Differences in the cost of admitted patient care for Indigenous people and people from remote locations

Abstract

The introduction of activity-based funding (ABF) means that Australian Refined Diagnosis Related Groups and their relative costs will become the basis for reimbursing public hospitals for admitted patient services. This study sought to investigate the variation in admitted patient costs for Indigenous people and people from remote areas that cannot be explained by variation in the clinical mix of cases, and to interpret this variation within an ABF framework. The study used a dataset of discharges from public hospitals of Northern Territory residents between July 2007 and June 2009. Multivariate regression analysis was used to estimate the variation in average costs, using the logarithm of patient cost as the dependent variable and Major Diagnostic Categories (MDCs), hospitals and population subgroups (Indigenous v. non-Indigenous; urban v. remote) as independent variables. Although much of the additional cost of Indigenous and remote patients was found to be due to differences in severity and complexity between MDCs, there were extra costs for remote Indigenous patients that were not captured by the classification system. Hospitals servicing larger than average proportions of these patients could be systematically underfunded within an ABF framework unless a price adjustment is applied. What is known about the topic? Indigenous people and people living in remote locations have a greater burden of disease and injury and are high users of hospital services. Past studies have quantified the relative cost of providing admitted patient services to these groups using survey data or the average length of stay as a proxy for cost. What does this paper add? This study provides estimates of the additional costs of providing admitted patient services to Indigenous people and people from remote areas and interprets these within an activity-based funding framework. What are the implications for practitioners? This paper provides information on the importance of recognising high cost populations in payment systems for public hospitals. © AHHA 2013.