be assessed by the Department. Quarterly targets at the network and campus level will be nominated by Networks and included in the Health Service Agreement (HSA). Significant departure from network target levels, (greater than 2.5 per cent) after consultation with the Network, may result in financial penalties. Same day caps will operate within overall WIES6 targets.

Targets (A plus Margin and Options) will continue to be administered quarterly at the network level. Non-admitted patients will have a budget ceiling for each hospital campus.

2.5.2 Rural Targets

In general, the allocation of throughput targets in 1998 - 99 shows a similar position to previous years, with an increase to Bendigo Health Service. Details are provided in Appendix 1.

Allocations to individual rural hospitals will continue to be determined by rural regions. Reallocations have been decided on factors such as the achievement of throughput targets over recent years, and the planned direction of services within the region in future years.

Quarterly targets will be nominated by each Group B hospital and included in the relevant Health Service Agreement. This will assist monitoring of throughput and scheduling of cash flows. Significant departures from these targets (greater than 2.5 per cent) after consultation with the hospital and the Regional Office, may result in financial penalties. Same day caps will operate within the overall WIES6 targets. Details on individual hospitals are provided in Appendix 1.

2.8 Same Day Medical Throughput and Caps

Same day caps were introduced in 1995 - 96 in response to the very high levels of growth in certain same day medical DRGs following the introduction of casemix funding. The aim of the caps was to ensure appropriate admission criteria were followed and prevent inpatient casemix payments for cases that should have been funded under outpatient block grants.

Same day caps apply to a limited set of medical DRGs and certain procedural DRGs. Caps should not affect the appropriate substitution of multi-day care for same day care for patients. Most cases where substitution is possible between a multi-day stay and a same day stay are grouped into DRGs other than those subject to a cap.

An examination of same day medical caps and throughput trends during 1997-98 showed that:

• The relative proportion of DRGs/episodes covered by same day caps varied substantially between hospitals;
• Same day medical admission practice varied considerably within and between hospitals;
• Same day admission rates vary between metropolitan Melbourne and rural Victoria, with the Peninsula Network having the highest rates of same day medical WIES4 per 1000 population;
• Same day DRG caps include a number that are based on procedures. Most of these DRGs are in gastroenterology; and
• Growth in same day medical throughput since 1994 - 95 is dominated by gastroenterology.

 

Same day medical throughput caps have to date been set at 1995 - 96 historic levels. For 1998 - 99 caps will be standardised at 6.5 per cent of total funded throughput across Victoria. Specialist hospitals will be excluded from same day medical caps and will not contibute to Network caps. These excluded hospitals are Royal Children's Hospital; Royal Women's Hospital; Royal Victorian Eye and Ear Hospital; Caulfield General Medical Centre; Peter James Centre; and Mercy Hospital for Women. Rural hospitals will be subject to the same level of caps.

In 1998 - 99 there will be:

• A full review of admission criteria and practice, and funding options for same day medical DRGs;
• A series of random hospital audits of patients admitted as same day medical DRGs to examine current practice; and

A review of same day gastroenterological service provision which will examine hospital specific and geographic area specific trends in the provision of services; the logic of the inclusion of procedure based care in the list of target same day medical DRGs; the cost of service provision for metropolitan and rural hospitals; and possible funding options for 1999 - 2000.

2.9 Unit Rates

The unit rates for all WIES6 are given in table 4.

Table 4: Unit Rates, 1998-99

	Unit Rates per Public WIES6			Private WIES6
Target	Notional Fixed Rate	Variable Rate	Total Unit Rate	Total Unit Rate
A Major Providers Rural Group B (large) Rural Group B (small) & C Rural Group D & E	$829 $843 $864 $887	$1,368 $1,368 $1,368 $1,368	$2,197 $2,211 $2,232 $2,255	$1,797 $1,811 $1,832 $1,855
Margin A	-	$958	$958	$678
Option	-	$1,368	$1,368	$968
Tender		To be determined	To be determined	To be determined

The notional fixed grant was standardised in 1995 - 96, when hospitals in Group D and E received a higher rate than larger hospitals in recognition of their higher infrastructure costs relative to inpatient throughput; the relative inelasticity of many costs in smaller hospitals; and because of the reallocation of targets from smaller hospitals to the larger regional hospitals.

For 1998 - 99, as previously, it has been recognised that higher infrastructure costs also apply to smaller Group B (those with less than 10,000 WIES per year) and Group C hospitals in rural areas. Overall these hospitals have had fewer Option WIES allocated to them than have Networks and other major hospitals. Thus the notional fixed rate for these hospitals has been increased.

As larger Group B hospitals do not have these costs to the same degree, their notional fixed rate is unchanged. As for 1997 - 98, Barwon Health and the Networks have been grouped as Major Providers. Major providers have a lower notional fixed rate reflecting economies of scale in their infrastructure.

The variable payment will be $1,368 per WIES6 and will be payable on all WIES (except those in the Target A Margin and Tender Pool). In 1998 - 99, the variable payment will continue to include the amount which used to be separately identified as the public medical payment.

2.10 Responses to Targets

2.10.1 Major Providers

Major providers are required as soon as possible, but no later than 1 August 1998, to advise the Department on:

• Quarterly throughput levels and indicative campus level throughput;
• The amount of allocated Option WIES that they will take up as proposed in table 3; and
• Their ability to comply with the timetable in respect of Option WIES.

Tenders for the Tender Pool WIES must be received by the Department by 15 August 1998. Formal notification of the outcome of the Tender Pool will be provided by 30 August 1998.

2.10.2 Group B Hospitals

Group B hospitals are also required to advise the Department by 1 August 1998 on:

• Quarterly throughput levels; and
• The number of Option WIES to be taken up (where appropriate).

Rural hospitals will also be able to tender for Tender WIES. Tenders are required to be received by rural Provider Managers by 15 August 1998.

2.11 Force Majeure

Circumstances (including industrial action), beyond the reasonable control of hospital management, may sometimes prevent the attainment of targetted throughput. In previous years, in these circumstances, the Department has, on a case by case basis, funded hospitals according to their cash flow projections irrespective of throughput, only for so long as force majeure continues. Hospitals are expected to mitigate their financial exposure and throughput decline during and following such events and will not be additionally funded for extra "catch-up" throughput in specific service areas undertaken around a period of force majeure. In general the relevant quarters performance will be used to determine the net impact of any period of force majeure.

2.12 Major Changes in Services Provided

Funding is provided to hospitals and Networks on the basis that the current range of services are continued. Before hospitals or Networks undertake a significant change in the range or scope of services, the planning implications of such a move must be discussed and agreed with the Department. In rural areas the appropriate discussion should be held with the Regional Provider Manager or Acute Health Manager. In the metropolitan area, discussions should be held with the Acute Health Program and the Region. In all cases, the Director of Acute Health Division must provide the final approval.

2.13 Superannuation

The Superannuation Guarantee levy rate will increase from 6 per cent to 7 per cent from 1 July 1998 and funding available to hospitals has been increased to meet these costs. As in 1997 - 98, unfunded liabilities in respect of the Contributory Scheme are being met directly from the Department of Treasury and Finance.

With the implementation of National Competition Policy and the introduction of competitive neutral costing for Victorian hospitals from 1 July 1998, it is likely that hospitals will be outsourcing and privatising some of their business units. In these situations hospital employees who are members of the Contributory Scheme, and who take up employment with the private provider, may be provided with three options in relation to their accumulated benefits. They are:

• Receive resignation benefits;
• Defer their benefits; or
• Elect to transfer their benefits ( referred to as the transfer benefit) in accordance with the section 9 of the Superannuation (Portability) Act 1989.

In the latter case, payment of unfunded liability becomes due if an "approved employee" accepts a position with an "approved employer". Put simply, the benefit cannot be transferred without the unfunded liability being met. Therefore the employee will not have this option available unless hospitals request and receive prior approval from the Department before offering a transfer benefit to employees.

2.14 Workcover

There are two significant changes to Workcover in 1998 - 99. They are, first, a change to the definition of remuneration to include superannuation which took effect from 1 January 1998; and second, an increase in the average premium rate from 1.8 per cent to 1.9 per cent, to take effect from 1 July 1998.

Hospitals have not yet been billed for the period 1 January 1998 to 30 June 1998 in relation to the change in the definition of remuneration. The Victorian Workcover Authority has advised that certification forms will be sent to hospitals in July 1998 to calculate the required payment for the period, but payment by hospitals is not anticipated until November 1998.

Funding available to hospitals has also been increased to take account of the 1998 - 99 full year impact of the change in definition in remuneration and the increase in the premium rate from 1.8 per cent to 1.9 per cent of payroll.

2.15 Water and Sewerage Reform

In line with the Government's user pays policy for water, hospitals will be required to pay commercial rates for water consumption and sewerage disposal in 1998 - 99. Government has given an undertaking that hospitals will not be disadvantaged by this measure and $3.5 million has been provided to meet these additional costs.

Water authorities will introduce a Sewerage Disposal Charge from 1 July 1998 which will have a financial impact on hospitals, as hospitals previously did not pay this charge. The charge is levied for the volume of waste sent through the sewerage system for treatment. In most cases the volume is not metered and a discharge factor of 90 per cent for hospitals has been put in place. This assumes that 90 per cent of the water metered as coming into the property goes into the sewer and a rate of between $0.76 and $0.78 per kl is applied (minus any allowance for trade waste). The options for hospitals are to:

• Accept the 90 per cent discharge factor;
• Carry out a self assessment to determine the appropriate factor;
• Install meters on discharge to sewer points; or
• Undertake a detailed audit to determine the appropriate factor.

Hospitals should contact their local water authority to ensure that a proper assessment has been undertaken.

The Department will be requesting each hospitals to provide an annual estimate of the impact of the new water and sewerage charges, based on their first quarter charges. If the total impact exceeds the amount of funds provided by Government, a submission will be made to Treasury to increase the amount provided to hospitals.