AIHW media releases

Some public hospitals spend nearly twice as much money as others to provide similar services to similar groups of patients – even after adjusting for differences in the services hospitals provide and the severity of patients’ illnesses, a landmark new report shows.

The National Health Performance Authority report finds the costs incurred by major metropolitan hospitals to deliver a notional ‘average’ service to acute admitted patients (excluding property, plant and equipment costs) in 2011–12 ranged from $3,100 to $5,800.

The top major metropolitan hospitals with the lowest costs were at Maroondah [East Ringwood] Hospital, Sunshine Hospital, The Northern Hospital [Epping], Dandenong Hospital and Royal Melbourne Hospital [Parkville] – all in Victoria. The highest costs were at Canberra Hospital (ACT), Sir Charles Gardiner Hospital (WA), Calvary Public Hospital (ACT) and Logan Hospital (Qld).

Among large metropolitan hospitals the costs varied similarly from $3,200 to $6,400, while among major regional hospitals costs ranged from $3,600 to $5,300.

The report breaks new ground by being the first national comparison of hospital costs that fairly accounts for the fact that some hospitals perform more complicated operations or see sicker patients.

Together, the total value of the costs examined in the report accounted for over 60%, or more than $16 billion, of the $26 billion spent nationally on acute admitted and emergency department patients in 2011–12. Costs in the report reflect the amounts hospitals spend to deliver a single ‘unit of activity’, which is equivalent to a notional ‘average’ service. A hip replacement is worth 4.2 activity units, while treating a patient with cellulitis is worth 0.8 of an activity unit.

Total costs are not considered in the report, as it excludes costs that are not comparable across states and territories and those related to property, plant and equipment. No determination is made that a hospital with higher or lower costs delivers better or worse care or patient outcomes. However, the report provides comparisons that for the first time provide an insight into the relative efficiency of more than 80 public hospitals.

The report also finds large variations between hospitals in the costs per admission for a range of common conditions and procedures. Among these 16 common conditions and procedures, the report finds that some of these comparable costs could be almost three times higher in 2011–12 depending on the hospital:

• The average cost per admission of a patient requiring appendix removal (without complications) was $6,300 among both major metropolitan and major regional hospitals. Comparable costs were more than twice as high depending on the hospital, ranging from $4,600 to $10,100 among major metropolitan hospitals, and from $4,300 to $9,300 among major regional hospitals
• The average cost of a vaginal delivery (without complications) was $4,600 for major metropolitan hospitals and $5,100 for major regional hospitals. Comparable costs were almost three times as high depending on the hospital, ranging from $2,200 to $6,500 among major metropolitan hospitals, and from $3,100 to $7,500 among major regional hospitals
• The average cost of a knee replacement (without complications) was $18,800 for major metropolitan hospitals and $18,100 for major regional hospitals. Comparable costs were almost three times as high depending on the hospital, ranging from $10,600 to $29,300 among major metropolitan hospitals, and from $10,700 to $22,600 among major regional hospitals.

National Health Performance Authority CEO Dr Diane Watson said the new report provided a starting point in assisting hospitals to make meaningful national comparisons on the cost of caring for acute admitted patients.

“For the first time comparable information about the cost of patient care is available for more than 80 of Australia’s largest public hospitals. It is up to each hospital to see how they compare with those that are similar and use this new information as a starting point to learn more about their efficiencies,” Dr Watson said.

To coincide with this report release, a range of data are also being updated on the MyHospitals website including elective surgery waiting times, emergency department waiting times and time spent in emergency departments for 2013–14, average length of hospital stay for 2012–13 and hand hygiene data (Audit Period 3).