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Health Service Providers Need to Prepare for the New Funding Models

9 Feb 2016, by Informa Insights

Adrian Munro | How Service Providers Need to Prepare for the New Funding Models

In his objective to make a genuine difference in the community, Adrian Munro has dedicated most of his career life focusing on his passion to provide help and support for the most disadvantaged people as evident in the values pursued by the organisations he has chosen to work for.  As the executive manager of operations for Richmond Fellowship of Western Australia, Adrian spoke at the National Disability Summit on “How Service Providers Need to Prepare for the New Funding Models.”

Click to view Key Speakers and Event Agenda

The History of Funding Models

The Organisation for Economic Co-operation and Development (OECD) is an international economic organisation that primarily aims to promote policies that will encourage the general improvement of the economic and social well-being of people across the globe. The OECD member-countries have evolved over the years of its existence, resulting in the development of various funding models that have underpinned the organisation and its various programs and activities.

Block Funding

The block funding setup involves the government having full reign on how much they can spend and what they want to get in return. This funding arrangement provides very limited ability for the government to ensure efficiency as can be predicted with them giving over lots of money while the organisations gets all the control.

According to Adrian Munro there is very little incentive for efficiency and innovation.

“Australian governments, like a lot of governments outside of Europe, have not been very strong at getting good outcome measures and social returns and net economic benefits through the last 30 years of our funding.”

The block funding arrangement targets 95% of the population. The remaining 5% is viewed by the Government as needing twice or three times as much effort to capture, which results in a higher number of block models aiming to win the 95% of the people. As such, many clients miss out on these arrangements because services normally offered are not flexible to cater to a great variation of individual needs.

Activity-Based Funding

The activity-based funding model is being observed in some of the hospitals in the country. It is also largely used in many OECD countries where the Government allocates how much they are going to pay for a certain procedure which allows hospitals to do as many as they want and they will get the corresponding funding in return, a process that drives efficiency. In this arrangement, the Government has control over the cost for every treatment but the treatments can expand (as there is no limit on the range or volume of services that you can provide) so there is room for benefits and innovation to come in.

Packaged Care Funding

Packaged care is a familiar setup as most of the Australian states have implemented it, particularly across the disability sector. Under this model the Government says, “Here is a package of care.  We are going to give this many dollars but we are going to give it to the service provider.”

The packaged care arrangement has the funder purchasing a group of services for the consumers, and service providers are normally allocated a number of packages in a particular geographical region. Unless the consumer can find a service provider who has a package at the right price, they cannot always get the service they want. While the packaged care funding model allows for some individualised and innovation from service providers, it is not as consumer focused as it should be.

“Fee for Service” Funding

Functioning much like the Medicare model, the “fee for service” setup entails service types having a set price allocated for them. Under this model the Government allocates how much they are going to pay for a type of service and the services they are going to buy, and healthcare services provide the ones chosen. However without the necessary restrictions in place the costs can quickly get out of control.

“Medicare is costing the government a lot more than they ever thought it would nowadays because the occasions of services are so much greater,” said Adrian.

“This is also an incentive for service providers to provide a service that is based on them earning more money, which is a perverse disincentive in health economics.”

This model enables services to be purchased privately or by funders, and the number of services is not capped. There exists and incentive to maximise profit but not for innovation such that only those services that are funded and promise more profits will be provided, where delivery of services for the consumers are greatly disadvantaged.

Insurance Model Funding

This model refers to the funding arrangement where the total amount of funding is pre-determined as a cost containment measure where the Government is the price setter. The challenge here lies in making the allocated money spread and reach out to as many participants as possible. Given that arrangement, many individuals are excluded as the servicing needs to be capped and the chosen service types are limited. The insurance model encourages funders to be very specific in determining the services that they will be purchasing.

Choosing the Best

Eventually it comes down to determining what’s best and what’s worst. When people talk about funding models, they need to look at the significance of versatility in terms of how the governments should supply funding to different programs.

Motivating Factors for Funding and Governance Models

Funding and governance models in healthcare are largely influenced by several motivating factors. There exists a long list of political imperatives, interests from professional organisations, government cycles, the perspective of the public, and the unsolved needs of the people that should be considered key factors.

Who Succeeds in Insurance or FSS Models?

American health maintenance organisations and British brokerage organisations have always been successful when it comes to using the insurance business models on their funding arrangements. Unfortunately however, these organisations have always aimed at providing services at the lowest possible cost while looking for the highest amount of volume and the lowest level of trained staff—which does not have to be necessarily carried out that way.

Adrian claims that reason behind the phenomenon was that the other existing healthcare services have not moved quickly enough.

“I would hate to see in Australia all of the great expertise, knowledge, and passion held by the organisations overtaken by a large organisation based overseas that comes in and strips away the quality of service and provides it dirt cheap, and all this knowledge and passion wilts away.”

Adapting to the Market

Marketing and Promotion and Intake

Many organisations like Richmond Fellowship have some capabilities and skills in marketing and promotion, but are not as good as those marketing professionals in the competitive commercial market. Service providers should learn the skills on market and promotion so they can promote themselves in the competitive environment of today’s industries—and for many it will be the first experience they have.

Similarly, the intake role is crucial.  It has to have a customer service focus and at the same time balanced with clinical skills and assessment and judgment. As a critical point in the organisation, you will need to put in place the best staff in the intake process, which could determine whether the business is winning or not.

Defining the Service

The next points are those which the organisation and the Government share in the implementation, as these help determine whether the organisation succeeds or fails in its undertaking in the insurance or fee for service. First, the government has to define the services that will be purchased and everyone in the organisation needs to aware what the services are and what they mean.

Allocating the Service

The organisation needs to be able to allocate the service as they are being paid by the Government. Information management systems and billing systems will be needed to efficiently do that. There is no room for mistakes in this process as that would mean losing track of the services allocated and incorrectly billing the government for something that you have already done.

Determining the Cost

This is a basic variable in all organisations and one that has to be given a lot of consideration. Service providers must be able to determine the cost of providing every single item of service that they would like to offer.

Counting the Services

Counting all the services that your organisation will provide is serious business, and an efficient client information system, billing system or other reliable counting programs will be needed to help keep track of all the services and how they are being distributed to the people.

All the information that is gathered from the counting system should be sorted per service item and matched with the appropriate clients. They should also be perfectly aligned with the NDIA portal and in sync with what you have been funded to provide as a cross-reference. This helps in cross-checking whether you have been over-servicing or under-servicing as well as examining whether each staff member is gaining a profit or losing every day.

Billing the Government for the Services

It is now important to work on an efficient billing method. Service providers will need to use the information from the counting portal and spend enough time inputting them, checking them, and re-evaluating them to ensure that every single item and process is correct and the invoice presented is accurate.

The billing system enables your organisation to invoice funders, taking into account all the services and attribute a price to these. This will help you determine surplus as well as help estimate future earnings. Service providers must consider how dependent they are on the portal and the internal systems that they have implemented across the organisation. Outside of NDIA, this may require acquiring software that will be compatible with the funder’s programs.

Keeping a Values Base

It’s a big challenge for many organisations to keep a values base specifically when the organisation is driven by money, efficiencies and outputs.

“The difficulty is if you are a values based organisation and you provide some services that run at a loss, but are just so amazing in reaching the community that you want to keep providing those, that is a challenge financially but it is really powerful for your organisation,” Adrian explained.

Social Impact and Net Economic Benefit

There is a critical need for service providers to demonstrate the value for money for all their services. Working among great hospitals and popular primary healthcare that have successfully competed in the industry has proven to be a challenge for start-ups and small NGOs. If you want to get money allocated to the disability or mental health sector, you need to seriously invest in these areas. An organisation should have ability to show the social return on investment and the net economic benefit of what you are actually doing so that the government can honestly justify allocating funds to the services that it would like to provide.

The Key Secrets to Success

It’s critical to listen to your clients. A successful model will surely be something that will be based on what the clients and consumers really want. Adrian recommended organisations to go and ask the people who are using the services, their families, and consumers and build models based on that. Nothing compares to the knowledge and experience of consumers who live with their physical impairment or their mental illness every day for so many years so make it a point to listen to what they have to say.

Another crucial factor to being successful is keeping things simple. Regardless how complicated a process or system is when you try to bare it down to the simple necessities, things become easier to understand and follow and monitor.

Measuring Value for Money

Adrian made clear that in Richmond Fellowship of Western Australia, measuring the value for money includes looking into tangible things that could include the following:

  • Training, education, and employment
  • Rates for hospital admission
  • Housing
  • Minimal contact with the Justice Department
  • Active participation in the community (social participation)
  • Volunteering
  • University research projects

When the governments get these reports with all the elements being tangible and fully implemented, they would be happy to have them presented to the Parliament. But what’s more important is that they will definitely decide on continuing the funding based on the results, and the organisations remain happy.

Maintaining the Values with the New Model

In order for the organisation to maintain the values in the new model, a strong leadership must be maintained. A robust leadership spearheading the organisation should be firmly embedded in the culture and must be illustrated in staff meetings, performance reviews, and in the general processes and procedures implemented across the system.

It should also go without saying that in the organisation’s focus to be innovative, they should prioritise and put at the core of all its undertaking their primary mission and inculcate in their programs their need to continue their provision of missional services to the community.

Join the 2016 National Disability Summit 15 – 16 March 2016  at  SMC Conference & Function Centre, Sydney to gain more insights on “Funding Models suitable for Disability and Mental Healthcare Services”.

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