Informa Australia is part of the Informa Connect Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 3099067.


CASE STUDY: Integrating patient costing with health unit management

10 Feb 2014, by Informa Insights

By Garth Barnett, Senior Costing Consultant, PowerHealth Solutions

Garth Barnett
Garth Barnett

This is preview of my paper for 2014 Hospital Patient Costing conference. I have outlined the steps and approach taken for the case study here in this article, and will be providing full supporting data at my conference presentation.


During 2013, PowerHealth Solutions (PHS) and SA Health (SAH) implemented Power Performance Manager (PPM) as the patient costing tool of choice in all four metropolitan Local Health Networks (LHNs) and the six largest country health units. For the first time, outpatient and emergency as well as inpatient activity was costed at the encounter level.  This gives health units the ability to review the total cost of a patient’s journey, including identifying high cost users.

With the implementation of PPM, SAH have primarily focused on preparing costing datasets in accordance with the Commonwealth Activity Based Funding (ABF) Model.  Adjustments for State Funding Model are no longer been made. This is really an exciting time to be in the patient costing sphere, now that health units have transparent costing data available at their fingertips.

Following the implementation, I have been engaged by Northern Adelaide LHN (NALHN) to integrate patient costing within the operational management of the organisation.


To ensure the success of an operational project like this, buy-in from Health Unit Executive is crucial, so it helps when the NALHN CEO, COO and Finance Director understand the value of patient costing information to aid decision making. Without support from the top, it will be more difficult to engage key stakeholders within the business.

Stage 1: Executives
The first stage in this project was to ensure that all of the NALHN Executive had the same understanding of patient costing basics and the ABF model. This included a live demonstration of the system with their own costing data along with summary benchmarking reports by activity of their costs versus funding.  This gave them an appreciation for the easy availability of performance information.

Stage 2: Finance Staff
The second stage was to run a Finance Team Workshop for Central Finance Staff and Business Managers to provide them with a consistent background on the Commonwealth ABF Reform, including how the funding model works and the classification system used. The workshop also detailed the PPM costing process and the standard SAH setups, to explain allocation methodology and assumptions used to derive patient costs. The result was that the Finance Staff gained an understanding of how their role influenced the costing process (for example accurate PFRACs, mapping of activities to the right cost centres, etc.). This enabled them to participate in the audit process to fine-tune the costing. They also gained an awareness of the accuracy of patient level costs based on the availability of feeder data.

Finance Staff now had an appreciation of the information available to assist them in preparing business cases, including a better understanding of the direct costs and overheads. This is particularly important for hospitals looking to expand specialised clinical services for patients within their catchment area.

Stage 3: Divisional Management
The third stage was to run separate divisional workshops for Senior Clinical Management teams along with key Executive and Finance Staff. Each workshop started off with patient costing theory describing the methodology and assumptions behind the numbers, and also importantly, where they could influence the process. The workshops went on to identify where each division could assist in improving the patient costing process, eg capturing data for patients seen by specialist nurses in order to allocate costs only across these select patients, rather than all patients within the specialty.

P14A14hospital patient costingAttendees were then presented with benchmarked data relating to their specialties (including costs and average length-of-stay versus funding and other health units) to identify potential high and low performing areas. To demonstrate the power of the system, we drilled down into specific detail (eg benchmarking theatre time per DRG and procedure versus other health units to understand theatre throughput/practice, pathology and imaging costs per DRG/URG/Tier 2 classification versus other health units to identify differences in test ordering practices) to give them a better understanding of the possibilities.

They were then asked to identify information for future review during their regular performance meetings. It is intended that this information will be used to target efficiency improvement strategies at the divisional level.  This in turn will assist the next financial year’s budget build of the LHN.


At the Hospital Patient Costing conference, I will be going through some of these benchmarking reports in more detail to give you some ideas on how to use patient costing information, which as a general rule has been poorly underutilised in the past.

Once you have engaged Health Unit Management in the Patient Costing Process, the only limit on using Quality Costing Information is your imagination. The added benefit of Health Units integrating patient costing into their business is that the quality of the information is likely to increase, which is a win/win situation for everyone involved.

Blog insights you may like

Get all the latest on Informa news and events

Informa Connect Australia is the nation's leading event organiser. Our events comprise of large scale exhibitions, industry conferences and highly specialised corporate training.

Find out more

Subscribe to Insights

Join Our Newsletter
Informa Insights

Stay up-to-date with all the latest
updates, upcoming events & more.