Activity-Based Funding Models and Investment Appraisal

This chapter delves into the intricacies of healthcare funding in Australia, examining the connection between performance evaluation and governmental healthcare payments. While Australia's commitment to implementing value-based healthcare (VBHC) through the quadruple aim has been spotlighted in Chapter 2, this chapter's analysis and discussion underscore the significance of creating payment models that reward optimum care value. Particular emphasis is placed on the prevalent lack of bundled payments in Australia, leading to complications in provider experience management. The chapter presents a detailed exploration of activity-based funding (ABF) as the dominant government funding mechanism for public hospitals. ABF, which ties funding to treatment and service volume, promotes efficiency by fostering hospital autonomy and transparency. The benefits of ABF are enumerated, highlighting its person-centred, data-rich and transparent nature. Furthermore, this chapter sheds light on capital budgeting in the healthcare sector, detailing sources of capital funds and the pivotal role they play in hospital budgeting. In doing so, this chapter underscores the complexity of the investment landscape in Australian healthcare, from large-scale infrastructure projects to small-scale, innovative solutions aimed at cutting costs. Through interviews with key stakeholders, the chapter unveils challenges tied to digital technology and digital health investments, funding sustainability and business models for healthcare innovations. Finally, the chapter touches on the accounting challenges facing hospitals, with a special focus on the dilemma of classifying digital health investments as assets. It stresses the importance of redefining the role of data, embracing a new mindset towards market fit, and the potential of ‘digital twin technology’ for risk assessment. In essence, this chapter offers contributions by providing a comprehensive insight into the nexus between healthcare performance and funding in Australia, presenting the reader with both challenges and opportunities of accounting and digital technology in the journey towards VBHC.

© 2024 selection and editorial matter, Gillian Vesty, Miia Jansson, Tarek Rana and Kerryn-Butler Henderson; individual chapters, the contributors

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