Ramsay Health Managers Conference

AMA PRESIDENT PROFESSOR BRIAN OWLER

**Check Against Delivery

Putting the Quality in Quality Health Care

I acknowledge the traditional owners of the land on which we meet, and pay my respects to elders past and present.

Thank you for the invitation to speak at this conference.

I have stated many times now that Australia has an excellent health care system.

It is not perfect, but it delivers great health outcomes including the fourth highest life expectancy in the world and some of medicine’s best innovations and advances. It is a health system we should be proud of.

In this sense, it is time for Australia to grow up and stop looking to overseas models in the mistaken belief they must be inherently better.

It is time to build on what we have here, and that includes the value of our private health system.

The success of our healthcare system is underpinned by the foundations of our healthcare system, which are:

•     universality;

•     equity of access;

•     training and standards;

•     the independence of the doctor-patient relationship; and

•     a balance between the private and public health systems.

The balance between the private and public system is something that is often overlooked.

A strong private health system means that patients relying on the public system have access to procedures in a more timely manner. Without the private system, our public hospitals would never meet the demand.

It is important to realise that the private system also delivers capital and infrastructure that governments would otherwise find difficult to fund.

The private health sector has also become an integral part of training, with clinical schools in many of our major private facilities, along with interns and residents in some.

Advanced trainees in many disciplines rely on the private sector for aspects of their training.

Part of my brief today is to talk about quality. This was, of course, brought about by the recent dispute between Medibank Private and the Calvary Health group.

This was much more than just a commercial dispute about a contract.

I described this dispute as a pivotal moment in our healthcare system - not just in terms of the private sector, but also in terms of the public system.

In looking at the dispute, apart from addressing the issue of quality, a driver of Medibank Private’s actions - and an issue that must be addressed - is that of affordability.

Essentially, this was an attempt by Medibank Private to impose financial sanctions on a provider for events which, although they have some degree of preventability, are an unfortunate, yet integral, part of clinical practice.

It was an attempt to impose cost-cutting measures through a commercial contract thinly disguised by the cloak of quality.

Medibank Private wanted to impose financial penalties for hospitals whose patients were subject to any event included in the list of 165 so-called 'highly preventable events'.

In addition, it would not pay for re-admission of patients within 28 days of discharge.

These 165 events included some rare 'never events', such as wrong site or side surgery. The AMA does not have any issue with a funder refusing to pay for such an event.

What the AMA was offended by was the continued, disingenuous use of the term ‘mistake’ to characterise events that are clinical complications, such as Deep Vein Thrombosis, Pulmonary Embolism, or infections.

The Medibank Private list was a subset from a list developed by the Australian Commission on Quality and Safety in Health Care, which looked at 500 high priority complications. These clinical complications have varied preventability.

Many, if not most, of them are not completely preventable. They are unfortunately a part of clinical practice - and doctors, nurses, and managers all strive to prevent them.

The Commission had developed this list in consultation with clinicians, and a pilot project was underway to test the validity of the data that was acquired.

The data would then be fed back to hospitals for benchmarking against de-identified peer hospitals to drive improved quality.

It was never designed as a funding model. The Commission’s CEO, Deb Piccone, herself has stated that the list that Medibank Private has used is not intended for funding purposes, and 'is not fit for purpose' as a funding mechanism.

The AMA and, indeed, doctors across the country were offended by Medibank Private’s use of the term ‘mistakes’, but also because it had the potential to adversely affect clinical practice by providing a disincentive for private hospitals to look after more complex cases or high-risk patients.

This has the potential to overload our public hospital system. It would upset that important balance between the public and private systems.

In addition, there were those patients who may need re-admission within 28 days.

If you were doubtful about the ability to admit within 28 days, the natural tendency would be to keep the patient in hospital for longer to ensure that the potential for re-admission would be diminished.

There would also be the potential for those patients who required re-admission to be sent to public hospital emergency departments, rather than being re-admitted to the same hospital.

There are other potential problems as well. For instance, where people have already experienced a seven day re-admission rule where funders have refused to pay for the second part of a procedure if in a re-admission, such was when a patient has a biopsy for a breast lump that is found to be cancerous and requires wider excision.

To suggest that these measures were about quality, or about preventing mistakes, is being mischievous with the truth. It was always about cutting costs.

This is why the AMA was so vocal about this behaviour. There is no self-interest here from the AMA. This is about preserving the foundations for a successful healthcare system. This is about ensuring the best care for our patients.

This was a test case.

Medibank Private was publicly supported by Bupa and NIB, who clearly wanted to impose similar measures.

It was resisted by the Australian Private Hospitals Association, by Ramsay and Healthscope, and others.

The fact that Medibank Private had got this through smaller players is to some extent irrelevant. 

Resolution of the dispute with Calvary at the eleventh hour has provided little comfort.

The outcomes are opaque, but it does appear that there will be some further work, which has been expedited through the Commission.

How that translates to Medibank Private's plans is unclear as the Commission’s work was never about a funding mechanism, nor is it intended to be in the future.

The question is: where do we go from here? There are two fundamental questions that need to be answered here.

One is the question of how we continue to drive quality in the private system. And the second is how we make private health insurance affordable, in terms of premiums, in the longer term.

To date the approaches by Medibank Private and other private health insurers have been clumsy and ham-fisted.

There has been no acknowledgement of the way in which quality is currently treated. Financial penalties such as the re-admission rule don't work.

In fact, just last month there was an article in JAMA that looked at what factors were able to be modified by surgeons and hospitals to prevent re-admission sand complications.

The results were that most contributing factors were not modifiable at all.

Very few factors had to do with the surgeon. Some had to do with the hospital, but the overwhelming majority of contributing factors were disease- or patient-related non-modifiable factors.

This underlines the point that the methods used by Medibank Private, even though they have elements of the approaches in the United States, are not backed by evidence - and they don't work.

What does work is good clinical governance and data.

Private hospitals have well-developed clinical governance frameworks, just as there are in the public sector. Good clinical governance includes systems to identify and manage risk, as well as peer review and audit.

Peer review and audit are already part of our continuing professional development – or CPD – requirements, which are a requirement for continuing registration.

Every hospital should be expected to have robust clinical governance frameworks in every department, and this is something that could be improved in some hospitals and units.

Clinicians are trained to analyse data. Clinicians are also competitive.

Provision of good quality, reliable data to clinicians, which enables them to benchmark their hospital, their unit, or themselves against their peers allows those that are underperforming to identify themselves, and then implement the necessary changes.

This is what the Commission was trying to do, and this is something that needs to be actively encouraged and supported.

Registries are another mechanism through which these can be achieved.

The registry can be based on a clinical condition or diagnosis, or it might be based on a procedure, or even an implant.

The Australian Orthopaedic Association runs a world-class registry for hip and knee implants, which can be used for quality measures. There are other examples as well, but they have been difficult to run because they need investment and they need support.

This is something of which I have personal experience.

A large part of my practice is that of hydrocephalus, a condition that is treated through the use of a CSF (Cerebral Spinal Fluid) shunt.

Shunts can be lifesaving but, as an implant, they have one of the highest failure rates of any medical device or implant.

At six months, the revision rate in children is 30 per cent, and 50 per cent at five years.

The consequences of shunt failure include death or major neurological deficit. Each revision also carries its own risk, including that of infection.

When I investigated the costs associated with shunt surgery, the costs associated with revision surgery were double that of the initial surgery.

Bad infections resulting in an extended Intensive Care stay approached $500,000 for one case.

Learning from my experience working in the UK, I thought it would be a no-brainer to institute a shunt registry here in Australia.

The registry was designed to allow every shunt operation and implant to be recorded. The revision rates, infection rates, would all be analysed by surgeon and unit.

That information could then be provided to surgeons and hospital units so that they could benchmark themselves against de-identified peers.

Underperforming individuals and units would then be motivated to examining their own practices and procedures to ensure that their performance improved. This is an approach that is known to work.

At first, I encountered some resistance in the profession but we got over that. But do you think I could get it properly funded or supported? 

There was some support from Government, but it was very modest. But there has been little support from elsewhere, except from patients who desperately want it to work.

I have been on the case of the shunt registry for almost 15 years.

So you might excuse my scepticism when I see Medibank Private and others talk about needing financial penalties to drive quality, when those within the profession are the people driving quality.

If funders, whether it be governments or health funds, are serious about quality, then they need to invest.

They need to provide the resources, and they need to allow those in the system to drive change that delivers better outcomes.

I can guarantee that, if they do this, then doctors, nurses, and managers within the health system will step up.

They are only too eager to do it. They just the need the support.

These latest actions by Medibank Private represent only the latest in a series of initiatives, across a number of insurers, which are designed to reduce costs and outlays.

The aggressive behaviour of the larger private health insurers is having a destabilising effect on the whole sector. The impacts include:

•     excluding treatments from existing policies;

•     removing services from schedules of medical benefits;

•     contracts with private hospitals that interfere with the established safety and quality system achieved by the accreditation arrangements;

•     paying the lowest possible benefits for pathology and diagnostic imaging services;

•     direct calls to members encouraging them to downgrade their cover;

•     requiring detailed clinical information and justification to be submitted at the time of booking hospital treatment; and

•     rejecting claims unless and until they are disputed by the patient or their doctor.

On their own, these activities reduce the value of the private health insurance product. Collectively, they are having a destabilising effect on privately insured in-hospital patient care and treatment. 

They are serious enough to warrant strong and swift intervention by the Federal Government before consumer confidence in the private sector is undermined, such that people drop their private cover altogether and/or turn to the public hospital sector for treatment.

But instead we are waiting for the Government to announce a review.

The activities I have described directly interfere with patient care, and fail to honour the policies that the insurers have sold to consumers - and which consumers have purchased in good faith with the expectation they will be covered if they need hospital treatment. 

The AMA cannot accept that insurers are behaving appropriately to manage their outlays. 

They are simply taking steps to get out of paying benefits for care and treatment that their members expect them to cover, given the policies they have purchased.

In 2010, CHOICE found that most people expect their private health insurance to cover them for heart surgery, hip and knee replacements, eye surgery, psychiatric care, rehabilitation and palliative care. 

AMA members report that they often need to cancel booked procedures when it becomes apparent that the patient is not covered for the procedure.

Commonly, patients believe they purchased cover and cannot recall being advised by their insurer that their policy had changed. 

In my own specialty of neurosurgery I have had many patients for whom I have had to change their treatment in these circumstances. 

As recently as last month, a patient with a 20-year history of spinal complaint, and who now requires spinal fusion, was shocked to find her NIB policy no longer covered that treatment.

She is adamant that she did not receive advice from NIB that her cover had changed. She is now serving a 12-month waiting period with another insurer, and doing so in substantial pain. 

Four years ago, I placed a shunt in a child for hydrocephalus.

His mother understood that there is a 50 per cent revision rate due to shunt blockage, and therefore the importance of maintaining private cover.

This child required revision surgery recently but, as you can now guess, the family policy no longer covered neurosurgical procedures. 

This was despite mum calling the fund, NIB, and speaking to a representative who told her that there was nothing to worry about.

Fortunately, I was able to treat this child as a public patient - an opportunity that is not often available to adult patients.

It is hard to imagine that, in both these cases, the patients and their families were completely ignorant of advice from their health insurer about changes to their cover, and failed to “upgrade” their policy when their existing policy became inadequate for their needs.

There are worrying signs out there. In the last month:

•     NIB has removed over 225 items from its schedule of medical benefits, three of which are for treatment of macular degeneration; and

•     Medibank Private is no longer covering spinal fusion and bariatric surgery under its Private Basic and Standard Hospital policies. 

The AMA has been unable to establish if and how NIB and Medibank Private have advised policy holders of these changes.

We also hear frequent reports of insurers cold-calling policy holders, encouraging them to downgrade their cover to reduce their premiums - and without a clear explanation of the exclusions. 

We are seeing a systematic downgrading of policies, and in a way that is not transparent to policy holders.

These tactics to exclude treatments from policies are not about improving the value of the private health insurance product.

They are blatantly about avoiding paying benefits for the treatments that people need, and expect to be covered for. 

The Private Health Insurance Administration Council data shows that the number of private health insurance policies with exclusions held by consumers has increased from around a third ten years ago to just under half today.

Given the experience of AMA members, this is most likely due to changes by health insurers, and not the informed choices by policy holders.

This slash and burn approach that some insurers are taking to their own sector cannot and must not continue unchecked.

While a lot has been said about the costs of health care over the past two years, much less has been said about affordability.

We need to draw that distinction between cost and affordability. They are two different yardsticks.

When it comes to private health insurance, it is affordability to consumers – i.e. premiums that is important.

Affordability operates at a number of levels:

•     the affordability of our health system to the whole community; and

•     linked to this, the affordability to governments - as funders and proxies for the community; and

•     the affordability of health care to individuals.

Let’s look at the big picture first.

The narrative that we have been exposed to in the past - and the Government narrative gaining pace now - is that healthcare costs are growing at an unsustainable rate. That health care expenditure must be cut.

Through 2013 and 2014, we have had range of Government attempts to reduce health expenditure:

•     some withdrawn - such as the various GP copayment proposals;

•     some continuing - the extended MBS indexation freeze, and the changes to the Medicare Safety Net; and

•     some yet to take effect – the significantly reduced funding for public hospitals.

And we now have a serious outbreak of Government reviews. In addition to the MBS Review, we have a Primary Care Review and a Compliance review.

The MBS review was said to be not about cost cutting, but instead was about looking at the Schedule and delivering a Schedule that is more reflective of modern medical practice.

The AMA supported the MBS review on the proviso that it was not a cost cutting measure, that it did not seek to limit access to services for patients, and it delivered a more modern Schedule through a process that engaged the profession.

However, as the Review has no formal engagement process for Colleges and Specialist societies, and has no mechanism for introducing new item numbers on the Schedule, we are very sceptical about the MBS review.

In view of the Minister’s recent comments on the Review that focused on the Medicare costs and the number of services, the AMA could be forgiven for seeing an analogy between Medibank Private’s use of quality to cloak savings measures and the Government’s framing of the MBS review.

The narrative to most of these recent proposals has been the Government’s claim that health spending is unsustainable, or even out of control. 

The AMA has argued against this perception, pointing to the Government’s own figures for health expenditure to establish that clearly there is no crisis.

In the 2014-15 Commonwealth Budget, health was 16.13 per cent of the total, down from 18.09 per cent in 2006-07. 

It reduced further in the 2015-16 Budget, representing only 15.97 per cent of the total Commonwealth Budget.

Last week, the 2014-15 Medicare statistics were released. 

Medicare expenditure increased by 5.6 per cent in 2014-15.  Over the last seven years, this is the second lowest annual increase in Medicare expenditure. 

The previous year, 2013-14, was the lowest, at three per cent.

Growth in the last two years has been well below the 7.1 per cent per year until 2023-24 predicted by the Government’s Commission of Audit.

The sky is not falling.

Nevertheless, the sustainability train rumbles on, fuelled by the payers.

The health financing system in Australia has served Australians well in terms of health outcomes and affordability, as acknowledgedin the National Commission of Audit report.

However, there is a general expectation in the Australian community that health care should be ‘free’ at the point of service.

Affordability of health care is usually considered in terms of out-of-pocket costs.

The perception in the Australian community that out- of-pocket costs for health care - in particular, for medical services - haveincreased as a proportion of health expenditure. 

This is not supported by data.

It is also not necessarily well-understood that out of pocket costs are a design feature of Australia’s healthcare financingarrangements.

A viable and sustainable healthcare system relies on private providers being free to set their fees and charges to recoup the cost of providing the service.

Safety nets are in place for people who are unable to afford out-of-pocket costs, to ensure they can access care when they need it.

As the AMA’s submissions to last year’s Senate inquiry on out-of-pocket costs showed, out-of-pocket costs are a feature of the Australian health financing system - a feature that is not growing at a faster rate than other health costs.

Nor have out-of pocket costs for health care increased as a proportion of health expenditure.

In the decade to 2012-13, the percentage of medical services attracting out-of-pocket costs has either stayed the same or declined. 

The medical profession has effectively absorbed the relative reductions in Government and PHI contributions to the cost of medical services. 

However, patients who do have out-of-pocket costs for medical services are paying more today than they were a decade ago.  These services partly offset the services provided at no cost.

It is also important to understand that less than 12 per cent of individuals’ out-of-pocket costs are for medical services.

This is contrary to the common misperception that all ‘out-of-pocket costs’ are for medical expenses.

Of course, there are always outriders for any statistical distribution, and I acknowledge there are individuals, who because of various circumstances, have incurred large out-of-pocket costs for their health care.

The specific circumstances for these costs need to be explored in detail to identify how such large costs have occurred.

The AMA has always encouraged its members to set their fees to cover their practice costs and to include a component that reflects their professional expertise and training. 

As Medicare rebates have not kept pace with increasing costs, they do not cover doctors’ fees to the same extent that they did in the past, and patients have out-of-pocket costs in more situations.

The AMA supports some forms of co-payments – but definitely not the ones proposed by the Government last year.

They are a natural feature of the Australian healthcare system that works well where they are determined by the doctor and the patient in the specific circumstances of the care provided.

Doctors are free to place their own value on their service, and Governments and other insurers are able to limit the benefits they pay for the services they cover.

But the various co-payment models proposed by the Government were poorly designed and did not meet the basic principle of being determined by the doctor and the patient.

So where are we today with medical fees?

The reality is that private medical fees are essentially ‘controlled’ by the MBS and the private health insurers’ schedules of medical benefits.

The rates of bulk billing by GPs and the rates of acceptance of PHI schedules for private in-hospital services are the highest they have ever been. 

Over the past decade, we have seen a steady increase in these rates. 

The Medicare statistics for the June 2015 quarter showed the bulk billing rates for all medical services increased since the March quarter.

Only operations, diagnostic imaging, and pathology services have remained steady.

Obstetrics had the highest jump for the quarter, at 3.9 per cent.

In June 2015, 86.3 per cent of privately insured medical services were provided at ‘no gap’ - and 3.8 per cent were provided under ‘known gap’ arrangements.

Most of our colleagues are accepting fees that are set by the payers.

It might be said that the medical profession is mostly complying with the “common fee”.

And they are doing this while the payers – the Federal Government and the private health insurers - are controlling the growth in price. 

It would be nice if the private health insurers were a bit more open with their members that the vast number of services are provided at the level of benefit set by the insurer, instead of portraying isolated cases as the norm.

Together, the MBS and the PHI schedules of medical benefits have moderated the average annual growth in expenditure on medical services to just four per cent in the decade to 2011-12. 

This is less than the 5.4 per cent growth for total health spending, the six per cent growth for the PBS, and the 9.3 per cent growth for products bought by consumers at the chemist.

But the profession is left dealing with the attention that is paid to the seven per cent of privately insured services that do have a gap. 

In summary, while a large proportion of episodes of health care are at no cost to the patient, the AMA recognises that Australian healthcare consumers are concerned about the out-of-pocket costs that they experience.

There is scope for much better information to the public on what are actual out-of-pocket costs, what drives them, and in what circumstances they are likely to be incurred.

The AMA supports good ‘informed financial consent’ practice by medical practitioners.

Providing information to patients in advance of the likely financial implications of proposed treatment is sound, ethical, and professional business practice.

A key to a sustainable private sector is adequate rates of private health insurance.

For that to occur, we need to ensure that private health insurance premiums are affordable - and represent value.

I understand the commercial realities in terms of the negotiations between hospitals and private health insurers. We are not privy to the details.

But what I do know that the results are becoming more and more difficult to sustain as the scope of the nature of the contracts appears to be increasing to include all manner of items.

Having different quality frameworks for different hospital networks and different private health insurers will be impossible to implement. We need some consistency.

I would like to think that there could be some effort placed on ensuring that our private health sector is sustainable.

That would take some initiative from groups such as Ramsay to open a dialogue with private health insurers, doctors, and other groups - outside of the pressures of contract negotiations - to establish a framework that deals with affordability.

As doctors, we see ourselves not merely as providers. We see ourselves as stewards of the healthcare system.

But other providers, including hospitals, should also aspire to that mantle.

I think that is a challenge that is there for us all. We have to address the issues of affordability, without compromising the value of the private health insurance product.

Without that, we will see the foundations of the Australian healthcare system continue to be undermined.

I am proud of our healthcare system, including its private sector. It is an excellent healthcare system.

The AMA will continue to defend the Australian healthcare system, those that work within it and, in particular, our patients who benefit from it.

11 September 2015

CONTACT:        John Flannery                     02 6270 5477 / 0419 494 761

                            Odette Visser                      02 6270 5412 / 0427 209 753

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