Hospital funding based on efficient pricing needed to address cost variations

Thursday, April 30, 2015

Potential opportunities for improved efficiency in public hospitals have been highlighted by a new report from the National Health Performance Authority, but the data should be considered with caution according to the Australian Healthcare and Hospitals Association (AHHA).

AHHA Chief Executive Alison Verhoeven welcomes the report, Hospital Performance: Costs of acute admitted patient in public hospitals in 2011-12, but says costs are only one measure of hospital performance, and should not be confused with quality.

“While information on hospital cost variations is useful, particularly to identify opportunities for greater efficiency, we cannot make judgements about hospital performance without also considering data on the quality of care and patient outcomes,” Ms Verhoeven said.

“The data reported is also from 2011-12, which is prior to the introduction of Activity Based Funding (ABF) under the National Health Reform Agreement. Since the introduction of ABF, the National Hospital Costs Data Collection has shown a reduction in the growth in costs and also a reduction in the variation in costs between hospitals.”

Ms Verhoeven says that, given the positive impacts of ABF and the efficient pricing model in addressing cost variations, the Commonwealth Government decision to cease ABF should be reconsidered.

“The government turned its back on Activity Based Funding in last year’s Budget, when it announced a return to a population and inflation-based funding model from 2017-18,” Ms Verhoeven said. 

“Since then, the Health Minister has recognised the need to focus on improving efficiency rather than cost-shifting to ensure a sustainable health system—reversing the decision to cease ABF would certainly be another step in the right direction.”

The AHHA represents Australia’s largest group of health care providers in public hospitals, community and primary health sectors and advocates for universal high quality healthcare to benefit the whole community.

Media enquiries:

Alison Verhoeven, Chief Executive

0403 282 501