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Costing overview

Hospital costing focuses on the cost and mix of resources used to deliver patient care. Costing plays a vital role in activity based funding. Costing informs the development of classification systems and provides valuable information for pricing purposes. Hospital patient costing is essential for understanding the total costs involved in treating a patient including the services or products used. 

A key output of the Independent Health and Aged Care Pricing Authority (IHACPA) is the collection, validation, analysis and reporting of the National Hospital Cost Data Collection (NHCDC). This process is performed in conjunction with states and territories and private hospitals, who submit cost data to the NHCDC on an annual basis, known as a round.

How much does patient activity cost in Australia’s public hospitals?

Source: NHCDC Round 24 public hospital cost information for the 2019–20 financial year. Read the full report.

NHCDC Round 25 - data map of Australia

The NHCDC is a critical component of activity based funding. To ensure its suitability as the primary data collection to determine the national efficient price (NEP) and national efficient cost (NEC), the Australian Hospital Patient Costing Standards (AHPCS) were introduced to outline best practice in generating high quality, reliable and comparable patient data that helps to refine classification systems, set prices and inform policy. The current version of these standards is the Australian Hospital Patient Costing Standards Version 4.1

IHACPA also commissioned the Strategic Review of the National Hospital Cost Data Collection in 2012-13. The Strategic Review recommended 20 key deliverables and IHACPA continues to implement these with the view to improving the processes, transparency and quality of the collection each round.

Where opportunities for improvement in understanding the cost of services are identified, IHACPA undertakes costing studies. Through these efforts and the collaboration of the states and territories, significant improvements have been made to the structure of the NHCDC and its validation and reporting tools.

The Australian Hospital Patient Costing Standards (AHPCS) provide direction for hospital patient costing through the development of standards for specific elements of the costing process and reporting requirements. The current version of the standards is the Australian Hospital Patient Costing Standards Version 4.1.

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