One of the things that wasn’t taught well when I went to medical school was actually how the health system works: in my case I’m referring to the Australian health care system but I’m sure the sentiment applies in other countries. Knowing how the health system works overlaps with how to run a business, which I’ll cover in a later post.

When you are studying medicine and even once you’ve graduated and working in the hospital you don’t really pay attention to how the health system works. The patients come and go and you do your best to look after them. It’s perhaps only once you actually have to go out and get a job, either in the hospital system or in private practice, that you start to care. When I refer to ‘how the health system works’ what I really mean is ‘how is health care paid for’. Once you get a job you are concerned with how you are paid and/or will pay other people. If you work in hospitals then you spend a lot of time listening to other people tell you you can’t do stuff because there is no money – even if what you want to do will result in real improvements and maybe even save money at the end of the day.

In Australia it is becoming even more important for medical students and junior medical officers to be taught how the health system works. As a result of the last round of health care reform the Federal government is phasing-in activity-based funding. So hospitals will be based on what they do according to a National efficient price. This sounds straight forward but in practice it is much more complicated. Hospitals won’t necessarily be getting paid on the basis of the activity they undertake. Governments must allocate budgets from finite coffers so the money local hospitals receives is based on projections, somewhat spuriously called targets. If the hospital undertakes more activity than predicted then unless it operates very efficiently it may end up over budget.

Medical students, junior and senior medical officers need to know about how activity-based funding works as they are the source of the the documentation about how much activity is being undertaken. Unless the doctor records not only the cholecystectomy but the co-morbidities of the patient and complications incurred during the hospital stay then ultimately the coding of the data to obtain funding will be inaccurate and inadequate. This in turn leads to inadequate models upon which the hospital activity targets are set.

These processes and in evolution and being rolled-out over the coming years. Doctors and their students need to become more familiar with how the system works so they can influence how their hospitals or practices are run and how the money is spent. Knowing how the system works will change how doctors work. Health care practitioners also need to be aware developments in primary care, such as the development of Medicare Locals. They will also need to keep up to date and the system is likely to change again. This is the decade of activity-based funding in Australia. The next decade might see a shift to process and outcomes-based funding and further changes to the way doctors practice.

I’ve only touched one major aspect of how the health system works. In Australia it is very complicated due to Federal, State and Local considerations. Medical schools will need to teach according to their local health care environment.

For more information see Activity Based Funding and the Independent Hospital Pricing Authority