Decision support systems are widely used in the hospital sector to assist in planning activity and budgets. In this chapter you will learn about the interrelation between activity changes and costs and then examine the use of a hospital model to forecast activity in an acute care setting. You will consider multiple linear regression as a modelling technique that can process aggregate data from many hospitals to identify predictors of cost and then look at case mix models that are based on detailed data from hospital management information systems.
• By the end of this chapter, you will be better able to: • identify different types of cost and explain how they change with activity • discuss alternative approaches to estimation of hospital costs • outline the use of a hospital model in activity and capacity planning • interpret and use models based on multiple linear regression • give examples of alternative approaches to modelling hospital costs • explain the use of DRGs in hospital management
Diagnosis related groups (DRG) Classification system that assigns patients to categories on the
basis of the likely cost of their episode of hospital care. Used as a basis for determining level of
prospective payment by purchaser.
Fixed cost A cost of production that does not vary with the level of output.
Flexible budget A budget showing comparative costs for a range of levels of activity.
Semi-variable costs Costs that contain both a fixed and a variable element.
Total (economic) cost The sum of all costs of an intervention or health problem.
Variable cost A cost of production that varies directly with the level of output.