3.7. Payment mechanisms

3.7.1. Paying for health services

Hospital inpatient services

Since 1997, inpatient health care services in public and private non-profit (funds) hospitals and private for-profit hospitals (funded by the Private Hospitals Financing Fund) are mainly financed on the basis of a DRG-like budget allocation system, also known as the Austrian DRG system (Leistungsorientierte Krankenanstaltenfinanzierung, LKF). In addition, public and private non-profit hospitals are financed via coverage for operational losses (Betriebsabgangsdeckung) by the hospital owners or operators (the Länder in case of public hospitals) as well as “special fee class” (Table3.10).

Table3.10

The LKF system

The LKF system was introduced in 1997 to increase transparency and efficiency, with the ultimate aim to contain hospital budgets. Prior to this, hospitals were financed on a per diem basis (BMGF, 2016e). The LKF system distinguishes between two areas: the nationally uniform LKF core area, and the LKF steering or governance area, which allows Länder to determine Länder-specific allocation rules on the basis of the core area.

The LKF core area consists of a patient classification system and the rules for determining the relative costliness of cases in terms of so-called LKF points, which are similar to DRG weights in other countries (BMGF, 2016e). Almost every inpatient case in both funds hospitals and hospitals funded by the Private Hospitals Financing Fund is assigned to one of 976 procedure- and/or diagnosis-related case groups (leistungsorientierte Diagnosefallgruppen, LDF) in a three-step procedure.

• First, the patient case is designated as procedure-related (if a main surgical service or a significant medical service was performed during the stay) or diagnosis-related (otherwise).
• Second, the patient case is classified as one of 202 procedure-related groups or one of 220 diagnosis-related groups. These 422 groups summarize procedures or therapeutic episodes that are assumed to incur similar costs.
• In a third step, a decision-tree classifies patients of these main groups into one of the 979 LDF groups (448 procedure-related, 531 diagnosis-related). This classification is based on detailed patient- or stay-related characteristics,for example age, main diagnosis or specific services provided (such as expensive chemotherapies) and aligns payments more closely to expected costs of patient cases.

Every LDF group is associated with a specific point-value (score) that represents the average costs of all patients in that LDF and includes a range of expected lengths of stay. Average costs are determined on the basis of micro-costing with data from selected reference hospitals. Associated scores are designed to cover all costs, including indirect costs of administration, depreciation of fixed capital not attributable to specific services (e.g. infrastructure) and other services, and are accounted for via mark-up rates to direct costs. If special care is provided, for example in an intensive care unit or a psychiatric or neurological ward, the LDF flat rate is supplemented with a mark-up to account for additional costs that accrue in these departments.

An interdisciplinary working group of experts from different fields regularly updates the LKF model to introduce new procedures or account for price changes. Minor changes of the LKF model are based on regularly performed simulations, while micro-costing is performed less regularly (in 1999 for the models 2002–2008, in 2005 for 2009–2016, and in 2014 for 2017 and after) (BMG, 2010).

While the amount of points assigned to an inpatient case is determined from the point-value of the relevant LDF group and assorted mark-ups (e.g. intensive care unit, long stay, etc.), the effective payout from the LKF system from LGF – that is, the amount in euros paid out per point produced – may vary according to:

• regulations set by the Länder in the “LKF steering area”; and
• the amount of resources available in the LGF.

In addition, some admissions are not classified into LDF and LKF points are awarded based on length of stay. This includes follow-up treatment of neurologic patients, acute geriatrics, remobilization and youth psychiatry.

The LKF steering area allows state governments to allocate funding based on specific functions of hospitals (i.e. centralized or specialized care, state provider) that are of particular significance in the Land (BMG, 2010). In principle, the budget of the LGF is divided between hospitals on the basis of LKF points (core area) and other (Länder) criteria (steering area). However, the distribution of funds between the steering area and the core area as well as the distribution of the steering area funds are within the discretion of the LGF. Typically, funds from the LKF steering area are allocated as different mark-ups (depending on the type of hospital) to payments based on LKF points (BMGF, 2010). These additional funding options can be used at the discretion of the State Health Platforms (bodies of the LGF) to create different conditions and incentives for hospitals (Czypionka et al., 2008).

As the system is used to allocate a fixed budget for the LGF, an increase in LKF points produced by hospitals reduces the value of one LKF point. This is because statutory LGF resources are determined by social security contributions and general taxation (see Fig3.6). As a result, payout via the LKF system does not (necessarily) cover total hospital costs, and public hospitals depend on additional funding via special class fees, the LKF steering area or coverage of deficits by the hospital owner.

Fig 3.6

Private for-profit hospitals receive public funding via the LKF system (see above) as well as private payments. As with funds hospitals, payout per point from the LKF system depends on the amount of funds available in the relevant source of financing, the Private Hospitals Financing Fund, which pools funds allocated to private hospitals. Private for-profit hospitals are not eligible for funds from the LKF steering area.

Hospitals that have contracts with SHI funds may charge the Private Hospitals Financing Fund directly. Hospitals without SHI contracts charge their patients who are then reimbursed by the Private Hospitals Financing Fund subject to the SHI benefits catalogue, determining which services and to what extent their costs are covered.

Cover for operational losses

The share of LKF in total hospital financing by the Länder must exceed 50% by law but, beyond that, the Länder can determine freely the degree to which to fund their hospitals via the LKF system versus cover for operational losses. Since deficits of hospitals will be covered by the Länder, the degree to which incentives in the LKF system affect hospital operation depends on the proportion of compensation payments versus funding via the LKF system (see Table3.9).

Table3.9

Hospital outpatient services

Hospital outpatient (intramural) services are also financed via LGF. Payment mechanisms used to vary across regions and were based on DRGs (outpatient LKF system), global budgets, fee-for-service or a mixture thereof. As a result of the 2017 health reform a unified catalogue of hospital outpatient and ambulatory (extramural) physician services was introduced. For hospital outpatient services, this catalogue will serve as the centrepiece for a new DRG-based payment system (LKF ambulant). After a two-year transition period for regional testing, the system is planned to be rolled out nationwide by 2019 (BMGF, 2017aq; ZS-G, 2017).

The new outpatient LKF system also assigns points to services provided in hospital outpatient departments. In contrast to the LKF system for inpatient services, payment for outpatient hospital services is scaled to cover only 50% of total costs. The remaining 50% are attributed to the “structural component” of the LKF system – fixed budgets that are set by the LGF and account for public supply mandates and contingency costs. This restriction of points-based reimbursement is expected to discourage overutilization of capacities (BMGF, 2017aq).

Besides the outpatient LKF system, a cross-sectoral documentation of diagnoses is planned to be implemented by the end of the current health care reform period (in 2021) (ZS-G, 2017).

Ambulatory (extramural) care

Ambulatory health services are provided by GPs, specialist physicians, dentists, allied health professionals and outpatient clinics. Payment mechanisms for these services depend on whether they are part of the catalogue of reimbursable services of the SHI funds, the provider is included in the collective contracts with the HVB and the location-based staffing plan, and the provider has a contract with the patients’ SHI fund (see section 2.8.2). If these conditions are not met, the provider charges the patient directly. The patients can claim reimbursement for these payments for up to 80% of applicable SHI tariff. Private health insurance may cover the difference between non-contracted provider fees and those reimbursed by SHI.

The catalogue of reimbursable services, which is part of the collective contract, includes fee-for-service payments and contact capitations, namely fees that can only be charged once per patient and quarter irrespective of the number of consultations (but not if the patient never seeks care). For example, the first GP consultation within a calendar quarter will result in a higher total fee than subsequent visits, since the provider may charge the contact capitation only once per calendar quarter. However, if the patient visits another GP in the same quarter, the new GP is also allowed to charge the contact capitation.

The mix of payment methods may vary across specialties and/or regions. GPs generate only about a quarter of their revenues based on service fees and three quarters based on contact capitations (Jung, 2016). In tariff regulations for specialist physicians, contact capitations play a substantially smaller role.

Many collective contracts specify budget ceilings up to which individual providers may charge the SHI funds for a specific type of service. Budget ceilings are a contested issue and subject to continuous public debate. SHI funds are in favour of budget ceilings as they allow containing budgets and decreasing unit prices if volumes increase. The Austrian Medical Chamber points out that budget ceilings create long waiting times for specific services. As a result, paying out of pocket to bypass waiting lists (see section 3.4.3) or taking up VHI to reduce waiting time is incentivized but creates inequalities in access to health services (Die Presse, 2015) (see section 7.3.2). Following public debate, budget ceilings were abolished for CT and MRI scans in 2017/2018 (Die Presse, 2017).

Many physicians practise without an SHI contract (Wahlärzte) because the number of contracts with SHI funds is limited based on staffing plans (see section 3.3.4). In addition, some physicians prefer not to contract with SHI because this allows greater flexibility with regard to fee levels, opening hours and SHI insurance status of patients. Non-contracted physicians are always paid fee-for-service and they may set their fees without any restrictions (BMGF, 2017am). These incentives have also contributed to an increase of the number of non-contracted physicians since 2000, while at the same time the number of physicians with SHI contract stagnated (see sections 4.2.1 and 7.3.2).

Pharmaceutical care

The costs of pharmaceuticals dispensed during inpatient stays are included in the associated LKF points. In the ambulatory sector, SHI funds cover most of the costs for prescribed medicines (except for the prescription fee).

• Remuneration of wholesalers and pharmacies is subject to statutory regressive mark-up schemes on regulated prices. For wholesalers, mark-ups depend on the classification of the pharmaceutical in the positive list, according to which pharmaceuticals either belong to green, yellow and red boxes (see section 2.8.4). Pharmaceuticals included in the yellow or green box of the positive list are subject to mark-ups of 7% to 15.5% of the ex-factory price (up to a maximum of €23.74 for products priced at €339.15 or higher).
• Pharmaceuticals in other boxes of the positive list, or pharmaceuticals that are not listed in the positive list, are subject to mark-ups of 9% to 17.5% of the ex-factory price (up to a maximum of €30.52 for products priced at €339.15 or higher) (BMGF, 2004).

For pharmacies, mark-up schemes depend on the customer.

• Community pharmacies face mark-ups ranging from 12.5% to 55% of the pharmacy purchasing price (which is the ex-factory price plus the wholesalers’ mark-up), as well as an additional “private customer mark-up” of 15%.
• “Privileged customers” such as SHI funds or Länder and associated institutions as well as non-profit hospitals benefit from lower mark-ups of 3.9% to 37% of the pharmacy purchasing price (Österreichische Arzneitaxe, 1962).

All mark-up schemes, except the fixed 15% “private customer mark-up”, are designed as staggered regressive mark-ups, namely mark-ups are higher for lower-priced products. Note also that the law sets maximum mark-ups. While wholesalers and pharmacies could set lower mark-ups, in practice they correspond to these maximum values (Zimmermann & Rainer, 2018).

In 2015, pharmacies dispensed medicines and medical non-durable goods worth €4339 million, of which 77.7% were for prescribed medicines and 20.4% for OTC products (OECD, 2017c).

Rehabilitative care

Rehabilitative care provided in acute care hospitals and specialized rehabilitation centres are excluded from the LKF system and paid per diem. Patients can use rehabilitative care after inpatient stays upon application to the SHI funds and are charged income-based co-payments of up to €19.91 per day. Rehabilitation centres are either operated by SHI funds directly or have contracts with SHI funds that stipulate payment schemes.

While SHI funds are responsible for rehabilitative care for the general population, pension insurance funds cover expenses for pensioners and people whose medical condition would have caused occupational disability. Accident insurance covers expenditure for rehabilitative care following work accidents.

Total expenditure for rehabilitative care (in all settings) was €2291 million in 2015. In inpatient settings, government/compulsory financing schemes covered 71% of total costs. This share was considerably smaller in ambulatory (extramural) settings (42%) where private OOP payments played a substantial role (56%).

Emergency care services

Emergency care that covers public pre-hospital emergency health care, including the ambulance service, is provided by municipalities, cities and Länder (see section 5.5). Ambulance transport fees are primarily covered by SHI funds. A budget from municipalities covers costs for availability of providers and capital investment. If transport of a patient is not medically necessary after an emergency care intervention, providers cannot charge transport fees. Tariffs for emergency care services differ between municipalities. Patients are charged fees if they are not insured by SHI, or if transportation turned out to be medically unnecessary (Andreaus, 2009; Austrian Red Cross, 2017c).

3.7.2. Paying health workers

In the ambulatory (extramural) sector, physicians mainly practise independently and are self-employed. Their remuneration is based on the fees they bill to SHI funds. According to the income report of the Austrian Court of Auditors, the annual median gross income of independently practising physicians varied between €86 512 for GPs, €99 704 for dentists and €120 589 for specialist practitioners in 2013 (Austrian Court of Auditors, 2016b).

Fees charged by specialty can also be disaggregated in the accounting data of SHI funds. The remuneration varies significantly across specialties, with radiologists charging SHI funds nearly four times the fees charged by GPs. The accounting data also shows that between 2005 and 2015 the average remuneration of GPs increased by 10.2%, while it increased by 45.1% for orthopaedists in the same period.

In the hospital sector, physicians, nurses and allied health professionals are employed by hospital operators. Collective bargaining agreements define remuneration schemes and working conditions (i.e. working hours). However, hospitals operated by the Länder apply separate collective bargaining agreements resulting in different wage levels in every Land. Also hospitals operated by religious associations and private hospitals have separate collective bargaining agreements for their employees. Salaries of hospital physicians also vary substantially as they may receive income from special class fees from private health insurances (see section 3.5) in addition to their salary. Some employed hospital physicians also operate private practices. As a result, there are no reliable figures on total earnings of hospital physicians (der Standard, 2017; Sommersguter-Reichmann & Stepan, 2017).

Based on taxation data, the annual median gross income of health professionals with university education in 2015 was €45 887, while assistants earned €30 407 annually. In comparison, the annual median gross income of employed workers in Austria was €27 347 in 2015 (Statistics Austria, 2018d).