6. Hospital Services

Hospital services are all services provided to patients in a hospital setting, including ‘hospital in the home’. They include all medicines, medical services, diagnostic and investigational services, and allied health services provided to patients.

Hospital services comprise care for admitted and nonadmitted patients. As defined in the Australian Institute of Health and Welfare’s Metadata Online Registry, METeOR, an admitted patient is a patient who undergoes a hospital’s admission process to receive treatment and/or care. This treatment and/or care is provided over a period of time, and can occur in hospital and/or in the person’s home (for hospital-in-the-home patients). Nonadmitted care includes all hospital services and care provided to a patient who is not formally admitted at the time when the care is provided (eg in an outpatient clinic).

Use clinical judgment when selecting the patient classification relevant to the economic evaluation, and justify the selection.

Seek advice from the department (see contact details on page 1) if the service is for neither nonadmitted patients nor for admitted patients under an Australian Refined Diagnosis Related Group (AR-DRG) as described in the National Hospital Cost Data Collection (NHCDC) (eg for a subacute or nonacute service).

6.1    Admitted patient services

Admitted patient services comprise all hospital services provided to patients who undergo a hospital’s formal admission process. The introduction of the proposed medicine may reduce the incidence of whole episodes of hospitalisation for a given illness or range of illnesses, or, in some cases, it may increase whole episodes.

Where the introduction of the proposed medicine is anticipated to increase or decrease whole episodes of inpatient care, or where its main comparator therapy includes whole periods of stay in hospital, the unit of measurement to be used is the hospital episode. The cost for each episode varies according to the AR-DRGs, which represent acute classes of patients with clinically similar diagnoses, and whose costs of treatment are relatively homogeneous. References for a list of AR‑DRGs according to their current AR-DRG classification are available from the Australian Consortium for Classification Development.

Current AR-DRG costs can be obtained from an appendix to the National Public Sector Cost Weights (Round 18 at the time of publication), in the NHCDC. Use the cost shown in the ‘Total cost’ column for the relevant AR‑DRG as the basis for determining the unit cost for the episode of hospitalisation. Use clinical judgment when selecting the NHCDC cost relevant to the economic evaluation, and justify the selection.

Specify the effective date of the AR-DRG classification and cost weights used in the submission (eg AR-DRG v7.0, Round 18 [2013–14]). Consider caveats identified in the NHCDC Cost Report and the NHCDC Independent Financial Review relating to each round of collection.

6.1.1   Use of alternative costs for admitted patients

Cost estimates may not be verifiable when disaggregated beyond an episode of hospitalisation. Therefore, it cannot be recommended that NHCDC cost weights be varied below the level of a whole episode. However, it could be argued that the cost of a whole episode from the NHCDC inadequately reflects different unit costs arising from changes in the duration of hospitalisation, changes in particular components involved in an episode of hospitalisation, and/or important heterogeneity across a particular AR-DRG. The estimate of admitted patient hospital unit costs may be affected by more than one of these factors (eg both duration and heterogeneity).

If a variation to the admitted patient unit costs is considered to be relevant and important to a particular submission, seek advice from the department (see contact details on page 1). As generally recommended in this manual, present two analyses (each with complete sets of sensitivity analyses): one that is completely consistent with the manual (ie using either the cost weight for the full episode of hospitalisation from the NHCDC AR-DRG unit costs, or no unit cost at all), and one that uses the alternative approach. This follows the general principle of ensuring comparability across submissions, and allows the implications of using alternative costs to be assessed.

Clearly explain and justify the alternative unit costs. Demonstrate why breaking down the unit cost beyond a whole episode of hospitalisation is of particular importance to the economic evaluation. Present and explain full details of the approach used to generate the alternative unit costs, including how they are applied to the estimates of changes and the extent for each resource.

Duration of episode

Where the medicine reduces the duration of an episode of hospitalisation, it is usually assumed that the cheapest days of hospitalisation are avoided. Thus, the cost per day for each day of hospitalisation avoided should be less than the average cost per day (calculated as the cost per episode divided by the average length of stay). Unless an alternative approach can be justified in the submission, use the cheapest estimate of the cost per bed day from the current NHCDC cost weights. This is appropriately conservative where confidence in the data is not strong.

Component costs

Where the medicine changes the extent of resources provided during an episode of hospitalisation, the component costs reported in the NHCDC should not be used. Justify any alternative source of costs, and discuss the extent to which this affects the conclusions of the economic evaluation.

Heterogeneity

Only consider an alternative unit cost for a whole episode of hospitalisation if the submission can demonstrate that heterogeneity within a particular AR-DRG is sufficient to affect the conclusions of the economic evaluation. Explain why any cost per episode for the selected AR-DRGs from the recommended AR-DRG dataset varies from the cost per episode for the corresponding AR-DRG from the chosen alternative dataset.

6.2    Nonadmitted hospital care

Nonadmitted services from acute care hospitals are classified according to the Tier 2 Non-Admitted Care Services Classification. Current Tier 2 class costs can be obtained from an appendix to the National Public Sector Cost Weights (Round 18 at the time of publication).

Where the introduction of the proposed medicine is expected to vary the number of nonadmitted patient service events, the units of measurement should be the average total cost per nonadmitted patient service event by Tier 2 class. Specify the effective date of the Tier 2 classification and cost weights used in the submission (eg Tier 2 v3.0, Round 18 [2013–14]). Use clinical judgment when selecting the NHCDC cost relevant to the economic evaluation, and justify the selection.

If a patient presenting for a nonadmitted service is admitted to hospital for care, it is essential that there is no ‘double counting’ of costs and that only the appropriate AR-DRG cost for an admitted patient is used. That is, a patient’s initial nonadmitted cost should not be counted in addition to the admitted cost.

6.3    Emergency department services

Emergency department presentations have been classified by Urgency Related Groups (URGs). Current URG costs can be obtained from an appendix to the National Public Sector Cost Weights (Round 18 at the time of publication).

Where the introduction of the proposed medicine is expected to vary the number of presentations to emergency departments, the units of measurement should be the average total cost per presentation by nonadmitted URG. Specify the effective date of the URG classification and cost weights used in the submission (eg URG v1.3, Round 18 [2013–14]). Use clinical judgment when selecting the NHCDC cost relevant to the economic evaluation, and justify the selection.

If a patient presenting to an emergency department is admitted to hospital for care, it is essential that there is no ‘double counting’ of costs and that only the appropriate AR-DRG cost for an admitted patient is used. That is, a patient’s initial nonadmitted emergency department cost should not be counted in addition to the admitted cost.