Indicator specification

Cost per National Weighted Activity Unit

This measure compares the costs of acute admitted patients against a common unit of activity, termed the National Weighted Activity Unit (NWAU).

Name Cost per National Weighted Activity Unit

Cost per NWAU is a measure of the cost of an ‘average’ acute admitted public hospital service and an indicator of hospital efficiency.

This measure compares the operational costs, of services provided to acute admitted patients at similar hospitals, adjusted for different types of patients served by different facilities. The analysis period is from 2012–13 to 2014–15.

Indicator disaggregation

The indicator is reported by:

  • hospital
  • peer group (website peer groups).
Results AIHW website
Data Sources
Data Sources

The data used to calculate cost per NWAU is sourced from three different collections:

  • National Hospital Cost Data Collection (NHCDC), 2012–13, 2013–14 and 2014–15 (Independent Hospital Pricing Authority)
  • Admitted Patient Care National Minimum Data Set (APC NMDS), 2012–13, 2013–14 and 2014–15 (Independent Hospital Pricing Authority)
  • Hospital Casemix Protocol (HCP), 2012–13, 2013–14 and 2014–15 (Australian Government Department of Health)

Hospital and patient level data were provided by the IHPA to the AIHW on 26 September 2017 (excluding patient level data for NSW).

Hospital costs data are sourced from the NHCDC held by the IHPA. The NHCDC collects data for activity based funding purposes and records the vast majority of health system costs at a patient or ‘product’ level, according to the AHPCS. The NHCDC includes the allocation of indirect costs from the general ledger. To ensure that the quality of NHCDC data is robust and fit-for-purpose, the IHPA commissions an independent financial review to assess whether all participating hospitals have included appropriate costs and patient activity.

Hospital activity data on the number of acute care separations are sourced from the IHPA’s Activity Based Funding Admitted Patient Care data collection (ABF APC data collection). The scope of the ABF APC data collection is episodes of care for admitted patients in all public and private acute and psychiatric hospitals, free standing day hospital facilities and alcohol and drug treatment centres in Australia.

As the costs of private patients not publicly funded are not fully recorded by the NHCDC in some jurisdictions the IHPA sources extra data from the HCP data set to better estimate the complete costs of private patients. This adjustment is undertaken by the IHPA for the NEP Determination. The HCP data set, managed by the Department of Health, collects data directly from all private health insurance providers and covers all privately insured admitted patients.

Indicator description and calculation

The numerator is in-scope acute admitted operational costs for a hospital.

In-scope costs are included on the basis of nationally comparability, including: allied health, imaging, pharmacy, pathology, critical care, hotel goods and services, non-clinical and on-costs, operating room, prosthesis, specialised procedure suites, ward medical, ward nursing and supplies.

Nationally comparable costs exclude blood costs, teaching, training and research (where TTR is costed separately), depreciation, payroll tax, medications subsidised by Commonwealth programs (e.g. the Pharmaceutical Benefits Scheme) and property, plant and equipment.


The denominator is in-scope acute admitted NWAUs (NEP 2017–18, AR–DRG v8.0) for a hospital.

An NWAU is a measure of health service activity expressed as a common unit, against which the NEP is paid. It provides the basis for understanding the activity undertaken at a hospital during the financial year (number of admissions), adjusted for the relative complexity of patients admitted to the hospital. The NWAU has many adjustments relating to patient characteristics beyond the AR–DRG classification, including Indigenous status, remoteness, patient age, length of stay, ICU hours and leave days. The average hospital service is worth 1 NWAU, the most intensive and expensive activities are worth multiple NWAUs, and the simplest and least expensive are worth fractions of an NWAU.


(Numerator ÷ denominator), indexed by the Australian Bureau of Statistics (ABS) Government final consumption expenditure (GFCE) hospital and nursing home deflator to 2014–15 prices (adjusted for inflation), rounded to the nearest $100.

Growth rates for the GFCE hospital and nursing home deflator are:

  • 2.8 per cent 2012–13 to 2013–14
  • 2.4 per cent 2013–14 to 2014–15.

The reported activity is consistent with the IHPA’s National Efficient Pricing Model, and only includes patients who were both admitted and separated within the reported financial year.

The following patient types are included in the cost per NWAU analysis: public patients, private patients (insured), contracted care patients and self-funded patients.

Patients whose services are not eligible for Commonwealth funding under activity based funding are excluded from the cost per NWAU calculation. This includes: Department of Veterans’ Affairs patients, Department of Defence patients, compensable patients and motor vehicle third party personal claim patients.

The following care types are excluded: other sub-acute, non-acute and non-admitted emergency department care.

Suppression rules

The reporting of selected hospitals is suppressed to ensure robust comparable results and protect the privacy of patients.

Hospitals were reported if they met the following criteria:

  • the hospital was a major, large metropolitan, large regional, medium metropolitan, or medium regional non-specialist public hospital
  • the hospital had an emergency department
  • the hospital received ABF for acute admitted patients
  • cost and activity data were available for at least two consecutive financial years
  • more than or equal to 90 per cent of patient unit records were matched to the NHCDC unit records of total admitted patient care unit records at the hospital
  • no anomalies were identified following triangulation analysis of cost data between the NHCDC and the NPHED
  • where a hospital had an ICU that was eligible for an NWAU ICU adjustment, the hospital must have recorded ICU hours greater than zero.