Abstract:
The rapid growth of the cost of health care is a serious concern for many developed countries. The present study attempts to investigate cost drivers in the health care sector by using the data for individual patient cases dealt with by New Zealand hospitals that utilise the case-mix system and the Diagnostic-Related Group (DRG) approach. We analyse the effects of various complexity factors in hospital products, processes, infrastructure and patient characteristics such as the hospital's tertiariness, patients' length of stay, ethnicity, admission and discharge types and the severity of the disease on the total hospital cost for individual patient cases. We also carry out a set of additional analyses where we further investigate the effects of patient's age, the relationships between the various complexity measures and the direct costs and various departments in a hospital. Finally, the varying influence of the complexity factors on the individual DRGs is also examined. We find that there is a positive association between the degree of case-mix complexity and production costs in the health care sector by observing positive and significant relationships between hospital costs and complexity factors such as the PCCL scores, patients' age and length of stay. Furthermore, the patient cases treated in the hospitals providing tertiary health care services or in the Starship hospital are found to have greater total cost than the cases treated in secondary hospitals. Patients' gender, however, does not have considerable effect on the total hospital cost.