Academic journal article Australian Health Review

Differences in the Cost of Admitted Patient Care for Indigenous People and People from Remote Locations

Academic journal article Australian Health Review

Differences in the Cost of Admitted Patient Care for Indigenous People and People from Remote Locations

Article excerpt


Under the national health reform agenda, activity-based funding (ABF) will be implemented as a means of paying for episodes of admitted patient care provided by public hospitals in Australia in 2012.1 ABF assumes that clinically similar patients with similar resource requirements can be grouped together and the spread of patients is normally distributed with similar numbers consuming more or less resources.2,3 Studies have shown, however, that within diagnosis- or service-related groups, Indigenous patients and patients from remote locations tend to have longer lengths of stay and higher costs of care than other patients.2,4-9 If hospitals were paid the average cost for episodes of care within a clinical grouping, ABF could disadvantage hospitals that provide services to a higher than average proportion of Indigenous and remote patients.2-4,7 One means of addressing this disadvantage would be to apply a price adjustment to episodes of care for these patients. There is, however, little direct evidence on the extent of the cost differentials and what adjustment would be appropriate to apply under an ABF framework.

Several studies examined cost differentials for Indigenous inpatients during the 1990s. Harkin estimated resource use at Alice Springs Hospital over an 8-month period in 1991-92 and found that after adjusting for differences in diagnosis-related groups (casemix), the mean cost for Indigenous admitted patients was 64% higher than that for non-Indigenous patients.10 Beaver et al., using length of stay data on discharges from Northern Territory (NT) public hospitals over a 3-year period (1992-95), estimated that the costs for Indigenous patients were more than a third (37.1%) higher than those for non-Indigenous patients.5 The disparity was even greater (up to 93.7%) when remoteness and hospital type (teaching v. non-teaching) were taken into account. In 1995, the Aboriginal and Torres Strait Islander Casemix Study collected survey data from 10 hospitals across four Australian states and territories over a 3-month period. It found the casemixadjusted cost of an inpatient episode for an Indigenous person was 19.0% higher than that for a non-Indigenous person.2 The study did not investigate the impact of remoteness.

There is a lack of consistency and comparability in data collection between the studies and they differ in their methods for estimating costs, using either length of hospital stay as a proxy for cost, or collecting data on resource use through surveys. Since these studies were conducted, improvements in recording and costing systems may now enable better estimation of costs, and there have been changes in service provision and clinical practice that could have affected the relative consumption of resources. Evidence also suggests that Indigenous people may be living longer, but in poorer health,11 which may impact on the complexity of treatments and duration of hospital stays.

This study examined data on episodes of admitted patient care in public hospitals in the NT over a 2-year period. Its purpose was to estimate the differences in the relative cost of providing episodes of care to Indigenous patients and patients from remote areas, and to investigate the implications of these differences for ABF.


There are five public hospitals in the NT: Royal Darwin Hospital, Alice Springs Hospital, Katherine Hospital, Gove District Hospital and Tennant Creek Hospital. A dataset comprising all discharges from these hospitals between 1 July 2007 and 30 June 2009 was extracted from the Department of Health's hospitalactivity database. The dataset comprised patient demographics and clinical information including Australian Refined Diagnosis Related Group (AR-DRG), Major Diagnostic Category (MDC), and admission and discharge categories. The cost for each discharge was drawn from the Department's hospital costing system, which uses a 'bottom-up' method to apportion expenditure based on individual items of patient consumption. …

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