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Activity Based Funding and Mental Health

26 May 2015

In December 2012, the Independent Hospital Pricing Authority (IHPA) decided that a new mental health classification would be developed for mental health services in Australia for the purposes of Activity Based Funding (ABF).  IHPA recognised that the Australian Refined Diagnosis Related Groups (AR–DRGs) was not the ideal classification in the longer term for mental health services, primarily because diagnosis is not as strong a driver of resource utilisation for mental health services, as it is in other acute services.

The development of the Australian Mental Health Care Classification (AMHCC) was foreshadowed in successive Pricing Frameworks and Three Year Data Plans, as well as through the IHPA Jurisdictional Advisory Committee and IHPA’s Mental Health Working Group (MHWG).

It is intended that the development of the AMHCC will significantly improve the clinical meaningfulness of the classification leading to an improvement in the cost predictiveness and will support the new models of care being implemented in all states and territories.  The steps involved in designing the AMHCC include the following.

  • Definition of services
  • Identification of cost drivers
  • Patient level costing study
  • Development of the classification system and associated infrastructure (data set specifications, grouping software, etc.);
  • Ongoing activity and cost data collection

To date, IHPA has completed steps one and two and step three was completed in April.  Step four is also underway.

Mental Health Costing Study

On 12 February 2014, IHPA engaged HealthConsult to undertake a Mental Health National Costing Study (MHNCS) to inform the development of the Australian Mental Health Care Classification (AMHCC).  The MHNCS was undertaken at a sample of Australian public hospitals, community mental health services and at a minimum of three private hospitals.  

The four private hospitals that participated in the MHNCS were:

  1. St John of God Pinelodge in Victoria;
  2. St John of God Richmond in New South Wales;
  3. Toowong Private Hospital in Queensland; and
  4. Perth Clinic in Western Australia.

In order to facilitate participation in the MHNCS for the private sector, the Private Mental Health Alliance (PMHA) advised IHPA that the Hospitals Standardised Measures database. (HSMdb) software that the PMHA’s Centralised Data Management Service (CDMS) provides to all 63 participating private psychiatric facilities, could be modified to enable the collection of all components of the Mental Health Costing Study Data Request Specification.  Accordingly, an agreement between IHPA and the AMA was executed on 19 August 2014 for IHPA to provide $55,000 funding for the AMA to engage the Director of the CDMS, Allen Morris-Yates, to undertake the following.

  • Modify the HSMdb and templates for standard data collection for the Mental Health Costing Study.
  • Develop forms and detailed Training Manuals and User Guides for clinical and administrative staff.
  • Distribution of the above software and other materials to the private hospitals participating in the Mental Health Costing Study.

All four participating private hospitals completed the data collection phase of the study.  During February, the CDMS assisted the hospitals listed above with cleaning the data in preparation for submission and finalised the data extraction functions within HSMdb to enable the data to be forwarded to IHPA in February.

There was a daunting volume of work for staff at all four private hospitals involved in the Study and it is to their credit that the data was collected accurately and submitted on time.  The PMHA has expressed its sincere gratitude to the CEO’s of those facilities and their staff for their efforts.

In 2015–16, IHPA will continue to progress the development of the AMHCC, with a pilot of the new classification and ongoing public consultation, ahead of implementation of the AMHCC for pricing from 1 July 2016.  Further detail is provided in the IHPA Work Program 2015–16, which was recently released for public consultation with submissions due by 29 May 2015.


Published: 26 May 2015