Private Hospital Data Collection Review Final Report

2.4 Productivity Commission Findings

Private Hospital Data Collection Review - Final Report

Page last updated: 14 June 2012

    The Productivity Commission has been investigating the state of comparative reporting across the public and private hospital sector as part of a wide brief to report on “the relative performance of public and private hospitals, and related data issues80. The Commission has produced several reports and issues papers relevant to this report over the period from 2009 to the present (2011).

    80 Productivity Commission, Public and private hospitals (December 2009).

    The relevance for this report is that the Productivity Commission has noted that ‘some data development will be needed in order to calculate ‘the efficient price’ for different services covered by the National Health and Hospitals Network Agreement (NHHNA)’. Now NHHNA has been formally agreed by all jurisdictions, the findings of the Productivity Commission and subsequent actions by the Department and other parties in response to those findings warrants some examination. The current state and implications for data development are examined in the sections below.

    2.4.1   Existing Cost Data Sets - Inconsistent Collection Methods and Missing Information

    The Productivity Commission Finding in its Report noted that:

    “Existing datasets on hospital and medical costs are limited by inconsistent collection methods and missing information. The Commission has sought to address these limitations by drawing on various data sources and incorporating adjustments to make the data more comparable where possible, as well as noting data deficiencies where they exist. The resulting estimates of hospital and medical costs should be considered experimental.” 81

    81 Ibid. Finding 5.1; p. 101.

    It is true that inconsistent collection methods and missing information limit the comparability and consequent utility of existing datasets on hospital and medical costs. Greater comparability could be achieved and some practical actions such as more effective data linkage are described in other parts of this report (Section 4). However it is important to note that private hospitals operate with different goals and in a different environment (where they are in competition with others) to the public sector. Issues to consider when contemplating changes to existing collections and processes to enhance comparability of public and private hospital data are:

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    • Private hospitals are reticent to make available data that may damage their commercial or negotiating position (with other hospitals and with insurers). Private hospitals making detailed costs’ data available is likely only to happen if the data are not published at a hospital level. This would mean such data would need to be provided in a manner that would preclude its publication on the myHospitals web site and protected it from access through Freedom of Information requests.
    • There is no commercial business case for private hospitals to invest in the feeder systems and operational processes necessary to generate reliable, patient level costs’ data. Such systems exist in the public sector by virtue of past investment by governments whose objectives were to improve the efficiency of publicly funded hospital services at a system level. Adopting a similar approach to the private sector (that is, providing government funding to install feeder systems) creates an ongoing operating cost and does not address the data quality implications of the private hospitals’ view that they do not need the detailed costing data for their internal financial management.
    • There are significant differences in business models between public and private hospitals that mean there are fundamental conceptual differences between the sectors. These differences include:
      -   treatment of capital;
      -   corporate overheads in the private sector vis á vis central departmental costs in the public sector (for example, how will local hospital network costs be viewed in the new system model?);
      -   medical workforce is not a meaningful concept for private hospitals but is for public hospitals; and
      -   the public system uses outpatient clinics as an extension of the hospital episode but in private sector this occurs in the community (in doctor’s rooms).
      • Each of these differences need to be closely examined to either find common measures and definitions, or to exclude these factors from any cost comparisons. The most viable course of action is to initiate a project to examine the cost components in public and private hospitals, whose objective would be to identify those cost components:

        a) that are directly comparable and require no further consideration (for example, pharmaceutical costs);
        b) where data development work will lead to meaningful comparisons (for example, nursing costs);
        c) that are not meaningfully comparable between the sectors (for example, corporate overheads).

        In the short term (12 months) costing comparisons could be drawn using only cost components in category a, in the medium term (3 years) work on cost components in category b would be added, while all those cost components in category c would be excluded.

        • Private hospitals are not directly funded by government so the sector does not necessarily feel an obligation to report costs’ data based on accountability for public funding. Public funding to private hospitals is indirectly provided through the medium of private health insurance, effectively relying on health insurers to ensure that private hospital services are delivered efficiently. Insurers have access to a wide range of data on private hospital charges (based on claims received across the private hospital sector) and are seen by private hospitals as sophisticated purchasers of hospital services, well equipped to deliver on this role.
        • Private hospitals are not signatories to the national health reform agreements. Several stakeholders made the point to this review that the process of national health reform has been one involving agreements among Federal, State and Territory Governments and that private hospitals have not entered into any of the national agreements. This leaves open the question of how private hospital compliance with the reporting expectations in those agreements will be delivered.

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        2.4.2   Private Hospital Reporting Methodologies

        A second Productivity Commission Finding relating to the issues discussed above in 3.4.2 and which warrants further analysis is Finding 5.4. This finding is quoted below:

        “A foreshadowed shift to nationally-consistent activity-based funding for public hospitals is expected to eventually lead to more robust cost data for the public sector. However, there remains considerable scope to improve the quality and consistency of hospital and medical cost data in Australia. In particular, there is a need for:
        • private hospitals to report cost data using the same methodology as public hospitals, and to continue to have a high level of participation in the National Hospital Cost Data Collection, so that the data are reliable and can be disaggregated by sector, region, and size and type of facility
        • items directly billed to private patients – such as some medical, diagnostics and medicines – to be linked with cost data reported by hospitals so that all costs associated with an episode of care are captured in a single collection
        • reliable data on capital costs, hospital administration costs, head-office overheads, and the cost of medicines prescribed to hospital patients
        • quantification of the additional FBT 82 liability that for-profit hospitals incur by not having the FBT exemption that is available to other hospitals.”

        82 Fringe Benefits Tax.

        Implementing this finding may require a strengthening of data-related provisions in the National Healthcare Agreement for public hospitals, and data reporting requirements for private hospitals. This would need to be informed by the project proposed in Section 2.4.1.

        In proceeding down this path, governments will need to be conscious of the regulatory burden on reporting hospitals and, where possible, seek to limit it by avoiding duplication and inconsistency in reporting requirements, and by utilising cost-effective electronic reporting of data.

        The most recent developments in this area are reflected in the recent National Health Reform Agreement (NHRA) among the Commonwealth, States and Territories to the national healthcare reforms83,84. That agreement sets out the performance and accountability framework for hospitals and local hospital networks under the national reforms. The agreement specifies that private hospitals are to be included in “clear and transparent quarterly public reporting of the performance of every Local Hospital Network, the hospitals within it, every private hospital and every Medicare Local, through the new Hospital Performance Reports and Healthy Communities Reports85.

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        83 National Health Reform Agreement. August 2011.
        84 National Health Reform Finalised. Media Release from the Prime Minister and the Commonwealth Minister for Health and Ageing. 2 August 2011. Canberra.
        85 National Health reform Agreement. August 2011. Clause B78, p39.

        The NHRA clearly expects that private hospitals will be expected to report against financial performance standards, without specifying what those standards will be86. The agreement also refers to reporting of “access to services, quality of service delivery, financial responsibility, patient outcomes and patient experience87 but it is not clear how much of this reporting will apply to private hospitals. For example, the NHRA specifically states there will be public reporting for public hospitals on “staffing, financial resources and performance outcomes and standards88 but does not provide similar detail regarding private hospitals’ reporting.

        86 Ibid. Clause C2, p44.
        87 Ibid. Clause C6, p44.
        88 Ibid. Clause C9, p45.

        The NHRA acknowledges the need to streamline data reporting obligations for all parties, including private hospitals, through use of existing data sources and supply paths “wherever possible89. This is consistent with the recent resolution by the Australian Health Ministers’ Conference (AHMC) to establish a working group “to review opportunities to improve the effectiveness of health data reporting90, with an emphasis on “the need to rationalise health data collections and reporting in the context of the national health reforms”.

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        89 Ibid. Clause C13, p45.
        90 AHMC Communiqué, 5 August 2011.

        The responsibility for performance reporting under the NHRA will fall to the NHPA and the AHMC notes that any work to rationalise health data reporting will be undertaken with the NHPA. The NHPA will also be responsible for considering the issues affecting future comparability between public and private hospital sectors as discussed in this section.

        2.4.3   Standardised Hospital Quality and Safety Reporting

        A third Productivity Commission finding (Finding 6.1) relates to the need for a robust nationally-consistent data collection on hospital-acquired infections. While limited data indicates that private hospitals may have a lower rate of infections, it may be because of the differences in the populations being treated e.g. private hospitals are more likely to be treating a healthier population carrying out simpler procedures. The Commission goes on to say that a more definitive finding will require the development of data collections that enable risk differences between hospitals to be distinguished from genuine differences in performance.

        The fact that a hospital is public or private is highly unlikely to be a causal factor for any differences in hospital acquired infection rates. Given that multiple factors are known to be involved (for example, age of the hospital and the extent of infection control education programs), a more productive course of action would be to set a target for a desired outcome (for example, that the rate of Staphylococcus aureus (including MRSA) bacteraemia be no more than 2.0 per 10,000 occupied bed days for acute care hospitals) and then measure achievement by each hospital of the outcome.

        This Review found that this issue is to be addressed under the NHRA performance reporting framework. That framework will be enacted through the reporting requirements under the NHRA.

        2.4.4   Including Private Hospital Quality and Safety Reporting in the NHPA

        A related quality and safety issue that also warrants further analysis is the Productivity Commission Finding 6.2 that more action will be required to enable meaningful infection-rate comparisons between public and private hospitals. The Productivity Commission sees that an important step in this regard would be to include private hospitals in national reporting arrangements. As stated above, this is the intention under the NHRA, through the development of relevant standards by the ACSQHC and reporting against those standards through the agency of the NHPA.

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        2.4.5   Limitations of the National Hospital Cost Data Collection

        The Productivity Commission commented that while the NHCDC is the best available data source for the purpose of analysing costs, it does have major limitations. For example, “the NHCDC data provided to the Commission are from an unweighted sample, and so may not be representative of all hospitals; do not identify how the different tax treatment of for-profit and other hospitals affect costs; and exclude the asset value data required to calculate a user cost of capital91.

        91 Productivity Commission, Public and private hospitals. December 2009. pXL.

        Since the Productivity Commission made this comment, work has commenced in the update and refinement of hospital patient costing standards. Version 1.0 of the Australian Patient Costing Standards has been approved and published on the Department’s casemix web site. It is expected that these costing standards will be adopted in subsequent instances of the NHCDC. These updated costing standards will now provide consistency and greater transparency in the NHCDC.

        As stated by the Commission, there are differences in the way hospitals measure costs they report to the NHCDC, which directly affects comparability between the two sectors. In particular, there is a mixture of hospitals who collect direct patient costs (principally public hospitals) and hospitals relying on modelled costs (most private hospitals). As referred to in Section 2.4.1, it is difficult to see this situation changing while private hospitals have no commercial incentive to invest in patient costing systems.