Patient care is being sacrificed for financial reasons under a new hospital funding scheme — known as “casemix” — a recent government report has acknowledged in Australia.

The auditor-general in the state of Victoria found that 80 percent of senior clinicians say that casemix has directly compromised treatment in the public hospital system since it was introduced in 1993.

Based on interviews with 700 senior health practitioners responsible for managing acute health services in hospital wards — including doctors and nurses — it finds strong evidence that hospitals are admitting patients according to financial considerations, rather than clinical need.

The Victorian Liberal Party government of Premier Jeff Kennett has spearheaded the Australian introduction of casemix classification and payment systems, originally developed in the United States under President Ronald Reagan to slash federal health funding.

Casemix formulae use financial incentives to push hospitals to reduce patients’ length of stay (LOS), in order to accelerate the rate at which patients are discharged from hospital. Victoria now spends the lowest amount per patient in Australia.

How the system works in practice can be seen at the inner-Melbourne Alfred Hospital, one of the state’s largest. A new clinical director of psychiatry was appointed on the basis of the applicant’s willingness to reduce the average LOS from 20 days to less than the state average of 16 days within a year. The hospital’s long-term aim is to cut the figure to eight days.

The smaller outer suburban Angliss Health Service recently considered monetary incentives for doctors to discharge patients more quickly, until an outcry from the doctors prevented the scheme.

The interviews with health workers uncovered what the report described as compelling evidence “of the breadth and depth of negative perceptions” of the new system.

• Half the senior doctors held the view that reduced LOS had a negative effect on health outcomes. The average LOS for metropolitan hospital patients has declined by 1.55 days or 27 percent.
• Fifty-seven per cent of senior doctors and nearly half the charge nurses and senior health professionals believed that risks associated with early patient discharge had not been adequately safeguarded by improved home nursing care.
• Two-thirds of the senior clinicians complained about increased administrative workloads, declining cleanliness, reduced cleaning staff, less maintenance of equipment and buildings, decreased patient access to allied services and greater work demands on doctors and nurses.

The audit report admits that nowhere in the world have indicators or guidelines been established to determine the quality of patient care post-casemix. That is, a far-reaching experiment in social engineering was embarked upon with disregard for the implications, and no forward planning to assess its consequences.

Vulnerable patient groups such as the chronically ill and the poor, likely to suffer more than one condition, may be at risk due to premature discharge, the report states.

Around one-third of hospitals said they had changed admission practices since 1993. Examples included higher ratios of privately-insured patients and concentration on better-paid treatments.

Summing up, the Victorian auditor-general Charles Baragwanath notes dryly that the findings highlight a potential risk to the provision of health services.

This damning picture emerges despite Baragwanath’s attempt to give a positive appraisal of casemix. He says it is “fairer, especially in context of an overall budget reduction,” than the previous system. That is, he does not challenge the budget cuts. In fact, he praises casemix as a mechanism to carry them out.

Under casemix, classifications known as Diagnostic Related Groupings (DRGs) enable governments to pinpoint the most expensive patient categories. Hospitals are effectively compelled to bid against each other for financing by delivering low-cost results as measured by these DRGs.

Casemix has provided a sophisticated means to speed the process of rationalisation and closure of hospitals. Governments are freed from taking responsibility for their budget slashing, hiding behind seemingly objective formulae.