Each year $120 billion is spent on health services in Australia. But hardly any research is done to investigate whether this money is being used wisely.
Only 2.8% of the funding for NHMRC project grants was devoted to health services research projects in 2011.
Today’s climate of financial austerity means we must find ways to save costs and improve health outcomes by investing in the best possible organisation of health services. We know we can’t afford to provide every service we’d like and that some configurations of services are superior.
Some alternatives
Here are six examples of how to make changes to health services that save costs and increase health outcomes:
Investing in good hospital discharge planning for high-risk elderly patients would save $333 million a year and would improve health outcomes. Research shows elderly patients who receive nursing and physiotherapy assessment via an individually tailored program of exercise strategies, and are followed-up for 24 weeks after discharge made fewer emergency re-admissions and avoided many other health-care costs.
Paying less for generic drugs to lower cholesterol would have saved the Australian government $130 million between May 2010 and October 2011. These large cost savings could be achieved if drug prices were negotiated to the level paid by the UK government for statins.
Stopping routine follow-up for patients with hip replacements will save resources worth $9 million each year. In most cases, the only benefit is to reassure patients. If a meaningful complication arises, patients would seek health services regardless of any routine follow-up from their surgeon.
Using antimicrobial-coated catheters in ICU patients to reduce rates of infections will save $130 per catheter placed and generate health benefits. With 17% of the annual 120,000 ICU admissions likely to receive a catheter, the cost savings are $2.65 million a year. And dangerous infections are reduced, saving lives.
Stopping the use of laminar airflow in operating theatres. The risk of costly and dangerous infections increase with their use, and these systems cost money to install and maintain. Not having laminar air flow in Australian operating theatres will save at least $4.5 million each year and will generate health benefits from avoided infection.
Restricting the use of leucodepleted blood products. In 2008, Australian governments started paying for high-cost leucodepleted products for all blood transfusions. This increased spending by $61 million a year and only delivered an extra 153 extra years of life. It’s not good value for money.
Proposed Change
Costs Saved
Health Benefits gained/lost
discharge planning
$333,000,000
118,000 extra QALYs
pay less for drugs
$130,000,000
Zero
follow up of hip replacement
$9,126,521
88 extra QALYs
antimicrobial coated catheters
$2,657,896
34 extra QALYs
laminar air flow
$4,592,200
127 extra QALYs
leucodepleted blood
$61,000,000
153 fewer years of life
Total
$540,376,617
118,096
Making these changes would generate health benefits of 118,096 quality adjusted life years (QALY) and release resources worth $540 million for alternate use. If this money is redirected toward the treatment interventions found to cost only $14,161 per QALY gained, an extra 38,160 quality adjusted life years would result. In total, 156,256 extra quality adjusted life years (118,096 plus 38,160) would be enjoyed by Australians for no extra cost. All this arises from re-organising the health services that are already supplied.
What to do?
This pithy analysis has ignored the complexity of health-care decisions. In health care, those who allocate spending tend to be risk averse and fear media attacks over controversial decisions, even if the decision is the right thing to do for society. Ultimately, they may consider doing nothing as the safe option, even though it is grossly inefficient.
We recognise that cost-effectiveness is an important criterion, but many other factors play a role in decisions to invest or disinvest in services and technologies. These include uncertainty about the safety of making a change and the availability of alternate interventions; and fairness and equity of access to health services, and perceived need in the community.
One example is the high cost and small health benefit of providing emergency helicopter services for rural and remote communities. Although unlikely to be a cost-effective health service, it would be unfair not to help these communities when they needed it. Good health decisions balance efficiency and fairness.
Australian governments seek to improve productivity. Health services are ripe for evidence-based reform and data to support this are valuable. The Australian Centre for Health Services Innovation is building partnerships with health-care professionals and academics to generate research evidence to improve health services. We hope senior health decision makers are motivated and excited by the work of AusHSI and will make strong health policy based on the evidence presented.
The disclosure statement on this article has been changed to reflect the fact that Professor Graves is the Academic Director of Australian Centre for Health Services Innovation.
Kathryn Goonan
Maternity leave
Interesting article.
I read an article a year or so ago in the SMH that mentioned the development of a health “credit card”. The basic idea of this health “credit card” was for individuals to pay for all medical related expenses on their health “credit card” (which is issued to anyone with a Medicare card). At the end of the month you receive a bill which was the difference between the scheduled fees less any applicable Medicare rebates. If you were a low income earner or a pensioner, you could pay the bill off under a HECS debt-like scheme. This would allow low income earners access to vital medical services early and avoiding potentially larger and more complicated health problems later on.
Are you aware if this health “credit card” scheme is being considered by the government? I imagine the cost savings to the government with something like this could be quite substantial.
Nicholas Graves
Professor of Health Economics at Queensland University of Technology
A health credit card would be a bold reform of health services, and maybe difficult to implement. It would be interesting to allow consumers to make purchasing decisions like this but often in health care the consumers don’t have good understanding of what services they need or what they are worth. So market forces fail to work, and resources might be wasted. The ideas we put forward would need strong leadership from governments for good decision making in health services. There are likely to be many hundreds of other good ideas in addition to the six we include.
Warwick Anderson
Professor & Chief Executive Officer at National Health and Medical Research Council
NHMRC has a proud record of supporting our talented Australian researchers and funding the best research to improve health outcomes.
Firstly, it is important to note that NHMRC funding schemes are investigator-initiated, which means that research directions are nominated by researchers themselves. We then use rigorous peer review to ensure that only the best applications are funded, regardless of the subject matter of the application.
NHMRC provides substantial support to health services…
Read moreNicholas Graves
Professor of Health Economics at Queensland University of Technology
The NHMRC makes good investment in health services research outside the project grants scheme. The total three-year investment of $192M in health services research described by Warwick Anderson is 8.25% of the total funding from 2009 to 2011. The Centre for Research Excellence scheme will train the next generation of health services researchers and the Partnerships programme links existing researchers with policy-making groups.
The next major challenge to health is how we respond to scarcity of…
Read moreMatthew McLean
General Practioner
Hello Dr. Graves
1. While anyone can agree with you about paying less for drugs, it is less clear whether anyone really wants a health economist telling people what to do with regards their own medical practice - RE: the non follow up of hip replacements! I suggest leaving this to experts, who rightly want to check on the quality of their work - and no, not "everyone" automatically seeks medical attention for complications, and no, these won't necessarily be caught quickly, or to everyone's satisfaction, particularly in this litigious environment.
2. Regarding discharge planning - yes I agree it is done damn poorly. There is literally almost no communication between hospitals/GPs or outpatient services/GPs in a timely fashion. There's just no incentive to: perhaps investigate this?
3. I notice you didn't include yourself in the calculation of QALYs.
Remove health economist from pontificating position: priceless! Infinity QALYs!