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Medical research funding has been saved: now we need to spend wisely

Successful: the threat of cuts led researchers to hold rallies in state capitals. AAP

The NHMRC budget escaped the threatened $400 million cut in last night’s Federal Government budget announcement. Instead, the 4% annual increase it has received in recent years will continue for another year.

The Government also announced a strategic review of federal funding for medical research. This provides the perfect juncture to reconsider the priorities of the research budget to ensure our health as well as our healthcare system remain viable.

Current spending

Australia spends over $100 billion on health care annually, which is about 9% of the Gross Domestic Product (GDP). The government is currently implementing major reforms across the healthcare system to make it more efficient.

It’s crucial that these reforms ensure better value for money, and establish a sustainable foundation for the future.

This means we need research into the health system and the effects of system-wide policies - what the World Health Organisation (WHO) calls the “brains of the health system.”

Medical research, it is often claimed, will not only deliver breakthroughs in treatment and cure, it will generate long-term savings for the health sector.

But, on the whole, new advances in medicine cost the country more, not less. According to a recent Productivity Commission report, “technological advances” have been responsible for over a third of recent increases in our health care spending.

This is more than twice the contribution of the ageing population to the burgeoning health budget. But that’s not to say that additional spending due to technology is not worth while.

Where technology has delivered improvements in survival and quality of life, there are real benefits, and benefits that most Australians are prepared to pay for. But they will not solve the underlying problems of the health care system.

Let’s look at how health research funds are currently spent. Last year, almost half of the NHMRC research budget - $700m of taxpayer money - was spent on basic science, with a further one third on clinical medicine.

A small amount, 14%, went to public/population health, and only 5% to health services research, which covers both research into service delivery and health systems research.

Yet, it is from health services and health systems research that the evidence for sensible health reforms will be produced.

The coming reforms

One of the key features of healthcare reform is the move to pay public hospitals on an activity basis, in accordance with the severity of the cases they treat.

That means that case severity must be measured validly and robustly, otherwise hospitals taking on more severe cases will be financially penalised.

Australia has developed and applied a measure of hospital activity, known as case mix, but this is a classification of case types, not a sensitive adjustment for how severity and complexity affect the cost of care.

What medical research into risk adjustment has been funded? How will the implementation of activity-based funding reward hospitals for what they actually do, rather than their skill in selecting less complex cases?

The new Independent Hospital Pricing Authority will have to determine exactly how to pay hospitals on an activity basis.

In general, hospitals have high fixed costs and low marginal costs, that is, the additional cost of admitting one more patient is low.

If activity-based funding means paying average cost per case, then there are extremely strong incentives to admit low-cost additional patients, rather than having them treated in other settings, which might provide more cost-effective care.

What research is underway to investigate such incentives in the Australian setting?

Another key feature of the Gillard-Rudd reforms is the establishment of the National Health Performance Authority to provide the community with valid information on the performance of their health service providers.

There is increasing commitment around the world to making health services more accountable, more transparent. Yet, according to a recent World Health Organisation (WHO) review, almost nothing is known about the how to present this information to providers, funders and the general public so that is useful and actually used.

What research on this topic is supported by medical research funding in Australia?

Perhaps the most immediate impact of the reforms being implemented is the development of Medicare Locals, and the setting up of new Local Hospital Networks.

The rationale for this is that devolving autonomy to local clinicians will improve decision making. The key issue here is how local a local network ought to be, in order to be small enough to be connected to the community but large enough to provide a comprehensive range of services and have the high-level management and operational skills required to operate in such a complex environment.

What research and evaluation is under way as these reforms are implemented?

Do we need another review?

Since the 1960s, reviews of Australian health and medical research have called for a greater investment in health services and systems research to meet the coming challenges of a sustainable healthcare system.

In 2000, the Wills Review recommended the establishment and funding of a number of substantial research centres in this field.

Following yet another review in 2004, the NHMRC made a commitment to increase its support of health services research and announced two new funding strategies - the development of partnership projects, and the development of partnership centres of excellence.

Partnership projects commenced in 2008, with a further 27 funded in 2010 accounting for 0.5% of total funding. To date, these projects have been mostly about clinical service delivery rather than the financing and organisation of health systems.

Centres of Research Excellence, the flagship of the commitment, were reviewed again in 2007, subject to a round of consultation in 2009, promised in 2010, and promised again in 2011. Perhaps they may be considered again this year.

This at a time when Australia faces major challenges in transforming our health service delivery into a sustainable 21st century health system.

Let’s hope that now that the threat of research funding cuts has passed, the review of research funding announced last night will not just recommend but lead to serious investment in funding health systems research.

Let’s hope we can direct some funds into building the evidence for the breakthroughs required to treat, not just individual patients, but our health care system.

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