Victoria - Public Hospitals Policy and Funding Guidelines 1997-1998
Section A: Policy

3.1 Inpatient Classification and Cost Weights

In 1997-1998 the unit of measurement will be formally known as WIES5. A full list of weights is given in Section C: Supplementary Information. WIES5 amendments and a full explanation of WIES5 are given in Section C: Calculation of WIES.

3.1.1 Additional Changes for Severity

 In 1996-97 the clinical use of mechanical ventilation was introduced as a sound and clinically valid surrogate for patient severity. In some DRGs mechanical ventilation is inherent to the episode of care and therefore only selected DRGs attracted an additional payment. These payments form part of each hospital's overall WIES5 target and are part of the hospitals' general funding arrangements.

During 1996-97 the Department reviewed the levels of use of mechanical ventilation using data from the first half of the financial year. Overall use of mechanical ventilation appears to be within forecast levels, however AN-DRG specific differences were noted. Levels of mechanical ventilation will continue to be monitored.

In addition, Departmental consideration is being given to extending mechanical ventilation co-payments to AN-DRGs currently exempt from these co-payments, by setting a maximum number of exempt mechanical ventilation days for these AN-DRGs. Co-payments would be made for days of mechanical ventilation in excess of the exempt days. Initial analyses have been undertaken and referred by the Casemix Clinical Sub-Committee for wider consultation and further consideration in 1997-98.

3.1.2 Prostheses

Historically, hospitals have found it difficult to develop appropriate prosthetic utilisation feeder systems to supply data at a patient level. This has resulted in prosthetic costs being absent from AN-DRG cost estimates. In Victoria, this problem was addressed in 1995-96, when selected AN-DRG cost weights were revised to take account of shortcomings of cost allocation in prosthetic feeder systems.

Prosthetic costs were modelled using data obtained from those hospitals in the Victorian study with accurate feeder systems, together with reference to the National Operating Room Service Weights Study, undertaken by Deloitte Touche Tohmatsu in 1994. These prosthetic costs were assigned to those DRGs with a significant prosthetic cost component which was not fully identified in the Victorian Cost Weight Study.

To ensure adequate payment for these DRGs, separate weights for the fixed and variable components of the funding formula were set. Prosthetic costs are included for the variable component but excluded from weights used to calculate fixed grants and outlier payments. For 1997-98 prosthetic costs have been set at the 1996-97 level.

3.1.3 Stents

In 1997-98 changes have been introduced to compensate hospitals more appropriately for the prosthetic cost associated with stents. Clinical advice was sought to determine the appropriate level of prosthetic costs of stents in cardiology and gastroenterology. Where appropriate DRG weights have been adjusted in the same way as other AN-DRGs with high prosthetic costs.

Based upon clinical advice and current VIMD data, stent adjustments have been made for two AN-DRGs. As the majority of patients in AN-DRG 385 are currently treated using stents, the 1997-98 cost weight for AN-DRG 385 has been adjusted for the cost of a stent. As about half of AN-DRG 297 cases received stents, the AN-DRG has been split for payment purposes into cases with stents (DRG 298) and cases without stents (DRG 299). Prosthesis costs have been added to the combined average cost when calculating the 1997-98 weight for DRG 298.

While stents are also used in other DRGs, at this time the numbers of cases within individual DRGs are too small to warrant further adjustments to the cost weights.

3.1.4 Thalessaemia

Thalessaemia cases are currently allocated to AN-DRGs 760 and 761. Data provided to the Department established that thalessaemia cases are significantly more expensive than other patients within these DRGs. Consequently, for 1997-98 each thalessaemia case in these DRGs will receive a co-payment of 0.2648 WIES. These WIES will be part of the hospital's WIES target and general funding arrangements.

3.1.5 Bone Marrow

In recognition of the higher cost associated with allogenic bone marrow grafts, DRG 6 has been split into DRG 11 Allogenic Bone Marrow Grafts and DRG 12 Non-Allogenic Bone Marrow Grafts, on the basis of principal procedure. Costs weights have been developed based upon information provided to the Victorian Cost Weights Study and other data provided to the Department. Trim points have been set at a third (low boundary) and twice (high boundary), the average length of stay for DRGs 11 and 12 based upon the 1995-96 VIMD.

3.1.6 Burns

Two changes have been introduced into the 1997-98 funding policy to increase funding for high cost burns patients. First, the high outlier adjustment factor for a number of burns DRGs has been increased from 0.7 to 1.0. Second, DRG 923 has been added to the one-night DRG list. This was done to prevent relatively short stay cases inappropriately reducing the weight of the more complex cases (analysis of the VIMD suggested that DRG 923 was bimodal with different hospitals treating different types of patients).

3.1.7 Low Frequency DRGs

Ninety-nine DRGs within the 1996 Cost Study had fewer than 150 inliers and an average cost which differed by more than 20 per cent from the 1995 Cost Study average cost. Average costs used to calculate the 1997-98 cost weights for these DRGs were calculated by combining 1995 and 1996 Cost Study data.

3.1.8 Neonate DRGs

In 1996-97 neonate cost weights were based upon average costs reported in the Neonate Costing Review, undertaken for the Department by Ernst and Young (May, 1996), rather than the 1995 Costing Study.

For 1997-98 the neonate cost weights are based upon the 1995-96 cost study. However, as noted above, low frequency DRGs that differed between years in their average costs were 'averaged' across studies. Neonate Costing Review average costs were used when 'averaging' low frequency neonate DRGs.

The impact of these changes on individual hospitals specialising in neonatal care was assessed by the Department prior to finalising the weights. Overall differences were small.

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