Hospital services and casemix in Western Australia

The Health Department of WA currently operates as a single integrated funder and purchaser of health services for the State. Health Service Agreements defining the level of health provision are negotiated with the various health services in WA. During the latter part of the 1990s, the funding of public hospitals for acute inpatient care moved away from a historical basis to output-based funding using a casemix approach based on Diagnosis Related Groups (DRGs). Other hospital services are still mainly purchased using historical funding levels, negotiated block funding or bedday payments, with output-based funding mechanisms under investigation. WA has developed its own approach to classifying admitted patients that recognises differences in complexity of care among episodes grouped to the same DRG. WA also has a unique cost estimation model for calculating DRG cost weights, which is based on a linear estimate of the relationship between nights of stay in hospital and the cost of hospital care for each DRG. Another emerging trend in the provision of public hospital services in WA has been the greater involvement of the private sector through the contracting of private providers to operate public hospitals. While no close examination has been undertaken of the outcomes of these changes in terms of their effect on efficiency or other relevant indicators of hospital performance, current purchasing arrangements are being reviewed following recommendations made in a report by the Health Administrative Review Committee. No decision has yet been made as to future changes to the funding policy of WA public hospitals.