This section presents information on funding source for admitted patient care, average cost of care (using the national weighted activity unit (NWAU)), and percentage of private patients.
Hospitals account for a large share of the funds Australia spends on the health sector each year. One way to assess hospital efficiency is to see how much money each hospital uses in comparison to its peers to provide specific treatments or procedures.
Making comparisons is difficult, as some hospitals may use more resources to treat patients with the same diagnosis because the patients they treat are sicker and have more complex care requirements. Therefore, it is important to adjust for these differences before comparing the cost of care between hospitals.
To assist in the comparing the cost of care between hospitals, the former National Health Performance Authority developed cost per national weighted activity unit (NWAU). Cost per NWAU adjusts for the factors that increase hospital costs to allow comparison. The measure provides an indicator of relative efficiency across more than 80 of Australia’s largest public hospitals.
Explore the data
In the visualisation below you can explore information on the cost per NWAU, total national weighted activity unit, and percentage of private patients over the three-year period from 2012–13 to 2014–15 by hospital in each state and territory.
Average cost of care
All data in these visualisations are available for download in the Data & downloads section of the MyHospitals website.
Hospitals and LHNs
This graphic explores the average cost of care between 2012–13 and 2014–15. Data is presented by measure (cost per national weighted activity unit, percentage of private patients and total national weighted activity units) and peer group. Hospital data is available.
- some public hospitals spent almost twice as much as others to provide similar services to similar types of acute admitted patients
- the average cost of care (cost per NWAU) ranged from $3,300 at one hospital to $6,400 at another.
Between 2012–13 and 2014–15:
- the average cost of delivering care in major public hospitals decreased by 1%, after adjusting for inflation
- there was a 6% increase in hospital activity but hospital spending only rose by 5%, suggesting that as a group, major public hospitals have improved in their efficiency – delivering care for less cost.
Watch an animated explanation of how hospitals’ average cost of care is measured.
National Weighted Activity Units (NWAU)
The National Weighted Activity Unit (NWAU) was developed by the Independent Hospital Pricing Authority to set the pricing of public hospital services eligible for Activity Based Funding (ABF). ABF is a system that funds hospitals according to the number and complexity of patients they treat, and the NWAU allows different hospital activities to be expressed in terms of a common unit of activity.
An ‘average’ public hospital service is worth 1 NWAU. More intensive and expensive activities are worth more than 1 NWAU, and simpler and less expensive activities are worth less. For example, a typical case of cellulitis might be assigned 0.7 NWAUs, as this condition requires fewer hospital resources than, for example, a typical knee replacement, which is assigned 4.0 NWAUs. Because of this weighting, the NWAU accounts for differences in the complexity of patients’ conditions or procedures, and a selection of individual patient characteristics (such as the patient remoteness area).
Cost per NWAU
Cost per NWAU is the cost associated with providing one ‘average’ unit (1 NWAU) of public hospital service, based on public hospital services provided to acute admitted patients whose treatment was eligible for ABF. It is an indicator of hospital efficiency.
To ensure the national comparability of public hospitals, the cost per NWAU:
- includes a subset of comparable running costs, which were accounted for similarly across states and territories. For example, property, plant and equipment costs are excluded from the calculations
- counts similar services for similar acute patients by using the NWAU.
Cost per NWAU is calculated by dividing the total comparable running costs by the total NWAUs for acute admitted patients. This reflects the average cost of care for a hospital.
The funding source describes the major source of funds used to pay for a hospitalisation. Funding source types are:
- Public patient
- Private health insurance
- Workers compensation
- Motor vehicle third party personal claim
- Department of Veterans' Affairs
- Other (includes Department of Defence, Correctional facilities, Other hospital or public authority, Health service budget—no charge raised due to hospital decision)
A hospitalisation may be funded by more than one funding source, but information on those other funding sources is not always available. For example, Private health insurance is reported for any hospitalisation that used private health insurance to fund all or part of their admission, regardless of whether it was the major source of funds. In many cases, however, funding for these admissions is also derived from a combination of Medicare subsidies and out-of-pocket fees.
- for all hospitalisations in public and private hospitals, 54% were funded as Public patients, and 39% were funded by Private health insurance
- 87% of hospitalisations in public hospitals were funded as Public patients, compared with 6.4% in private hospitals
- for private hospitals, 80% of hospitalisations were funded by Private health insurance (compared with 11% in public hospitals) and 7.9% were self-funded.
- Public hospitals accounted for 95% of Public patient hospitalisations and 16% of Private health insurance-funded hospitalisations.
- Private hospitals accounted for 4.9% of Public patient hospitalisations and 83% of Private health insurance-funded hospitalisations.
- 14% of hospitalisations in Women’s and children’s hospitals and 12% of hospitalisations in Principal referral hospitals were Private health insurance-funded.
- Public patient hospitalisations increased on average by 2.2% each year. They increased on average by 1.9% each year in public hospitals and by 11.6% each year in private hospitals
- Private health insurance hospitalisations decreased on average by 0.7% each year. They decreased on average by 5.6% each year in public hospitals and increased by 0.4% each year in private hospitals
- Self-funded hospitalisations increased on average by 4.7% each year and Department of Veterans’ Affairs funded hospitalisations decreased on average by 6.6% each year.
Elective admissions involving surgery for Public patients in private hospitals has been increasing since the start of the pandemic, from 33,400 in 2019–20 to 52,100 in 2020–21 and then to 57,400 in 2021–22.
Relative cost of admitted patient care (average cost weight)
Relative cost of admitted patient care is the costliness of an AR-DRG relative to all other AR-DRGs such that the average for all separations is 1.00. A hospitalisation with a cost weight of 5.0, therefore, on average costs 10 times as much as a hospitalisation with a cost weight of 0.5. There are separate cost weights for hospitalisations (directly related to the diagnosis related group (AR-DRG) assigned to the hospitalisation) in the public and private sectors, reflecting the differences in the range of costs and AR-DRGs in the different sectors.
- the average cost weight for public acute hospitals, ranged from 1.17 in New South Wales to 0.59 in the Northern Territory. The relatively low average cost weight for the Northern Territory reflects the relatively large proportion of same-day hospitalisations for dialysis in that jurisdiction.
- in public hospitals, the lowest average cost weights were for Public patient hospitalisations (1.00), and the highest average cost weights were for hospitalisations funded by Motor vehicle third party personal claim (2.46)
- in private hospitals, the lowest average cost weights were for Public patients (0.64), which reflects the relatively large numbers of contracted care for dialysis in Western Australia and South Australia.
Over the last five years to 2021–22, using the AR-DRG version 9.0, the average cost weight for public acute hospitals has changed from 0.99 to 1.00.
What other information is available?
More information about the data can be found in tables 7.1–7.6 in Admitted patient care 2021–22: Costs and funding.
Definitions of the terms used in this section are available in the Glossary.
Average cost weight
The average cost weight for a hospital (or group of hospitals) is calculated as the sum of the cost weights for each acute separation, divided by the total number of acute separations for the hospital. For example, a hospital with an average cost weight of 1.05 has a 5% more costly casemix than the national average. Separate cost weights are usually estimated for the public and private sectors because of differences in the range of costs recorded in public and private hospitals. For example, private hospitals do not generally report imaging, pathology, and medical costs as many of these services are charged directly to the patients by providers, whereas these are included for public hospitals.
The costliness of an AR-DRG relative to all other AR-DRGs such that the average cost weight for all separations is 1.00. A separation for an AR-DRG with a cost weight of 5.0, therefore, on average costs 10 times as much as a separation with a cost weight of 0.5. There are separate cost weights for AR-DRGs in the public and private sectors, reflecting the differences in the range of costs in the different sectors.