Hospital costs differ wildly: report

Some Australian hospitals are treating patients at half the cost of others, a new report shows.


Victoria is leading the way and is home to all of the major metropolitan public hospitals with the lowest cost of care.

ACT and Western Australia aren’t doing so well by comparison, with their hospitals shouldering some of the highest costs for delivering similar services to similar patients.

The National Health Performance Authority report doesn’t deal with the quality of patient care, but allows hospitals to assess their average costs against others of about the same size and function.

And it’s revealed wildly different costs.

In 2013/14, some hospitals spent almost twice as much as others to provide similar services.

But there was some across-the-board good news, with hospital costs in the three years to 2013/14 rising only in line with the amount of work they did, and at a level slightly below inflation.

The Australian Healthcare and Hospitals Association says the report is an endorsement of the current model of activity-based funding, which sees hospitals paid an average amount per patient treated, regardless of the actual cost of care.

AHHA chief executive Alison Verhoeven says it pushes hospitals to keep their costs down and that’s good news for the health budget.

She points to the strong performance of Victorian hospitals, which moved to activity-based funding well ahead of other states and territories.

“They’ve had a longer period of time over which they’ve managed that efficiency process, and that’s why Victoria has done better than other states and territories,” she told AAP.

“The good news is that just prior to the COAG meeting in early April (federal health minister) Sussan Ley announced continuing activity-based funding, nationally.”

But Ms Verhoeven says cost is only one aspect of care that needs to be considered, alongside patient outcomes, access to the right services, and the appropriateness of the care that’s provided.

The Australian Medical Association agrees and says that while activity-based funding is an important method, it’s not perfect and leaves a lot to be desired.

“The cost of providing health services in Bunbury in Western Australia is not the same as it is in Brunswick in suburban Melbourne, for example,” AMA Vice-President Dr Stephen Parnis said.

He warns the system of paying hospitals a standard amount per patient will eventually sail the hospital system into dangerous waters.

“They calculate a price in such a way that the price goes down every year pretty much, but they find an actuary to say that somehow it’s increased,” he said.

“The fact is if the unit price goes down from year to year efficiency will only get you so far.”

Dr Parnis said the Turnbull government’s recent three-year, $2.9 billion offer to the states and territories to patch up some of the hospital funding stripped away under Tony Abbott wasn’t close to enough.



– The Canberra Hospital (ACT) $6100

– Calvary Public Hospital (ACT) $5800

– Sir Charles Gairdner Hospital (WA) $5600

– Fremantle Hospital (WA) $5500


– Dandenong Campus (Vic) $3400

– Western Hospital (Vic) $3300

– Casey Hospital (Vic) $3200

– Frankston Hospital (Vic) $3100

(Source: Hospital Performance Report, by the National Health Performance Authority)