Activity based funding may be considered by the government, for Australia’s public hospitals to attract cost reduction and efficiency increases. According to the Australian Institute of Health and Welfare (2014), in Australia, $140.2 billion was spent on health care in 2011-12; with 69.7% of the funding derived from the federal government and 27.3% from state and territory governments. Since the global economic crisis in 2007/2008, government health funding has increased and tax revenue has declined; where previously the figures were growing at an adjacent and stable rate. Elective surgery average waiting times increased from 33 days in 2011-12 to 36 days in 2012-13. In 2012-13, wait times ranged from an average of 27 Days in Queensland hospitals and 51 days in hospitals in the ACT (Australian Institute of Health and Welfare, 2013, p. 13-15).
With the looming pressure of decreasing tax revenue and heavy reliance on government funding; implementation of activity based funding may result in cost savings for the government and improved efficiency for patients; however to achieve added value to hospitals, they will need a dramatic change to traditional costing methods, so costs can be accurately analysed.
ABF is explained by the UBC Center for Health Services and Policy Research (2014, p. ...
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... time consuming set-up processes and unless administration of the set-up is completed with correct research and cost drivers, the system will become inadequate and inefficient. If the system cannot be implemented, the outcomes will be inaccurate cost allocation and the inability to analyse financial and non-financial data. Availability of this data is imperative to effective decision making and the ability for management to see shortfalls and recover costs and efficiencies.
It seems that any value added as a result of ABF implementation, is fixated towards the government and not the hospital. If activity based information is unavailable, not only will hospitals bear the grunt of any variances between funding and actual costs; if ABF is inflexible, they will also have to pay for innovations, or not offer improved health benefits and cost saving techniques to patients.
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