Transcript (NHCDC) studies - Brian Hanning

Correlation Results Public and Private
Sector National Hospital Cost Data
Collections (NHCDC)
2013 Activity Based Funding Conference
Sydney
th
15 May 2013
Dr Brian Hanning
Medical Director
Australian Health Service Alliance (AHSA)
Introduction
 AHSA uses a DRG payment model (Equitable Payment Model
– EPM)
 contains relative weights based on NHCDC private sector data
 Some private hospitals have questioned the accuracy of
relative weights based on cost modelling

These are based mainly on cost modelling
 Further some have asserted that EPM weights are inaccurate
compared to public sector weights
 These are based mainly on patient level costing
 AHSA has investigated these assertions
 The implications of the findings are discussed
Hypothesis / Methodology
Are the average DRG cost by sector highly
correlated over relevant DRGs when cost buckets
common to both sectors are considered?
 EPM covers acute care type DRGs only
 Private sector DRGs with under 30 cases are excluded
 Some cost buckets are excluded and others discounted
 similar to IHPA discounts of public weights for private cases
 Average cost per case for DRGs relevant to EPM were
calculated
Modification of Cost buckets
Excluded from correlation:
 Prostheses
 Radiology
 Pathology
 Interest
 Depreciation
 Emergency
 Ward Medical (There are few HMOs in the private sector)
Public Sector Costs Discounted in correlation :
 These discounts reflect medical costs in public sector cost buckets,
consistent with IHPA methodology
 Critical Care by 15%
 Theatre and Special Suite by 37.5%
NHCDC Studies correlated
 Average costs were correlated for each of the three most
recent NHCDC where results were available for both sectors
 Rounds 11 (2006-7) to Round 13 (2008-9) all based on
ARDRGv5
 all these studies appeared robust
 Correlation is between average cost by DRG over the two
sectors based on relevant cost buckets for ~600 DRGs
 does not reflect absolute cost differences at the DRG level
between the two sectors
 No private sector NHCDC ARDRGv6 study has made
publicly available to date
Results - 1
Table 1 – Correlation of average DRG cost between the public
and private sectors
Round
Year
DRGs included
Correlation
11
2006-7
607
94.9%
12
2007-8
599
93.5%
13
2008-9
599
89.5%
Results - 2
Table 2 – Correlation between various NHCDC studies
NHCDC Round 1
NHCDC Round 2
Correlation
Private Round 11
Private Round 12
97.7%
Private Round 11
Private Round 13
89.6%
Private Round 12
Private Round 13
93.2%
Private Round 11
Public Round 13
96.8%
Public Private Correlation

Consistently high correlation between public and private studies


cross validates both studies
A presentation noting high correlation between public and private sector
studies was given at the 2000 Casemix Conference

EPM was in development at about that time
B. Hanning, “Can Private Sector Cost Weights be appropriately based on the National Cost Data Collection –
Private Sector?”, Conference Proceedings the 12th Casemix Conference in Australia, Cairns, 28th to 30th
August 2000. p 331-332
Conclusion
 Private sector NHCDC is an appropriate basis for deriving private sector
weights



EPM weights include all relevant cost buckets to the private sector
Concerns about the use of cost modelling at the DRG level are not well based.
In principle the public sector NHCDC weights could be used to derive robust
private sector weights although not the converse
AHSA Policy: Correlation NHCDC Studies

If cost weights are highly correlated between the most recent
study and the study in which EPM weights are based:
 AHSA does not change weight versions.
 threshold for change is under 85% correlation
 saves both hospitals and funders time and expense

Correlation between the three ARDRGv5 based NHCDC studies
exceed the 85% threshold

Should IHPA have a similar policy in the public sector?

A danger of this policy – cessation of annual NHCDC studies
 High correlation can only be confirmed by annual studies
 The loss of corporate knowledge will impair the quality of biannual
or less frequent studies
Conclusion
 Well based private sector NHCDC studies are an
appropriate basis for deriving relative DRG weights
 The high correlation of public and private sectors is a
significant cross validation of both studies
 It is not significant that the private sector study is generally
based on cost modelling rather than patient level costing
 Any Questions?