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Department of Health


Competitive Elective Surgery Initiative 2013-14

Request for Submission (RFS)PRN: 2374

Released 19 September 2013Providers can choose to attend an information session or participate in a webinar:

Information Session 1Tuesday 24 September 2013 at 11.00 amRoom 1.02, 50 Lonsdale Street Melbourne

WebinarThursday 26 September 2013 at 1.00 pm

Information Session 2Friday 27 September 2013 at 10.00 amRoom 1.02, 50 Lonsdale Street Melbourne

Providers must register to attend an information session or participate in the webinar by emailing [email protected]

mailto:[email protected]

Glossary Term Definition

Agreed Referral Criteria

The basis on which Patients will be identified, referred and accepted/refused.

AR-DRG Australian Refined Diagnosis Related Group

ASA score American Society of Anesthesiologists score

BMI Body Mass Index

BPS Budget Payment System

Contracted Surgical Procedures

The elective surgical services specified in the Service Agreement that are to be provided by the Successful Provider for patients sourced from the Referrer in accordance with the Service Agreement

Contractual Close Date of execution of contracts

Closing Date Date for the lodgement of Submission, being Thursday 24 October 2013

Closing Time The date and time by which Submissions are to be received by the Department, as defined in Section 7.1

CRAFT Casemix Rehabilitation and Funding Tree

Department Department of Health

DRG Diagnosis Related Group

ENT Ear Nose and Throat

ESIS Elective Surgery Information System

ESIS Public Provider

This includes the 21 public health services for which elective surgery data is publicly reported plus the two public health services (Albury Wodonga Health and South West Healthcare) for which elective surgery data is not currently publicly reported.

ESWL Elective surgery waiting list

Evaluation Criteria The evaluation criteria set out in Section 6.2

Evaluation Process The process outlined in this document by which Submissions will be evaluated by the Department

FESS Functional Endoscopic Sinus Surgery

Final Payment Date Three months after expiry of the Term subject to satisfactory data submission to the VAED

IAP Industry Advisory Panel

ICD-10-AM International Statistical Classification of Diseases and Related Health Problems, 10th Revision, Australian Modification

Initiative The 2013-14 Competitive Elective Surgery Initiative for public and private providers ($15 million in 2013-14)

MACSS Ministerial Advisory Committee on Surgical Services

Minister Minister for Health

NEST National Elective Surgery Target

Nominated Surgical Procedures

The surgical procedure(s) that Providers nominate in the Submission and intend to provide during the Term set out in Section 4.2

NPA National Partnership Agreement on Improving Public Hospital Services


Term Definition

Option Terms First Option Term 1 July 2014 to 30 June 2015Second Option Term 1 July 2015 to 30 June 2016Third Option Term 1 July 2016 to 30 June 2017

Patients Patients that are treated under this Initiative

Proposed Surgical Procedures

The procedures that the Department has proposed for this Initiative set out in Section 4.1

Private Provider A private provider participating in the RFS process in a treating capacity

Provider A public or private provider participating in the RFS process in a treating capacity (rather than in a referring capacity)

Public Provider A public provider participating in the RFS process in a treating capacity (rather than in a referring capacity)

Referral Patients that meet the agreed patient selection criteria

Referrer An ESIS reporting public health service that the Provider enters into a collaboration with to source elective surgery waiting list patients. Contact details for Referrers are set out in Appendix D.3.

RFS Request for Submission

RFS Process The process for the calling, preparation, submission and evaluation of Submissions

RFS Terms and Conditions

The terms and conditions set out in Section 8 of this document

Service Agreement The contract entered into by the Department, the Successful Provider and the Referrer, being the document annexed to the RFS at Appendix B.

Service Agreement Term Sheet

A term sheet that sets out the key terms of the Service Agreement for Contracted Surgical Procedures to be provided by the Successful Providers

Short-Listed Provider

A Provider who is short-listed in the evaluation process and invited to enter into negotiations with the Department

Specialist Medical Practitioner

The medical specialist that will be delivering the Contracted Surgical Procedures under the Initiative

Submission A formal response from a Provider to the RFS

Successful Provider

Provider(s) that the Department selects and will contract with to deliver the Contracted Surgical Procedures

Term 1 January 2014 to 30 June 2014

TURP Transurethral resection of the prostate

VAED Victorian Admitted Episodes Data Set

VASM Victorian Audit of Surgical Mortality

WIES Weighted Inlier Equivalent Separation


1. Introduction and purposeThe 2013-14 State Budget allocated $420.7 million of funding over four years to be allocated on a competitive basis to drive efficiencies in elective surgery, meet increasing levels of demand and treat more Victorian elective surgery patients sooner.

This follows on from the $44 million of funding committed to the Competitive Elective Surgery Initiative in 2012-13.

$101 million has been allocated for the 2013-14 financial year and has been split between three funding pools:

A pool for Elective Surgery Information System (ESIS) reporting public providers ($77 million); A pool for the public and private providers currently delivering surgery under the 2013 Elective

Surgery Services Deed of Agreement ($9 million); and A pool for public and private providers to be allocated via a new competitive Request for

Submission (RFS) process ($15 million).This RFS has been issued by the Department of Health (Department) and relates to the pool of funding ($15 million in 2013-14) to be contested by public and private providers (the Initiative).

The Department intends to contract for 2013-14, 2014-15, 2015-16 and 2016-17. The maximum value to be covered by these contracts will be $165 million, including $15 million to be allocated for 2013-14.

The Department is seeking Submissions from all potential private and public providers (Providers) interested in participating in the Initiative.

This RFS provides further information on the Initiative including policy context and objectives, governance, scope of surgical services, proposed commercial framework, the Evaluation Process that will be applied by the Department and the instructions for preparation and lodgement of Submissions.

The RFS is issued by the Department subject to the specific terms and conditions contained in this document.

1.1. Structure of Request for Submission The structure of the RFS is as follows:

Section 1: Introduction and purpose

Provides an outline of the RFS Process including key dates and the protocol for communication between Providers and the Department during the RFS Process.

Section 2: Policy framework and context

Provides background information on the Initiative and in particular the policy framework and objectives of the Initiative.

Section 3: Governance and stakeholders

Provides an overview of the governance framework.

Section 4: Scope of surgical procedures

Provides an overview of the scope of surgical procedures which are included in the Initiative.

Section 5: Commercial framework

Provides an overview of the Initiative’s proposed commercial framework including key contractual terms.


Section 6: Evaluation of Submissions

Provides an overview of the Evaluation Process to be applied in the evaluation of the Submissions.

Section 7: RFS – Submission Process

Provides an overview of the process Providers are required to follow for the Submissions.

Section 8: RFS Terms and Conditions

Provides the terms and conditions of the RFS Process.

Appendices

Appendix A Service Agreement Term Sheet

Provides a general outline of the main terms that are included in the Service Agreement between the Department and the Successful Providers.

Appendix B Service Agreement

A Service Agreement will be executed between the Department, the Successful Private Provider and the Referrer (tripartite contract). Successful Public Providers will be engaged via an exchange of letters. The draft Service Agreement will be emailed to all potential Providers by 26 September 2013.

Appendix C Submission requirementsProvides details of the requirements for the Submission.

Appendix D Supplementary informationProvides further information that Providers may find useful in preparing their Submission.

1.2. RFS Process

1.2.1. Indicative timetable

The table below outlines the timetable for the RFS Process, the selection of the Successful Providers and the delivery of the Contracted Surgical Procedures.

Table 1: Indicative timetableMilestone Date

Issue of Request for Submission Thursday 19 September 2013

Information sessions Information Session 1Tuesday 24 September 2013 at 11.00 amRoom 1.02, 50 Lonsdale Street Melbourne



Lodgement of Submission Thursday 24 October 2013

Selection of Successful Providers October / November 2013

Notification to Successful Providers and Contractual Close

December 2013

Delivery of Contracted Surgical Procedures 1 January 2014 – 30 June 2014


1.2.2. Provider enquiries

Providers will be given an opportunity to interact with the Department throughout the RFS Process in accordance with the RFS Terms and Conditions set out in Section 8. All correspondence, notifications, contact and enquiries in respect to this RFS and the Initiative overall are to be communicated to:

Ms Carmen Yiu Manager, Acute Inpatient and Specialist Clinics ProgramDepartment of [email protected]

Any enquiries that Providers may wish to make in order to clarify their interpretation of the RFS, or for any other purpose, should be submitted no later than seven working days prior to the Closing Date.

Enquiries and the Department’s responses will be circulated to all Providers, except where:

the Provider nominates in their enquiry that it relates to proprietary information, relevant to its Submission; and

the Department is of the opinion that the enquiry and the Department’s response are not material to the integrity of the competitive nature of the RFS Process.

In the event that a Provider nominates that an enquiry relates to proprietary information relevant to its Submission, and if the Department is of the opinion that the enquiry is not proprietary in nature, the Department will advise the Provider, who will be given the option to withdraw the enquiry. If the Provider then reaffirms its request for a response to the enquiry, the enquiry and the Department’s response may be circulated to all Providers.

An independent probity auditor, Pitcher Partners Consulting, has been appointed to ensure that the initiative is conducted in accordance with Government probity requirements. Any queries or concerns about probity matters should be directed to:

Dr Richard Shrapnel PhDExecutive DirectorPitcher Partners Consulting +61 3 8610 [email protected]

Further information about elective surgery in Victoria is available at:http://www.health.vic.gov.au/surgery

Providers should contact Victorian public hospitals for further data and information on elective surgery waiting lists for the Proposed Surgical Procedures. A list of Elective Surgery Information System (ESIS) hospitals, including contact details, is contained in Appendix D.3.

More information about Victorian public elective surgery providers is available at: http://performance.health.vic.gov.au/Home.aspx


http://performance.health.vic.gov.au/Home.aspx


1.2.3. Additional information and clarifications sought by the Department

Notwithstanding any other requirements of this RFS, the Department may require Providers to submit additional information or clarifications. Providers will be required to promptly respond, in writing, to all such requests for additional information or clarifications. Where such information is not provided within the timeframe nominated by the Department, the Department reserves the right to continue the evaluation of the Submission on the basis of the available information.

1.2.4. Information sessionsProviders can choose to attend an information session or participate in a webinar:

Information Session 1Tuesday 24 September 2013 at 11.00 amRoom 1.02, 50 Lonsdale Street Melbourne



Attendance at an information session or participation in the webinar is not mandatory.

Providers wishing to attend an information session or participate in the webinar must register by emailing [email protected] by Monday 23 September 2013.



2. Policy framework and context

2.1. OverviewThe Victorian Government is committed to working with the health sector to deliver necessary reforms to ensure that services are delivered efficiently and are sustainable. The challenge facing Victoria’s health care system is that demand, driven by population growth, an ageing population and increases in chronic and complex conditions, is growing faster than available revenue. Furthermore, the uncertain global and national economic climate requires a greater focus on efficiencies in government spending to ensure Victoria is well placed for the future.

Elective surgery is one area facing demand growth and the Victorian Government is using new approaches to delivering public elective surgery with both public and private providers, to drive efficiencies and maximise the value of Victorian Government funding.

The Department’s Elective Surgery Access Policy (2009) provides policy direction and guidance for public health services in Victoria to ensure that patients are treated equitably, within clinically appropriate timeframes, and with priority given to patients with an urgent clinical need. Victorian public health services are responsible for ensuring compliance with the policy and for providing accurate data sets for performance management. Timing for elective surgery is based on clinical urgency and then treatment in turn within clinical urgency categories (category 1, 2 and 3). Targets are structured around these categories.

To help meet demand for elective surgery and support progress against targets, the 2013-14 Victorian State Budget allocated $420.7 million of funding over four years to be allocated on a competitive basis to drive efficiencies in elective surgery, meet increasing levels of demand and treat more Victorian elective surgery patients sooner. This follows on from the $44 million of funding committed to the Competitive Elective Surgery Initiative in 2012-13.

$101 million has been allocated for the 2013-14 financial year and has been split between three funding pools:

a pool for Elective Surgery Information System (ESIS) reporting public health services1 ($77 million);

a pool for the public and private providers currently delivering surgery under the 2013 Elective Surgery Services Deed of Agreement ($9 million); and

a pool for public and private providers to be allocated via a new competitive Request for Submission (RFS) process ($15 million in 2013-14) (the Initiative).

Funding from the $77 million pool has now been allocated to public providers. This process delivered on average a 7.8 per cent discount to the Victorian WIES unit price. The Victorian WIES unit price in the 2013-14 Victorian health policy and funding guidelines2 (for a DRG costweight of 1.0) for Victorian public hospitals differs by the size and location of hospital (peer group pricing). Further details on the case mix funding model are provided in Appendix D.1.

The Department intends to contract for 2013-14, 2014-15, 2015-16 and 2016-17. The maximum value to be covered by these contracts will be $165 million, including $15 million to be allocated for 2013-14.

This RFS is seeking submissions for the Initiative and is open to both public and private providers. Private providers should note that the patients under this Initiative remain as public patients, and should ensure that any insurances and indemnities take account of this.

1 This includes the 21 public health services for which elective surgery data is publicly reported plus the two public health

services (Albury Wodonga Health and South West Healthcare) for which elective surgery data is not currently publicly reported. Contact details are set out in Appendix D.3.

2 http://www.health.vic.gov.au/pfg/


The Initiative will treat public patients by either public or private hospitals (Providers). These patients will be referred by one of the ESIS public health services (Referrers). A full list of Referrers is set out in Appendix D.3, including contact details for each health service.

The Initiative will only fund the Proposed Surgical Procedures (listed in Section 4.1) for patients referred by a Referrer for treatment by a Provider, where the patient has consented to being treated by the Provider. No other procedures or referring hospitals will be considered for funding.

Referrers may also participate in this Initiative as Providers.

2.2. Objectives The objectives of the Initiative are to:

maximise the value of Victorian government funding for elective surgery public patients over the long term;

drive efficiencies and innovation in elective surgery to improve access and maximise the number of public patients treated; and

encourage partnerships between the public and private sector for the delivery of public elective surgery.

2.3. Guiding PrinciplesIn undertaking this Initiative the Department intends, where possible, to treat Public and Private Providers equally. It has been clearly articulated in the RFS where it may be necessary to make a departure from this principle (for example, where aspects of certain evaluation criteria and Submission requirements are not relevant to both Public and Private Providers).


3. Governance and stakeholders

3.1. Governance frameworkAn effective governance framework has been implemented for this Initiative to provide support, accountability, and an appropriate reporting structure throughout the planning and RFS phase of the Initiative. An overview of the governance structure is illustrated in Figure 1 below.

Figure 1: Governance structure

The key components of the governance structure are outlined below.

3.1.1. Department of Health

The Department has been tasked with the delivery of the Initiative. The Department has established a project team to progress the Initiative. The Department receives advice from the Industry Advisory Panel (IAP) and provides advice to the Minister for Health (Minister).

3.1.2. Industry Advisory Panel

The IAP has an oversight role, which includes:

providing advice about key features of the design of the Initiative to the Minister and the Department; and

having oversight and reporting on the conduct of the process and the outcomes.

The IAP has no role in the evaluation of Submissions.

3.1.3. Ministerial Advisory Committee on Surgical Services

The Ministerial Advisory Committee on Surgical Services (MACSS) provides advice and makes recommendations to the Minister and the Department on the provision of surgical services in Victoria's public hospitals.

Further details on membership of the MACSS are available at: http://www.health.vic.gov.au/surgery/committees.htm


Minister for Health


Industry Advisory

PanelMinisterial Advisory Committee

on Surgical Services

4. Scope of surgical proceduresThis section provides an overview of the elective surgical procedures that are being included in this Initiative.

4.1. Proposed Surgical ProceduresThe Initiative will include a mixture of multi-day and same-day procedures.

The procedures proposed for this Initiative, and an extract of the elective surgery waiting list (ESWL) at Victorian ESIS public health services are summarised in the table below.

Table 2: ESWL for the Proposed Surgical ProceduresProcedure name3 Number waiting

(June 2013)Number overdue

(June 2013)

Number treated in 2012-13

1 Repair procedures on shoulder and elbow 1,209 530 1,404

2 Total hip replacement 1,263 448 2,152

3 Total knee replacement 2,201 914 2,600

4 Repair of cruciate ligaments 335 133 672

5 Excision / repair of bunion and other toe deformities

573 191 732

6 Prostatectomy (TURP) 585 242 1,897

7 Functional Endoscopic Sinus Surgery (FESS) 530 163 651

8 Tonsillectomy 2,577 748 4,357

9 Septoplasty 1,182 411 1,218

10 Cholecystectomy 1,033 229 3,939

11 Inguinal herniorrhaphy 1,123 261 3,363

12 Other herniorrhaphy 1,093 282 2,659

13 Hysterectomy (for non-malignancy) 968 241 2,373

14 Arthroscopy of knee 1,081 280 3,099

15 Release of carpal tunnel 873 270 2,013

16 Repair of cataract 3,071 48 12,528

17 Local excision / destruction of lesion / tissue of skin and subcutaneous tissue

2,759 646 10,141

The Department may elect to award some or all of the Proposed Surgical Procedures.

Surgical procedures that have not been specified above will not be considered as part of this Initiative.

Further information about elective surgery in Victoria is available at:http://www.health.vic.gov.au/surgery

3 This is the Principal Prescribed Procedure (PPP) (the elective procedure for which the patient has principally been placed on the waiting list). More information about ESIS and PPP codes can be found at:

http://www.health.vic.gov.au/hdss/esis/2013-14/manual/esis_v16_final.pdfhttp://www.health.vic.gov.au/hdss/reffiles/2011-12/esis/esis_ppp_codes.xls


http://www.health.vic.gov.au/hdss/esis/2013-14/manual/esis_v16_final.pdf

Providers should contact Referrers for further data and information on the ESWL for the Proposed Surgical Procedures. A list of Referrers is contained in Appendix D.3.

Further information about Victorian health services is available at: http://performance.health.vic.gov.au/Home.aspx

4.2. Nominated Surgical ProceduresProviders can nominate to deliver some or all of the Proposed Surgical Procedures outlined in Table2. Providers are required to nominate in their Submission the surgical procedure(s) they intend to provide during the Term (Nominated Surgical Procedure(s)).

Surgical procedures that have not been specified in Table 2 will not be considered as part of this Initiative.

Successful Providers who are contracted to deliver the Contracted Surgical Procedures should note that it is not possible to substitute other procedures, irrespective of whether these are Proposed Surgical Procedures, for the Contracted Surgical Procedures.


http://performance.health.vic.gov.au/Home.aspx

5. Commercial framework

5.1. OverviewThis section provides a summary of the key commercial terms underpinning the Service Agreement. Successful Private Providers will enter into a Service Agreement with the Department and the Referrer (tripartite contract) for the delivery of the Contracted Surgical Procedures. Successful Public Providers will enter into an exchange of letters with the Department, with the elective surgery targets within the Statement of Priorities to be amended.

The Service Agreement Term Sheet is included in Appendix A.

The draft Service Agreement will be emailed to all potential Providers by 26 September 2013.

5.2. Key commercial terms

5.2.1. Term

The Contracted Surgical Procedures will be delivered during the period commencing 1 January 2014 and ending 30 June 2014. The exact date for commencement is flexible and will be separately agreed with the Successful Providers, but Contracted Surgical Procedures must be delivered by 30 June 2014.

5.2.2. Option Terms

The Service Agreement includes three options in favour of the Department to extend the term for up to an additional three years from the expiration of the original Term. The Option Terms are:

First Option Term 1 July 2014 to 30 June 2015;

Second Option Term 1 July 2015 to 30 June 2016; and

Third Option Term 1 July 2016 to 30 June 2017.

The provision of services pursuant to the options will be on the same terms and conditions as the Service Agreement; however, the number of Nominated Surgical Procedures will be determined by the Department, but will not exceed three times the number specified for the Term of the Service Agreement.

For Contracted Surgical Procedures to be carried out in 2014-15, an indexation adjustment as set by the Department of Treasury and Finance for fees and penalties in the 2014 (May) State Budget will apply to all components of the price (see 5.2.6 below).

If the options to extend are taken beyond 2014-15, the Department will apply the same approach.

5.2.3. Additional services during the Term

The Department may in its discretion, offer the Successful Provider to undertake up to the same number of services again as specified for the Term. The offer to undertake the additional services during the Term will be on the same terms and conditions as the Service Agreement, including as to price.


5.2.4. Additional volume of services during the Option Terms

The Department may in its discretion, offer the Successful Provider an additional volume of services to be undertaken by the Successful Provider during the Option Term, but not exceeding three times the number specified for the Term of the Service Agreement. The offer to undertake the additional services during the Option Terms will be on the same terms and conditions as the Service Agreement, including as to price.

5.2.5. Volume of service

The Submission should specify a minimum and maximum volume for each Nominated Surgical Procedure that the Provider is prepared to undertake during the Term.

It is intended that Successful Providers will be awarded packages for the Contracted Surgical Procedures of between $0.25 million and $3 million for 2013-14. Providers are permitted to propose maximum volumes for their Nominated Surgical Procedures which, based on the Provider’s proposed pricing, could total more than $3 million. However, the Department makes no guarantee that packages for the Contracted Surgical Procedures in excess of $3 million will be awarded.

5.2.6. Pricing

Providers must detail their proposed pricing structure for each Nominated Surgical Procedure in the Volume and Pricing Schedule attached in Appendix C.2. This includes specification of the volume and procedure price (including scalable procedure prices) for each Nominated Surgical Procedure.

Further details on the Victorian case mix funding model, including peer group pricing, are provided in Appendix D.

In developing the procedure price, Providers should give consideration to the following:

Patients should not incur any out of pocket expenses associated with treatment;

Providers will not be entitled to any other funding in addition to the above (for example, there will be no further entitlement to WIES, CRAFT, Medicare, private health insurance etc. for Public Providers and no entitlement to Medicare, private health insurance, etc. for Private Providers);

all procedure prices are to be inclusive of:

- any associated critical care stay;

- any re-admission to operating theatre; and

- all prosthetic costs;

the Department has specified fixed pricing for pre-operative care and review. Pathology, medical imaging and other diagnostic testing are included as part of the pre-operative care and review. Successful Providers will receive one fixed price payment of $185 per Patient for pre-operative care and review by the Specialist Medical Practitioner;

the Department has specified a fixed price of $185 per Patient for post-operative review by the Specialist Medical Practitioner;

the Department has specified a fixed price of $267 per Patient for allied health services. This will be accessible only for Patients requiring repair procedures on shoulder and elbow, hip replacement, knee replacement and repair of cruciate ligaments. This funding can be used as a pool across Patients (who have had these procedures);

the Department has specified a fixed price of $1,070 per Patient for rehabilitation. This will be accessible only for Patients requiring hip and knee replacement. This funding can be used as a pool across Patients (who have had these procedures);


costs incurred as a result of a medical emergency that requires admission of a Patient into an Intensive Care Unit or re-admission to an operating theatre during the inpatient episode will be borne by the Successful Provider;

costs incurred as a result of readmission or presentation to an emergency department of a Patient within 14 days of discharge in relation to the procedure undertaken as part of the Initiative will be borne by the Successful Provider. If the Patient is treated by another hospital, the Successful Provider will be liable for the costs associated with the transfer and treatment of the Patient;

procedure prices will be assessed relative to the ‘without complications’ DRG inlier cost weight (for short-stay or multi-day procedures) and the same-day cost weight (for same-day procedures) (see Appendix D.2);

the Department will apply a complexity loading for Patients who are identified as complex (‘with complications’) through coding in the Victorian Admitted Episodes Data Set (VAED) (see Appendix D.2). This loading will remain the same during the Term and the Option Terms; and

under the Initiative, the Department will not fund staged procedures or follow up procedures (in relation to procedures undertaken as part of the Initiative).

5.2.7. Private and compensable patients

Successful Public Providers who are treating their own ESWL patients are required, as they are for all patients, to ask each patient if they wish to elect to be treated as a public or private patient. If the patient elects to be treated as a private patient, the treatment of this patient must not be funded through this Initiative. The patient must be funded through usual private patient WIES, private health insurance and Medicare.

Compensable and Medicare ineligible patients whose treatment is being funded via other funding mechanisms such as the Transport Accident Commission, WorkSafe, Department of Immigration, Department of Justice, Department of Veterans Affairs etc are not eligible to be funded under this Initiative and must not be referred to Successful Providers.

Patients who are identified by the Referrer as being suitable for referral to the Successful Provider, must be asked, as part of the consent process to be referred to another Provider, if they wish to be treated as a public or private patient. If they elect to be treated as a private patient, they are not eligible to be referred and funded under this Initiative. The patient must be funded through usual private patient WIES, private health insurance and Medicare at the public health service.

5.2.8. Patient supply

Private Providers and Public Providers who are not Referrers will be required to establish collaborative arrangements with Referrer/s to source ESWL patients for the Nominated Surgical Procedure(s). Continuity of care for Patients is an important consideration in these arrangements.

These collaborative arrangements must include agreement in relation to issues such as the proposed Contracted Surgical Procedures, the number of Patients to be treated and the basis on which Patients will be identified, referred and accepted/refused (Agreed Referral Criteria). This agreement must be documented and must form part of the Submission (see Appendix C.4).

For each Nominated Surgical Procedure, Referrers must stipulate in the Collaboration Agreement if the agreed number of Patients to be referred is conditional (that is, is dependent on the outcome of other Submissions the Referrer is involved in (as either a Referrer or a Provider) because the Submissions seek to treat the same cohort of patients.

Providers that have not entered into a collaborative arrangement with a Referrer will not be eligible for this Initiative.

A Referrer may participate in this Initiative as a Provider.


The expected process for patient supply and delivery of Contracted Surgical Procedures is as follows:

Step 1: Patient identification

The Referrer will be responsible for identifying patients for the Contracted Surgical Procedures to be delivered by the Provider in accordance with the pre-agreed criteria (that is, on the basis agreed as part of the collaborative arrangements).

Step 2: Patient referral and acceptance

Patients who have been identified by the Referrer as meeting the pre-agreed referral criteria are referred to the Provider. The Provider may refuse any such Referrals on pre-agreed grounds of sound clinical reasons such as:

- the Provider is of the view that the Contracted Surgical Procedure is generally not required by the patient;

- the Provider is of the view that the Contracted Surgical Procedure would be medically unsafe or not suitable for the patient; or

- the patient does not meet the agreed referral criteria.

Where the patient meets the agreed criteria for Referral, Providers will be allowed a discretionary refusal rate of one out of every 10 Referrals. The Department will penalise Providers with a discretionary refusal rate of greater than one out of every 10 Referrals by permanently withholding 5 per cent of all payments made to the Provider at the Final Payment Date.

The Referrer and the Successful Provider must each nominate a person responsible for coordinating the patient referral and acceptance process. Regular liaison should occur between the Referring Provider and the Successful Provider as appropriate.

Step 3: Patient consent and delivery of service

The Provider is required to ensure that consent has been obtained from the Patient (or their parent/carer if under 18 years of age) prior to delivery of the Contracted Surgical Procedures. The Provider is solely responsible for the Patient’s care not only for the inpatient period, but also from the commencement of the pre-operative review until the completion of the post-operative assessment (if required).


5.2.9. Reporting requirements

Successful Providers will be required to comply with a set of reporting requirements. The reporting requirements will be standardised across all Successful Providers and are based on the reporting requirements for public hospitals in the VAED manual. To ensure the integrity of the information and data provided, the Department may conduct audit(s) of various reporting processes such as clinical coding, adverse events and any deaths associated with surgical care.

Table 3 provides a summary of the key monthly reporting requirements.

Table 3: Summary of reporting requirements

Item Detail

1 Admission episode Successful Providers will be required to provide information on admission episodes in accordance with VAED reporting requirements. This will include: patient level data that identifies type of procedure undertaken, date for

admission and discharge; and specification of complications or unplanned intervention during the

inpatient episode of care.

2 Quality and safety of service

Successful Providers will be required to provide information to evaluate the quality and safety of the service provided. This will include: Provider initiated cancellations or delays of surgery; unplanned return to theatre; unplanned admission to intensive care; post-operative transfers to other hospitals; readmission or presentation at an emergency department within 14

days of discharge; participation in the Victorian Audit of Surgical Mortality; and sentinel events.

5.2.10. Accreditation and other requirements

Successful Providers will be required to comply with accreditation requirements. In particular they will need to ensure accreditation with one of the following:

National Safety and Quality Health Service Standards;

International Society for Quality in Health Care Inc; or

Australian Council on Healthcare Standards.

Successful Providers will be required to comply with the National Safety and Quality Health Service Standards at their next scheduled accreditation.

In addition to the above, Private Providers are required to hold current registration (as a private hospital or a day procedure centre) with the Department and maintain valid medical credentialling for all Specialist Medical Practitioners.

The above requirements must be maintained at all times throughout the Term and any Option Terms.


6. Evaluation of Submissions

6.1. Selection ConsiderationsConsistent with the objectives of this Initiative (outlined in Section 2.2), the Department intends to select an appropriate overall mix of Providers to optimise best value for money for the Initiative. To achieve this, consideration will be given to the following factors:

Service mix: an appropriate mix of Successful Providers to deliver all or some of the Proposed Surgical Procedures;

Provider type: an appropriate mix of Successful Providers. Subject to value for money outcomes and the specifics of the Submissions received, the Department will be seeking to include at least one Public Provider and one Private Provider;

Access and geographical coverage: a mix of Successful Providers with an appropriate geographical coverage such that patients in both metropolitan and rural Victoria have access to the Initiative. Subject to value for money outcomes and the specifics of the Submissions received, the Department will be seeking to include at least one metropolitan Provider and one rural Provider;

Collaboration: subject to all other considerations being equivalent, the Department wishes to encourage collaboration between Referrers (ESIS reporting public health services) and Private Providers; and

Quality: an appropriate mix of Successful providers which demonstrate to the Department that the quality expectations of services that receive public funding will be maintained or enhanced.

6.2. Evaluation CriteriaThe Evaluation Criteria that the Department will use in the evaluation of the Submissions are set out in Table 4.


Table 4: Evaluation Criteria

Compliance Criteria

Evaluation Criterion 1: Accreditation

For all Providers, demonstrated compliance with respect to accreditation against one of: National Safety and Quality Health Service Standards; International Society for Quality in Health Care Inc; or Australian Council on Healthcare Standards.

Evaluation Criterion 2: Registration, qualifications, credentialling and other requirements

For Private Providers only: provision of a copy of the current registration certificate (registration as a private hospital or

day procedure centre) issued by the Department; demonstrated compliance with respect to the requirements for the Specialist Medical

Practitioner(s) including:o appropriate qualification for the Nominated Surgical Procedures;o valid medical credentialling for the Nominated Surgical Procedures; ando valid professional indemnity insurance in the amount of not less than $10 million per

claim, and not less than $20 million in the aggregate, until a period of seven years following the end of the term of the agreement;

valid public liability insurance in the amount of not less than $10 million per claim; and workers’ compensation insurance as required by law.

(RFS Note: This is only applicable to Private Providers because Public Providers must comply with these requirements under the Victorian health policy and funding guidelines 2013-14 – Part two: Health operations, section 1.3)

Evaluation Criterion 3: Submission requirements

For all Providers, provision of: a completed Volume and Pricing Schedule in the Excel format specified in Appendix C.2; a signed Submission Form in the format specified in Appendix C.3; and a completed and signed Collaboration Agreement in the format specified in Appendix C.4.

Comparative Criteria

Evaluation Criterion 4: Price

For all Providers, the extent to which the Provider’s proposed pricing structure is competitive with respect to the procedure price for each Nominated Surgical Procedure within the proposed basket of procedures.

Evaluation Criterion 5: Commercial terms and contractual certainty

For Private Providers only, the extent to which any proposed commercial departures from, or variations to, the Department’s preferred position as set out in the RFS has an impact on value for money and the ability to achieve Contractual Close within the Department’s preferred timeframes.(RFS Note: This is only applicable to Private Providers as no commercial departures from, or variations to, the Department’s preferred position, will be considered from Public Providers)


Evaluation Criterion 6: Capacity and sustainability

For Public Providers only, the extent to which the proposed approach does not impact on the ability of the Public Provider to operate as usual (including if the contract were to be extended).(RFS Note: this is only applicable to Public Providers because the Department has overall responsibility for the performance of Public Providers.)

Evaluation Criterion 7: Collaboration and patient complexity

For Private Providers and non-ESIS Public Providers (or ESIS Public Providers who might seek referrals from other ESIS public hospitals), the extent to which a collaborative arrangement has been agreed with a Referrer, including the agreed numbers and complexity of Patients to be referred and treated.(RFS Note: This is not applicable to ESIS Public Providers who intend to only treat Patients from their own waiting lists. The Department may consider its knowledge and previous experience and dealings with the Provider and may seek information from Referrers, who are part of more than one Submission, on their capacity to refer patients to more than one Successful Provider and any preference that the Referrer may have for one Submission over another)

Evaluation Criterion 8: Capability

For all Providers, declaration of: the number of each Nominated Surgical Procedure undertaken by the Provider in the 2012-

13 financial year; and the Provider’s capability to comply with VAED data reporting requirements, including

accuracy and timeliness of data submission.(RFS Note: The Department may consider its knowledge and previous experience and dealings with the Provider, together with data and other information available to the Department)

6.3. Evaluation ProcessThe evaluation of the Submissions will be conducted by the Department within an established probity framework.

The evaluation will be conducted over a four-stage process:

Stage 1: Review against Compliance Criteria

Providers will be assessed against Criteria 1 - 3 of the Evaluation Criteria to establish whether Providers satisfactorily meet these requirements. If the Provider fails to satisfactorily meet these requirements, the Department reserves the right to cease consideration of their Submission at this point in the Evaluation Process.

Stage 2: Review against Comparative Criteria

Providers will be quantitatively and qualitatively assessed against Criteria 4 - 8 in order to assess the extent to which their Submission offers value for money.

Stage 3: Determine Short-Listed Providers

Consistent with achieving the objectives of the Initiative, the Department will seek to determine its short-listed Providers (Short-Listed Providers), having regard to the outcome of the Stage 2 assessment, and the selection considerations identified in Section 6.1.

At this Stage, Short-Listed Providers may be required to provide additional information to allow the Department to exercise its rights under Section 8.9.


Stage 4: Negotiation and award of contracts

The Department will engage with Short-Listed Providers to complete the evaluation, agree upon the desired service mix, finalise documentation and award contracts. This may involve seeking best and final offers (BAFO) and negotiating contractual terms.

6.4. Competitive NeutralityCompetitive neutrality adjustments are sometimes required in government procurement processes to remove any net competitive advantage that may accrue to public sector entities as a result of government ownership.

The Department will ensure that competitive neutrality is considered and that any appropriate adjustments, such as adjustments for differences in State taxes, are made to ensure comparability of the Submissions from both Public and Private Providers. The Department will not make any adjustments for differences in Federal taxes or general operating profit/cost differences between the public and private sectors (for example, there will be no adjustments to allow for the profit requirements of Private Providers and no adjustments to allow for differences in the cost of items such as prostheses).

To assist with this, the Department will use a price comparator for benchmarking and ensuring comparability of Submissions from all Providers.


7. RFS – Submission Process

7.1. Closing TimeThe closing time for lodgement of Submissions is 2.00 pm on Thursday 24 October 2013 (‘Closing Time’). The Department reserves the right to extend the Closing Time by written notice to all Providers.

Submissions received after the Closing Time will be deemed to be ‘late’ and will be registered separately. If a Submission is received after the Closing Time and the Department’s receiving arrangements were responsible for the Submission being deemed late, the Department will admit the Submission. A late Submission will only be admitted for evaluation by the Department in its absolute discretion. The Department will not accept changes, modifications or adjustments after the Closing Time other than at its absolute discretion.

7.2. Place for Lodgement Submissions must be delivered to the following address:

Department of Health Tender BoxBasement Level B150 Lonsdale StreetMelbourne VIC 3000

Submissions will not be accepted by the Department if sent by facsimile or email.

7.3. Submission requirements

7.3.1. Lodgement of responses

Submissions should be marked:

Strictly Private and Confidential Request for Submission Response Competitive Elective Surgery Initiative - $15m poolLodged By: [Name of Provider]

7.3.2. Copies of responses

Providers must lodge: 4 bound copies of its Submission, with one marked ‘Original’; and 2 electronic copies on CD or USB (ensuring that any formats specified in Appendix C are adhered

to). The bound copies and the CDs or USBs should be numbered. The content of the copies (hard and soft) must be identical. In the event of any discrepancies between the copies, the bound copy marked ‘Original’ will prevail. Submissions must be signed and dated by an authorised officer of the Provider, contained within sealed envelopes or packages and delivered to the address specified in Section 7.2.If more than one envelope or package is delivered, all such envelopes or packages must carry an indication of the number of envelopes or packages in total (e.g. 1 of 2 etc).


7.4. Clarifications and incomplete responsesThe Department reserves the right to seek clarification or further details regarding any information submitted by the Providers. However, the Providers should submit Submissions in sufficient detail to allow a complete assessment. The Department at its discretion may decline to consider a Submission that is incomplete or does not comply with the requirements of this RFS.


8. RFS Terms and ConditionsThis section sets out the terms and conditions applicable to the RFS.

8.1. Copyright, intellectual property and disclosureThis RFS is subjected to copyright vested in the Department.

A Provider may only copy, save electronically, or otherwise reproduce this RFS for the purposes of preparing and submitting their Submission. A Submission becomes the property of the Department upon lodgement and will not be returned to the Provider. The Department will hold all Submissions as commercial in confidence so far as the law permits.

Without limitation, each Provider authorises the Department to use and reproduce the whole or any portion of the Provider’s Submission for the purposes of evaluation. Any personal information collected as part of the RFS Process will be handled in accordance with the Information Privacy Act 2000 (Vic).

Any intellectual property rights that may exist in a Submission will remain the property of the Provider. Any element of a Submission considered to carry any intellectual property rights should be clearly identified by the Providers.

By lodging a Submission, the Provider licenses the Department to copy, adapt, modify, disclose or do anything else necessary in the Department’s sole discretion, to all material (including that material which contains any intellectual property rights of the Provider or any other person), contained in the Submission, for the purposes of the RFS Process.

8.2. Collusive tenderingProviders must not engage in any collusive tendering, anti-competitive conduct or any other similar conduct with any other Provider or any other person in relation to the preparation or lodgement of a Submission or at any point during the RFS Process.

8.3. ProbityProviders must not offer any incentive to, or otherwise attempt to, influence any of the persons who are either directly or indirectly involved in the RFS Process.

If the Department determines that a Provider has violated this condition, the Provider may be disqualified from further consideration.

8.4. Notification of change in circumstancesProviders must inform the Department promptly in writing of any material change to any of the information contained in the Provider’s Submission and of any material change in circumstance that may affect the truth, completeness or accuracy of any information provided in, or in connection with, a Submission.

8.5. Freedom of informationThe Freedom of Information Act (1982) provides for the right of the community to access information in the possession of the Government of Victoria. This right is limited to the extent necessary to protect essential public interests and the private and business affairs of persons in respect of whom information is collected and held by agencies.

Documents provided as any part of a Submission to the Competitive Elective Surgery Initiative may be the subject of a request under this Act.


Such documents acquired by the Department from business undertakings (for example with private providers) that contain trade secrets, or business, commercial or financial information are exempt where disclosure would be likely to expose the undertaking unreasonably to disadvantage. The Department is required to consult with the undertaking before claiming that disclosure of the business, commercial or financial information would expose the undertaking to unreasonable disadvantage. If the Department decides to release such information contrary to the wishes of the undertaking, the Department must advise the undertaking of their right to appeal this decision at the VCAT under section 50(2)(e).

Examples of documents which may attract this exemption include tender documents, contracts and documents detailing charging information.

8.6. Information from the DepartmentThe Department has prepared this RFS to give Providers background information on this Initiative. The Department does not give any warranty, or make any representations, express or implied, as to the truth, completeness or accuracy of the information contained or referred to in this RFS or any information which may be provided in connection with it.

8.7. Disclosure of Evaluation ProcessThe Department is not required, and does not intend, to release any details regarding the Evaluation Process.

Providers who are not selected as Successful Providers may make a formal request to the Department (see contact details in Section 1.2.2) for a debrief.

8.8. Conflict of interestAny Provider with any actual or potential conflict of interest in relation to its potential involvement in the Initiative must declare that interest to the Department as soon as it is identified, and advise whether it has been identified before or after its Submission. The Provider must also provide details of their strategy for managing the conflict of interest.

8.9. Department’s rightsThe Department reserves the right in its absolute discretion and at any time to:

accept and consider or reject the Submission if the Submission is not lodged at the place for lodgement specified in Section 7.2 by the Closing Time specified in Section 7.1;

cancel, suspend or change the Initiative, or any aspect of the RFS Process or to take such other action as the Department considers, in its absolute discretion, appropriate in relation to the RFS Process or the Initiative;

reject or refuse to consider or evaluate any Submission for any reason;

require additional information from a Provider (including requiring the Provider to respond to written clarification questions or attend clarification meetings);

disqualify the Provider from the RFS Process for breach of any of its obligations in Section 8 of the RFS or failing to meet any requirements of the RFS;

perform any security, probity, police, financial or reference checks or procedures in relation to any Provider;

hold meetings or workshops or discussions with, or seek information from, one or more Providers at any time during the RFS Process without notifying the other Providers;


in selecting the Successful Provider(s) have regard to:

- the Department’s knowledge and previous experience and dealings with the Provider;

- seek information from Referrers, who are part of more than one Submission, on:

- their capacity to refer patients to more than one Successful Provider, and

- any preference that the Referrer has for one Submission over another.

- information concerning the Provider which is in the public domain or which is obtained by the Department through investigations;

consider and accept any Submission that does not fully comply with the requirements of the RFS;

add a Provider, remove or add a Successful Provider;

negotiate with the Provider on any matter the Department may determine;

record and transcribe the proceedings of any individual or industry briefing session with one or more Providers and circulate that material as it sees fit;

publish the names of the Providers and the Successful Providers; and

waive any requirement or obligation under this RFS.

The Department is not required to give reasons for the exercise of any of the Department’s rights under this Section 8.9.

8.10.Provider acknowledgments and warrantiesThe Provider acknowledges and agrees that:

in no circumstances will the Department be liable to the Provider whether in contract, tort (including negligence, misrepresentation or breach of warranty), under statute (to the extent permitted by law) or otherwise for any costs, losses, expenses or damages incurred or suffered by the Provider as a result of or arising from:

- any incompleteness or inadequacy of, or any inaccuracy or error in, or omission from this RFS; or

- any use of, or reliance by, the Provider upon, any of the documents, information or other things mentioned in this RFS;

in the event that a Provider is awarded the Service Agreement, the Provider should not announce their successful appointment for this Initiative without the Department’s prior written consent;

the Provider participates in the RFS Process at their own cost and risk;

no payment will be made by the Department to the Provider for any costs, expenses, losses or damages incurred by the Provider in preparing the Submission, or otherwise incurred in respect of the RFS Process;

it prepared its Submission based on its own investigations, interpretations, deductions, information and determinations;

the information contained in its Submission is true, accurate and complete as at the date on which it is lodged, and may be relied upon by the Department in its selection of Successful Provider(s);

it did not place any reliance upon the completeness, accuracy, adequacy or correctness of any of the documents, information or other information provided by the Department as part of this RFS;

the Department will rely on the warranties and undertakings provided above when evaluating the Submissions;

this RFS does not constitute an offer or invitation to treat; and


any obligations and liabilities which may otherwise be implied or imposed on the State under contract, equity, by statute or otherwise are excluded.

8.11.AddendaWithout limiting Section 8.9, the Department may issue addenda to this RFS to modify or clarify this RFS in any manner and all such addenda shall become part of this RFS.


Appendix A Service Agreement Term Sheet Term Overview

1 Parties The parties to the Service Agreement are:

the Department of Health (Department);

the Successful Provider; and

the Referrer.

2 Term From 1 January 2014 to 30 June 2014.

3 Contracted Surgical Procedures

The Parties to agree the surgical services that the Successful Provider will deliver.

The services will cover the complete episode including pre-operative assessment, surgery and post-operative care (if required).

4 Volume of services

The Service Agreement will document the agreed maximum volumes for each Contracted Surgical Procedure.

5 Responsibility of Successful Provider

The Successful Provider is responsible for:

ensuring the patient’s informed written consent (or parental consent if the patient is under 18 years of age) is obtained before the Contracted Surgical Procedures are performed;

performing the Contracted Surgical Procedures by 30 June 2014;

conducting a pre-operative review and care by a Specialist Medical Practitioner engaged by the Successful Provider in the relevant surgical specialty;

conducting a post-operative review, and providing allied health services and rehabilitation as required; and

meeting all the reporting and data requirements specified in the Service Agreement.

Pre-operative reviews and care may include pathology, medical imaging and other diagnostic testing reasonably required to perform the Contracted Surgical Procedures.

6 Pricing The Successful Provider is entitled to:

fixed price of $185 per Patient for the compulsory pre-operative review;

fixed price of $185 per Patient for any post-operative review which might be required;

procedure price for the Contracted Surgical Procedures;

fixed price of $267 per Patient (only for those requiring repair procedures on shoulder and elbow, hip replacement, knee replacement and repair of cruciate ligaments) for allied health services, which may be pooled and used flexibly across Patients (who have had these procedures);

fixed price of $1,070 per Patient (only for those requiring hip and knee replacement) for rehabilitation, which may be pooled and used flexibly across Patients (who have had these procedures); and

a complexity loading for Patients who are identified as complex (‘with complications’) through coding in the VAED.

The Successful Provider is not entitled to additional costs for:

associated critical care stay;

any re-admission to operating theatre; and

prostheses.


Term Overview

7 Unexpected services

In the event that the Patient requires readmission or presents for treatment to an emergency department within 14 days of discharge, in relation to the procedure undertaken, the Successful Provider must either at its cost provide the appropriate treatment(s) including surgery or if the patient is not readmitted to the relevant Successful Provider, bear all the costs associated with the readmission or treatment at another health facility.

8 Patient identification

The Referrer is responsible for the identification of patients that meet the agreed referral criteria and correspond with the Contracted Surgical Procedures.

9 Patient referral The Referrer is responsible for referring the patients to the Successful Provider.

10 Refusal of patient referrals

The Successful Provider is obliged to accept patient referrals except on grounds of sound clinical reasons. Parties to agree on sound clinical reasons and document in the Collaboration Agreement attached in Appendix C.4.

The Successful Provider is allowed a discretionary refusal rate of one out of every 10 Referrals.

11 Department Visits

The Department may visit the Successful Provider any time during the Term and Option Terms and make an informal assessment of the Contracted Surgical Procedures the Successful Provider is delivering and / or conduct audit(s) of various reporting processes such as clinical coding, adverse events and any deaths associated with surgical care.

The Department is required to give two days written notice to the Successful Provider prior to any such visits.

12 Monthly reporting requirements

The Successful Provider is required to report based on the reporting requirements for public hospitals outlined in the VAED Manual. This includes flagging patients with a program identifier in the VAED.

Monthly reporting requirements are set out in Table 3.

13 Accreditation requirements

The Successful Provider will need to be accredited against one of:

National Safety and Quality Health Service Standards;

International Society for Quality in Health Care Inc; or

Australian Council on Healthcare Standards.

Successful Providers will be required to comply with the National Safety and Quality Health Service Standards at their next scheduled accreditation.

The Successful Provider will also need to ensure that there is in place current registration with the Department, medical accreditation, appropriate professional indemnity insurance and credentialling for each Specialist Medical Practitioners, and workers’ compensation insurance (only applicable for Private Providers).

14 Additional procedures during the Term

During the Term, the Department may in its discretion, offer the Successful Provider to undertake up to the same number of services again as specified for the Term. Any offer to increase Nominated Surgical Procedures undertaken during the Term will be on the same terms and conditions as the Service Agreement, including as to price.


Term Overview

15 Option The Service Agreement will include three option terms of one year. The Successful Service Provider must provide the Nominated Surgical Procedures specified by the Department provided the number of procedures does not exceed three times the number specified during the Term. The services to be provided during an Option Term will be provided on the same terms and conditions as the Service Agreement at the price which does not exceed the price payable during the Term increased by the indexation adjustment as set annually by the Department of Treasury and Finance (DTF) for fees and penalties in the 2014 (May) State Budget. The Department will increase the price payable for procedures during any further Option Term by the indexation adjustment set by DTF in the period immediately preceding the commencement of the option.

16 Transfer of payments

The Successful Provider will receive payments through the Department’s Budget Payment System (BPS). The Successful Provider will be required to submit relevant information to enable payment through the BPS at the commencement of the contract.

17 Failure to perform services properly

If the Successful Provider fails to perform the Contracted Surgical Procedures in accordance with the Service Agreement or in accordance with appropriate regulatory requirements, the Department may take any action which it deems necessary to ensure that the Patient receives appropriate medical treatment.

The Successful Provider will indemnify the Department for any costs incurred as a result of the Successful Provider failing to perform the services properly.

18 Payment schedule for Providers for the Term

Providers will be paid according to the following schedule for the Term:

20% of the estimated contract value (based on the agreed schedule of procedures by type and quantity) within 50 business days of all parties signing the contract (Initial Payment);

30% of the estimated contract value at 30 April 2014 (First Interim Payment);

30% of the estimated contract value at 30 June 2014 (Second Interim Payment); and

the balance of payments for all procedures performed during the Term will be paid three months after expiry of the Term, subject to satisfactory data submission to the VAED. A complexity loading will be paid for all patients coded in the VAED as complex (‘with complications’). Please note that 5 per cent of the total payments to be made under the Service Agreement will be permanently withheld if the discretionary refusal rate exceeds one out of every 10 Referrals.

Public Providers will be paid according to the above arrangements and a prior year adjustment process undertaken to reconcile the activity.

19 Payment schedule for Providers for the Option Terms

Providers will be paid according to the following schedule for the Option Terms:

20% of the estimated contract value (based on the agreed schedule of procedures by type and quantity) in August (Initial Payment);

20% of the estimated contract value in December (First Interim Payment);

20% of the estimated contract value in March (Second Interim Payment);

20% of the estimated contract value in June (Third Interim Payment); and

the balance of payments for all procedures performed during the Option Term will be paid three months after expiry of the Option Term, subject to satisfactory data submission to the VAED. A complexity loading will be paid for all patients coded in the VAED as complex (‘with complications’). Please note that 5 per cent of the total payments to be made under the Service Agreement will be permanently withheld if the discretionary refusal rate exceeds one out of every 10 Referrals.

Public Providers will be paid according to the above arrangements and a prior year adjustment process undertaken to reconcile the activity.


Appendix B Service AgreementThe draft Service Agreement will be emailed to all potential Providers by 26 September 2013.


Appendix C Submission requirements

C.1. General Information RequirementsThe following table sets out the details required from Providers to address each of the Evaluation Criteria set out in Section 6.2.

Compliance Criteria

Evaluation Criterion 1: Accreditation

Demonstrated compliance with relevant accreditation.

For all Providers, evidence of the Provider’s accreditation against one of: National Safety and Quality Health Service Standards; International Society for Quality in Health Care Inc; or Australian Council on Healthcare Standards.

Evaluation Criterion 2: Registration, qualifications, credentialling and other requirements

For Private Providers only: provision of a copy of the current registration certificate (registration as a private hospital or

day procedure centre) issued by the Department; demonstrated compliance with respect to the requirements for the Specialist Medical

Practitioner(s) including:o appropriate qualification for the Nominated Surgical Procedures;o valid medical credentialling for the Nominated Surgical Procedures; ando valid professional indemnity insurance in the amount of not less than $10 million per

claim, and not less than $20 million in the aggregate, until a period of seven years following the end of the term of the agreement;

valid public liability insurance in the amount of not less than $10 million per claim; and workers’ compensation insurance as required by law.

(RFS Note: This is only applicable to Private Providers because Public Providers must comply with these requirements under the Victorian health policy and funding guidelines 2013-14 – Part two: Health operations, section 1.3)

Evaluation Criterion 3: Submission requirements

For all Providers, provision of: a completed Volume and Pricing Schedule in the Excel format specified in Appendix C.2; a signed Submission Form in the format specified in Appendix C.3; and a completed and signed Collaboration Agreement in the format specified in Appendix C.4.


Comparative Criteria

Evaluation Criterion 4: Price

The extent to which the pricing structure is competitive with respect to the procedure price for each Nominated Surgical Procedure and the proposed basket of procedures.

All Providers must provide a completed Volume and Pricing Schedule (in the Excel format attached in Appendix C.2) that provides sufficient details of the proposed pricing structure for each of the Nominated Surgical Procedure(s) for the Department to assess quantitative value for money.

Evaluation Criterion 5: Commercial terms and contractual certainty

The extent to which any proposed commercial departures from, or variations to, the Department’s preferred position as set out in the RFS has an impact on value for money and the ability to achieve Contractual Close within the Department’s preferred timeframes.

Private Providers must provide details of the nature and extent of any proposed commercial departures from, or variations to, the Department’s preferred position as set out in the Service Agreement Term Sheet and the Service Agreement by providing a schedule of commercial departure(s) which should set out:

a reference to the relevant provision of the Service Agreement Term Sheet and/or the Service Agreement;

details of the relevant departure (Note - where one issue requires change to more than one principle, it is acceptable to group these principles together for the purposes of the explanation);

the rationale for the commercial departure (or variation); and the value for money impact of the departure (or variation) on the Department and rationale for

the calculations.(RFS Note: This is only applicable to Private Providers as no commercial departures from, or variations to, the Department’s preferred position, will be considered from Public Providers.All departure schedules must be provided in editable Word format).

Evaluation Criterion 6: Capacity and sustainability

The extent to which the proposed approach does not impact on the ability of the Public Provider to operate as usual (including if the contract were to be extended).

(RFS Note: There are no specific Submission requirements for Evaluation Criterion 6. This will be assessed based upon information already available to the Department).

Evaluation Criterion 7: Collaboration and patient complexity

The extent to which a collaborative arrangement has been agreed with a Referrer, including the agreed numbers and complexity of Patients to be referred and treated.

Private Providers, non-ESIS Public Providers and ESIS Public Providers who might seek referrals from other ESIS public hospitals must provide a completed and signed Collaboration Agreement (in the format attached in Appendix C.4).

(RFS Note: The Department may consider its knowledge and previous experience and dealings with the Provider and may seek information from Referrers, who are part of more than one Submission, on their capacity to refer patients to more than one Successful Provider and any preference that the Referrer may have for one Submission over another)


Evaluation Criterion 8: Capability

All Providers must provide declaration of the: the number of each Nominated Surgical Procedure undertaken by the Provider in the 2012-

13 financial year; and the Provider’s capability to comply with VAED data reporting requirements, including

accuracy and timeliness of data submission.(RFS Note: The Department may consider its knowledge and previous experience and dealings with the Provider, together with data and other information available to the Department)


C.2. Volume and Pricing SchedulePlease refer to separate attachment.


C.3. Submission Form[to be returned on Provider letterhead]

Ms Anna BurgessDirectorHealth Service ProgramsDepartment of Health50 Lonsdale Street Melbourne Vic 3000

[insert date]

Dear Ms Burgess

Competitive Elective Surgery Initiative $15 million pool (the Initiative) – Submission Form

[insert name of Provider here] hereby:

1) Offers under this Submission to deliver the Nominated Surgical Procedures in accordance with the Request for Submissions (RFS) issued by the Department of Health (Department), under the terms of the Service Agreement (adjusted to reflect proposed departures) and otherwise on the basis set out in this Submission (including the completed Volume and Pricing Schedule).

2) Confirms that the Submission is correct and complete and includes all the information required by the RFS. The documents comprising this Submission are: this Submission Form; the completed Volume and Pricing Schedule; the completed Collaboration Agreement; and any other information submitted by the Provider in accordance with the requirements of the

RFS.

3) Accepts the RFS Terms and Conditions and confirms and repeats the acknowledgements set out in the RFS Terms and Conditions in relation to the Submission.

4) Confirms, as required by the RFS Terms and Conditions, that there is no conflict of interest in respect of the Initiative other than, where relevant, in respect of any disclosed conflicts which have been consented to by the Department in writing.

5) Acknowledges the Department’s sustainability policies and agrees to comply with these as far as reasonably practicable.

6) Confirms that this Submission (including the completed Volume and Pricing Schedule) is valid for [x] days from the date of submission and that these terms and prices shall remain binding and may be accepted at any time by the Department before the expiration of that period.

7) Agrees that, if invited by the Department to participate further in the RFS Process, will enter into negotiations with the Department in good faith with a view to delivering the objectives of the Initiative within the required time frame.


In this Submission Form any word, expression, reference or term used which is defined in the RFS issued in connection with the Initiative will, unless the context requires otherwise, have the same meaning as in the RFS.

EXECUTED on the……...day of…………………………2013

Signature of Authorised Officer Signature of Authorised Officer

Printed Name Printed Name

Attachment 1: Contact Details (all Providers)

All Providers are required to provide the contact details of the individual from the Provider which the Department will principally communicate with throughout the RFS Process. This includes:

Name:

Title:

Mobile number:

Office number:

Facsimile number:

Email address:

Office address:

Postal address:

Attachment 2: Corporate Information (Private Providers)

All Private Providers are required to provide the following corporate details:

Registered name:

Registered office:

Address for correspondence:

Australian Business Number (if applicable):

Australian Company Number (if applicable):

Registered Charity Number (if applicable):

Place of incorporation/registration:

Details of any immediate and ultimate parent companies:


C.4. Collaboration Agreement

Patient selection and refusal grounds

Agreed patient selection criteria Criteria Details

Age

BMI

Comorbidities

ASA score

Other

Agreed patient referral numbers for the Term (1 January 2014 to 30 June 2014) based on the agreed patient selection criteria Nominated Surgical Procedure Agreed

number of Referrals

Are the agreed number of Referrals conditional? (Yes or No)*

* For each Nominated Surgical Procedure, Referrers must stipulate if the agreed number of referrals is conditional (that is, is dependent on the outcome of other Submissions the Referrer is involved in (as either a Referrer or a Provider) because the Submissions seek to treat the same cohort of patients.

Note: The Department may seek further clarification during the evaluation process.


Agreed refusal grounds (refer to Definitions and clause 4 of the Service Agreement) Details

Depending on the circumstances of the Provider, the Referrer and the Provider should agree on any additional categories of patient which the Provider will not be expected to operate on. These categories will allow the Provider to refuse to treat a certain patient on the basis of one of these grounds.

Agreed ad hoc refusals (refer to Definitions and clause 4 of the Service Agreement) Details

The Provider and the Referrer should agree on particular types or categories of cases (which may be quite broad) for which the Provider may contact the Referrer to discuss whether to proceed with the Procedure. These grounds may relate to the availability of certain facilities of the Provider and therefore whether an appropriate level of care can be provided to the particular Referred Patient in the circumstances.

Signed:Provider

Name

Title

Signature

Date

Referrer

Name

Title

Signature

Date


Appendix D Supplementary information

D.1. Casemix funding modelVictoria’s casemix funding model allocates funding on the basis of the numbers and types of patients treated and the average cost of treating patients (for further detailed information refer to http://www.health.vic.gov.au/pfg/).

Diagnosis Related Groups (DRGs) are used to classify patients. DRGs are designed to be: clinically meaningful; resource homogeneous such that the type of resources used and their amounts are similar for

episodes within the DRG; and individual episodes map to one DRG and not multiple DRGs.

Victoria uses the Australian Refined Diagnosis Related Groups (AR-DRG) classification which incorporates: International Statistical Classification of Diseases and Related Health Problems, 10th Revision,

Australian Modification (ICD-10-AM) Australian Classification of Health Interventions Australian Coding Standards.

In 2013-14 Victorian public hospitals are assigning diagnosis and procedure codes using the 7th edition of the ICD-10-AM classification, which for funding purposes are mapped back to the 6th edition of the ICD-10-AM and grouped to the AR_DRG Version 6.0x.

On each episode of care, a patient may have a number of diagnoses and procedures recorded. The principal diagnosis (assigned after the patient's condition has been investigated) is the driver for allocation of the episode to a DRG.

D.2. Cost weightsCost weights represent a relative measure of resource use for each episode of care in a DRG. Victorian cost weights are developed each year using the costs of treating patients as reported to the Department by public hospitals.

A cost weighted separation is called a Weighted Inlier Equivalent Separation (WIES). If the patient's length of stay falls within the inlier range for that DRG, the episode will attract the standard inlier WIES payment for that DRG.


http://www.health.vic.gov.au/pfg/

The 2013-14 Victorian public hospital funding model uses WIES-20 cost weights and WIES-20 prices. The WIES-20 inlier weights for the short-stay or multi-day Proposed Surgical Procedures are summarised below, together with the DRG that these procedures are likely to be coded to.

Procedure name DRG group Victorian AR-DRG 6.0x Inlier weight Complexity loading

1Repair procedures on shoulder and elbow

Other Shoulder Procedures

I16Z Other Shoulder Procedures 1.2412 0.00%

2 Total hip replacement Hip Replacement

I03B Hip Replacement W/O Catastrophic CC 3.6778

19.26%I03A Hip Replacement W Catastrophic CC 4.3861

3 Total knee replacement

Knee Replacement and Reattachment

I04B Knee Replacement W/O Catastrophic or Severe CC

3.674

15.77%

I04A Knee Replacement W Catastrophic or Severe CC

4.2534

4 Repair of cruciate ligaments

Knee Reconstruction or Revision

I29Z Knee Reconstruction or Revision 1.4144 0.00%

5Excision / repair of bunion and other toe deformities

Other Foot Procedures I20Z Other Foot Procedures 1.042 0.00%

6 Prostatectomy Transurethral Prostatectomy

L05B Transurethral Prostatectomy W/O Catastrophic or Severe CC

0.9959

100.81%L05A Transurethral Prostatectomy W Catastrophic or Severe CC

1.9999

7Functional Endoscopic Sinus Surgery (FESS)*

Sinus and middle ear D06Z Sinus and Complex Middle Ear Procedures 1.0341 0.00%

8 Tonsillectomy Tonsillectomy and/or adenoidectomy

D11Z Tonsillectomy and/or Adenoidectomy 0.5504 0.00%

9 Septoplasty Nasal Procedures D10Z Nasal Procedures 0.8072 0.00%

10 Cholecystectomy Laparoscopic Cholecystectomy

H08B Laparoscopic Cholecystectomy W/O Closed CDE W/O Cat or Sev CC

1.2176

63.90%

H08A Laparoscopic Cholecystectomy W Closed CDE or W (Cat or Sev CC)

1.9957

11 Inguinal herniorrhaphy# Hernia Procedures

G10B Hernia Procedures W/O CC 0.8369

84.50%G10A Hernia Procedures W CC

1.5441

Procedure name DRG group Victorian AR-DRG 6.0x Inlier weight Complexity loading


12 Other herniorrhaphy Hernia Procedures

G10B Hernia Procedures W/O CC 0.8369

84.50%G10A Hernia Procedures W CC

1.5441

13 Hysterectomy (for non-malignancy)

Hysterectomy for Non-Malignancy

N04B Hysterectomy for Non-Malignancy W/O Catastrophic or Severe CC

1.6638

33.09%N04A Hysterectomy for Non-Malignancy W Catastrophic or Severe CC

2.2144

Source: Victorian health policy and funding guidelines 2013-14, Part Three: Technical Guidelines, Appendix 2: WIES 20

Victorian Cost Weights 2013-14

*Some patients awaiting a FESS on the ESWL may require a combination of FESS/Septoplasty and possibly a turbinectomy procedure. Providers should discuss the likely patient profile with the Referrer and take this into account when submitting their procedure price. Note that these patients will be coded to a single DRG and Providers will only be entitled to receive the procedure price and the fixed price pre-operative and post-operative review payment.

#Some patients may require bilateral inguinal herniorrhaphy. Providers should discuss the likely patient profile with the Referrer and take this into account when submitting their procedure price. Note that these patients will be coded to a single DRG and Providers will only be entitled to receive the procedure price, any applicable complexity loading and the fixed price pre-operative and post-operative review payment.

The WIES-20 same-day weights for the same-day Proposed Surgical Procedures are summarised below.

Procedure name DRG group Victorian AR-DRG 6.0x Same day weight

Complexity loading

14 Arthroscopy of knee

Other Knee Procedures Arthroscopy

I24Z Arthroscopy 0.6541 0.00%

15 Release of carpal tunnel

Carpal Tunnel Release

B05Z Carpal Tunnel Release 0.3829 0.00%

16 Repair of cataract Lens Procedures C16Z Lens Procedures 0.4938 0.00%

17

Local excision / destruction of lesion / tissue of skin and subcutaneous tissue

Other Skin, Subcutaneous Tissue and Breast Procedures

J11Z Other Skin, Subcutaneous Tissue and breast Procedures

0.3735 0.00%

Source: Victorian health policy and funding guidelines 2013-14, Part Three: Technical Guidelines, Appendix 2: WIES 20

Victorian Cost Weights 2013-14


Providers should note that should any of the Proposed Surgical Procedures ultimately end up coded to DRGs other than those listed in the tables above, the Provider will only be entitled to receive the procedure price, any applicable complexity loading listed for the DRGs nominated above, plus any applicable fixed prices (for pre-operative review, post-operative review, allied health services and rehabilitation).

The unit price (for a DRG costweight of 1.0) for Victoria public hospitals differs by the size and location of the hospital. An extract of the public WIES-20 price for four peer groups of health services is provided in the table below. Further details of all peer groups are available in the Victorian health policy and funding guidelines 2013-14.

Peer Group Public WIES-20 price Sample health services in peer group

Major provider $4,248 Alfred Health Austin Health Barwon Health

Outer metropolitan and large regional $4,364

Northern Health Western Health Peninsula Health Ballarat Health Services Bendigo Health Care Group Latrobe Regional Hospital

Regional and large sub-regional $4,595

Mildura Base Hospital Goulburn Valley Health Bairnsdale Regional Health Service

Sub-regional and local $4,674 Bass Coast Regional Health Benalla Health Castlemaine Health

Source: Victorian health policy and funding guidelines 2013-14, Part Two: Health Operations, Table 18, page 136.


D.3. Potential ReferrersESIS health services and hospitals are identified in the table below.

Health Service ESIS reporting hospitals

Contact Email Telephone

Albury Wodonga Health*

Albury Hospital Wodonga

Hospital

Mr Dennis Baker (Operational Director of Surgical Services)

[email protected] 0458 517 066

Alfred Health Alfred Hospital Sandringham

Hospital

Mr Andrew Way (CEO) [email protected] 9076 2449

Austin Health

Austin Hospital Heidelberg

Repatriation Hospital

Dr Brendan Murphy (CEO) [email protected] 9496 5363

Ballarat Health Services

Ballarat Base Hospital

Mr Andrew Rowe (CEO) [email protected] 5320 4300

Barwon Health Geelong HospitalDr David Ashbridge (CEO)

[email protected] 4215 1051

Bendigo Health Bendigo Hospital

Mr Peter Faulkner (Executive Director Surgical Services)


Eastern Health

Angliss Hospital Box Hill Hospital Maroondah

Hospital

Mr Alan Lilly (CEO) [email protected] 9895 3259

Goulburn Valley Health

Goulburn Valley Health

Mr Dale Fraser (CEO) [email protected] 5736 0400

Latrobe Regional Hospital

Latrobe Regional Hospital

Mr Peter Craighead (CEO)


Melbourne Health Royal Melbourne Hospital

Mr Tobi Wilson(Acting Deputy Executive Director, Royal Melbourne Hospital)


Mercy Health

Mercy Hospital for Women

Werribee Mercy Hospital

Dr Linda Mellors (Executive Director, Mercy Health Services)








Monash Health

Monash Medical Centre (Clayton)

Monash Medical Centre (Moorabbin)

Dandenong Hospital

Casey Hospital Cranbourne

Integrated Care

Mr Siva Sivarajah(Chief Operating Officer, South East)

[email protected] 1155 0404 824 682

Northeast Health Wangaratta

Northeast Health Wangaratta

Ms Margaret Bennett (CEO)


Northern Health

The Northern Hospital

Broadmeadows Health Service

Mr Sam Costanzo(Executive Director Finance and Client Data Management)


Peninsula Health

Frankston Hospital

Rosebud Hospital

Dr Sherene Devanesen (CEO)


Peter MacCallum Cancer Centre

Peter MacCallum Cancer Centre

Mr Shane Ryan (Executive Director Clinical Operations)


Royal Children’s Hospital

Royal Children’s Hospital

Professor Christine Kilpatrick (CEO)


Royal Victorian Eye and Ear Hospital

Royal Victorian Eye and Ear Hospital

Mr Peter Gould (Executive Director Corporate Services)


Royal Women’s Hospital

Royal Women’s Hospital

Ms Lisa Dunlop (Acting CEO) [email protected] 8345 2005

South West Healthcare*

Warrnambool Base Hospital

Mr John Krygger (CEO) [email protected] 5564 4060

St Vincent’s Health

St Vincent’s Hospital

Professor Patricia O’Rourke (CEO)


West Gippsland Healthcare Group

West Gippsland Healthcare

Mr Dan Weeks (CEO) [email protected] 5623 0611





Western Health

Western Hospital Williamstown

Hospital Sunbury Day

Hospital Sunshine

Hospital

Associate Professor Alex Cockram (CEO)


* Albury Wodonga Health and South West Healthcare are moving to full ESIS reporting capability in 2013-14.

D.4. SustainabilityInformation on the Department’s sustainability policies can be found at:

http://www.capital.dhs.vic.gov.au/Environmental/SustainabilityGuideline/


http://www.capital.dhs.vic.gov.au/Environmental/SustainabilityGuideline/

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