Prostheses List Update 8.9.2021

On Monday the Independent Hospital Pricing Authority (IHPA) released its ‘Consultation Paper on a Methodology for Determining the Benchmark Price for Prostheses in Australian Public Hospitals’. This is a critical paper in the Prostheses List (PL) reform discussions, because out of this consultation process and IHPA’s final recommendations, the way of calculating the public price for benefit reductions beginning 1 July will be determined. MTAA has always insisted this needs to be done fairly in a way that truly reflects the public sector and the differences it has with the private sector.

Consultation is open until 1 October, after which IHPA will consider the feedback and make recommendations to the Government. These recommendations will be a critical factor in determining whether MTAA will be willing to release company data to IHPA for analysis. 

MTAA has been in ongoing discussions with IHPA about its methodology and data collection for reviewing the PL benefit. The Consultation Paper confirms our understanding that IHPA prefers a weighted pricing methodology over choosing a lowest price point to establish the public price. If implemented, this makes an enormous difference to the impact of benefit reductions, as difficult as they still are. However, we can expect insurers to argue hard for more punitive pricing measures.

MTAA will be putting in a submission arising from the work of its committees and the decisions of the Board. Companies are welcome to make their own submission, but unlike the Prostheses List Scope Consultation which ends 19 September, there is less need for companies to provide individual examples, as the issues are more generic in nature. If you are not involved in a relevant committee, you will receive a copy of MTAA’s submission once complete.

Other key points raised in this paper that you should be aware of:

  • As expected IHPA has recommended weighted average pricing over some lower price point methodology which is positive
  • IHPA plans to use HCP data as a source of device volume data in the private sector
  • DRG data will be used if industry data can’t be accessed – this would be a much worse outcome than using our own data
  • Some states have indicated willingness to assist to supply data – it is unclear how this would be done given sponsor confidentiality arrangements
  • Proposed to cleanse very high or low data – unclear how this would apply to aggregated data
  • Main reason provided to support volume weighted average is market share arrangements
  • Private adjustment calculation is discussed in Section 5  – refers to the concept of ‘legitimate and unavoidable cost differences’ used in NHCDC – the paper invites stakeholders to look at the framework for this. We need to consider this carefully as this is an important part of our asks.

MTAA has been working with KPMG on the process of PL data collection as previously advised to CEOs and Authorised Representatives by email and on the monthly CEOs call. CEOs/Authorised Representatives should expect a communication late this week formally communicating what data needs to be provided ahead of the process beginning next week.

Please contact Paul Dale or 0414 234 058 if you have comments or questions.