The cost per NWAU measure is calculated in constant prices (adjusted for inflation) to clearly demonstrate changes in hospital costs over time. Nominal costs in 2012–13 and 2013–14 were indexed to 2014–15 prices.
The deflator that the AIHW uses in this report is sourced from the Australian Bureau of Statistics (ABS): the Government Final Consumption Expenditure (GFCE) hospitals and nursing home deflator. This deflator is a chain price index calculated at a detailed level, providing a close approximation to measures of pure price change. The GFCE hospitals and nursing home deflator was selected due to its alignment with the scope of the cost per NWAU measure and its method of calculation, which is external to efficiency gains recorded by the NHCDC. The ABS deflator uses 2014–15 as the base year.
Classification across the time series
Data for all published years is classified by a single version of the AR–DRGs and NEP Determination 2017–18. Applying consistent classifications across years supports comparability of data across years and is standard industry practice. AR–DRG v8.0 and NEP 2017–18 are used in the calculation of the measure for all financial years.
For more information about the NEP Determinations, see: https://www.ihpa.gov.au/what-we-do/national-efficient-price-determination.
More information about the AR–DRG v8.0 can be found at: https://www.ihpa.gov.au/admitted-acute-care/ar-drg-classification-system.
Private patient adjustment
The private patient adjustment is applied by the National Efficient Pricing Model to account for missing medical costs of private patients. The IHPA sources extra data from the HCP data set to better estimate the complete costs of private patients. Using the HCP, the IHPA applies a correction factor to the NHCDC to more accurately estimate the total cost of private patients (specifically for private patient medical expenses that are not recorded in hospital accounts).
Over time, the IHPA has refined the private patient adjustment methodology, as a number of jurisdictions have provided feedback that the NHCDC contains all private patient costs.
In 2015–16 National Efficient Pricing Model correction factor was 1.9 per cent. The correction dropped to 1.4 per cent for the 2016–17 Model, as a result of a more targeted private patient correction. The National Efficient Pricing Model 2017–18 applies a 1.5 per cent correction factor.
Analysis of change in cost per NWAU result from 2012–13 to 2014–15
The AIHW undertook analysis focused on exploring whether a change in cost per NWAU was driven by a change to in-scope costs, a change in NWAU or a combination of both. This involved comparing the change of in-scope costs and in-scope NWAU from 2012–13 to 2014–15.
The AIHW also sought to understand what was driving a change in NWAU, that is, was it a change in separations or a change in relative complexity, as measured by both the cost-weight per separation and NWAU per separation. The analysis broadly observed an increase in the number of separations per hospital from 2012–13 to 2014–15; however, this increase was at a faster rate than the growth in NWAU from 2012–13 to 2013–14. That led to an observed decrease in NWAU per separation from 2011–12 to 2013–14.
Activity Based Funding (ABF) was progressively introduced from 1 July 2012 for admitted patient services. The timing of implementation varied between individual states and territories. This may have resulted in fluctuations in results between years, within and across states and territories.