Activity-based funding models can disadvantage trauma centres

Thursday, February 6, 2014


Worldwide, traumatic injury accounts for 11% of premature deaths and is a leading cause of death and disability. In Australia, injuries are one of the most costly disease groups to treat, responsible for over half a million hospitalisations, making it the second highest in-hospital cost after cardiovascular disease. In 2008-09, more than one-third of all hospital admissions in New South Wales were because of traumatic injuries.

In Australia, activity-based funding (ABF) for acute healthcare services has recently been introduced. Under this system, a healthcare facility is allocated a predetermined financial payment for each type of patient episode, defined by an Australian Refined Diagnosis-Related Group (AR-DRG)

In a recent study published in the February 2014 issue of the Australian Health Review, a team of researchers led by Associate Professor Kate Curtis from the University of Sydney looked at whether the recent introduction of activity-based funding and AR-DRGs is an appropriate way of funding hospitals for treating patients with traumatic injuries. 

According to the researchers, when looking internationally, activity-based funding models do not adequately compensate hospitals for the cost of treating major trauma. They can financially disadvantage trauma centres because severely injured trauma patients often have multiple injuries, in more than one body region, thus the determination of AR-DRG can be problematic.

After conducting costing studies at multiple trauma centres nation-wide, the researchers found that traumatic injury cost trauma centres in the state $178.7 million in 2008-09. The actual costs incurred by trauma centres were on average $134 per bed day above AR-DRG costs-determine costs. Falls, road trauma and violence were the highest cause of total cost. The count of body regions injured, sex, length of stay, serious traumatic brain injury and admission to the Intensive Care Unit were significantly associated with increased costs.

The researchers concluded that “with the globally increasing burden of injury, accurate costing information is essential for health service resource strategies. AR-DRG classifications do not adequately describe the trauma patient episode of care. Future research should examine the process of allocation of AR-DRG for trauma and a revision of trauma-related AR-DRG should be conducted to prevent the underfunding of trauma patient episodes.”

“The increasing use of activity-based funding has the potential to provide more accountable and transparent funding arrangements for hospitals.  In order for this to be embraced by health services there must be confidence in the funding model and the funds provided must reflect the actual cost of service delivery.  As a result of this study, a review of the ABF payments for trauma cases should be considered,” says AHHA Chief Executive, Alison Verhoeven.

The Australian Healthcare & Hospitals Association 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 inquiries:

Alison Verhoeven, Chief Executive, Australian Healthcare and Hospitals Association 0403 282 501