Gap in funding for specialist hospitals treating patients with traumatic spinal cord injury under an activity-based funding model in New South Wales, Australia
Authors: Vaikuntam Bharat Phani , Middleton James W. , McElduff Patrick , Walsh John , Pearse Jim , Connelly Luke , Sharwood Lisa N. 
Published: May 2020

ObjectiveThe aim of this study was to estimate the difference between treatment costs in acute care settings and the level of funding public hospitals would receive under the activity-based funding model.
MethodsPatients aged ≥16 years who had sustained an incident traumatic spinal cord injury (TSCI) between June 2013 and June 2016 in New South Wales were included in the study. Patients were identified from record-linked health data. Costs were estimated using two approaches: (1) using District Network Return (DNR) data; and (2) based on national weighted activity units (NWAU) assigned to activity-based funding activity. The funding gap in acute care treatment costs for TSCI patients was determined as the difference in cost estimates between the two approaches.
ResultsOver the study period, 534 patients sustained an acute incident TSCI, accounting for 811 acute care hospital separations within index episodes. The total acute care treatment cost was estimated at A$40.5 million and A$29.9 million using the DNR- and NWAU-based methods respectively. The funding gap in total costs was greatest for the specialist spinal cord injury unit (SCIU) colocated with a major trauma service (MTS), at A$4.4 million over the study period.
ConclusionsThe findings of this study suggest a substantial gap in funding for resource-intensive patients with TSCI in specialist hospitals under current DRG-based funding methods.
What is known about the topic?DRG-based funding methods underestimate the treatment costs at the hospital level for patients with complex resource-intensive needs. This underestimation of true direct costs can lead to under-resourcing of those hospitals providing specialist services.
What does this paper add?This study provides evidence of a difference between true direct costs in acute care settings and the level of funding hospitals would receive if funded according to the National Efficient Price and NWAU for patients with TSCI. The findings provide evidence of a shortfall in the casemix funding to public hospitals under the activity-based funding for resource-intensive care, such as patients with TSCI. Specifically, depending on the classification system, the principal referral hospitals, the SCIU colocated with an MTS and stand-alone SCIU were underfunded, whereas other non-specialist hospitals were overfunded for the acute care treatment of patients with TSCI.
What are the implications for practitioners?Although health care financing mechanisms may vary internationally, the results of this study are applicable to other hospital payment systems based on diagnosis-related groups that describe patients of similar clinical characteristics and resource use. Such evidence is believed to be useful in understanding the adequacy of hospital payments and informing payment reform efforts. These findings may have service redesign policy implications and provide evidence for additional loadings for specialist hospitals treating low-volume, resource-intensive patients.