Update: 1993-1994

Have budget cuts made Manitoba hospitals less expensive?

That question underscores this report by MCHPE-the Manitoba Centre for Health Policy and Evaluation. It is a brief follow-up to a study we released in May 1995 called "Hospital Case-Mix Costing 1991/92" which compared costs at Manitoba hospitals. At that time we found that some hospitals were much more costly than others and that substantial savings might be realized by improving cost-efficiency at many hospitals.

We have all read about the budget cuts and staff layoffs which have occurred. Did these narrow the gap between the least and the most expensive hospitals?

Unquestionably, these are very sensitive issues and the current economic climate makes them even more so. Threats of more bed closures further complicate matters. MCHP's role is to provide information that policy makers and health care providers can use to improve the effectiveness and efficiency of the care they deliver. One of our major concerns is that key characteristics of the Canadian health care system - quality care, public funding, equal access - be preserved.

This report again compares the costs of providing inpatient care at each Manitoba hospital by using cost per weighted case (CWC is calculated by dividing total inpatient expenditures by total weighted cases). As before, we adjust for the different types of patients treated, but make no adjustments for teaching costs at the two teaching hospitals.

  • Not unexpectedly, bed closures have led to a decline in inpatient days- 14%- and inpatient cases - 9%. Overall there has been a 6% decline in expenditures on inpatient care. But, while urban hospitals had lower expenditures in 1993 than they did in 1991; expenditures were up on average at the rural hospitals.

  • Inpatient expenditures decreased 9% at the two teaching hospitals. However, they still receive 45% of what the province spends on inpatient care.

  • Teaching hospitals became more costly, not less; the CWC rose from 29% above the provincial average in 1991 to 33% above in 1993.

  • The urban community hospitals became slightly less costly, dropping from 5% below the provincial average in 1991 to 6% below it in 1993.

  • The intermediate rural hospitals are still the least expensive institutions at 12% below the provincial average.
    With downsizing, the assumption was that since hospitals would be operating with reduced budgets, they would become more cost-efficient. But a look at cost per weighted cases shows how this is not necessarily so.

    At the risk of oversimplifying, if a hospital used to spend X number of dollars, it was assumed that after budget cuts, the same hospital would be spending less, therefore its cost per weighted case would fall. But expenditures are literally only one-half of the equation. Cutbacks have affected weighted cases too, causing them to rise and fall.

    For instance, with bed closures came the anticipated drop in hospital days, ranging from 20% at the teaching hospitals to 4% at northern hospitals. Without going into detail, a drop in days can lower weighted cases which in turn makes the CWC rise - the hospital's per-patient cost goes up.

    A drop in cases has the same affect. With bed closures, there has also been a drop in inpatient cases, the result of, among other things, a shift from inpatient to outpatient surgery. Here again, the resulting drop in weighted cases causes the CWC to go up; the hospital appears more costly.

    The aforementioned changes have mostly affected the less serious patients in hospitals, leaving many hospitals with a higher proportion of more severe cases. The higher the average level of severity, the higher the case weights which, when divided into a hospital's operating budget, would make it less costly.

    Again we stress this is a simplification; many other considerations go into case-mix costing. The point is that if the days of care (and inpatient cases) provided by an institution are cut by more than the budget, the cost per weighted case may not go down. By and large, this has been the case in Manitoba.

    When we look at specific CWCs, our most significant finding is that the gap between community hospitals and the teaching hospitals has increased (fig.1). Put another way, in 1991/92 it cost considerably more to treat a patient in a teaching hospital than in another urban hospital; in 1993/94 even more so.

    This brings us to the issue of indirect teaching cost. Again, we have not attempted to adjust for teachingness. There is no agreement on how to make this adjustment, although everyone agrees some adjustment should be made. In the current literature, the percent of costs attributable to teaching ranges from 2% to 20%. Since one-third of Manitoba patients are treated at the two teaching hospitals (fig.2), this raises two questions: If the teachingness factor is closer to the lower range, why are teaching hospitals' CWCs persistently higher? Or, if the true cost of teaching is 20%, can we afford to have such a large proportion of inpatients treated at the teaching hospitals?

    Whether the cost gap between community and teaching hospitals is attributable to indirect teaching costs or something else entirely, it emphasizes the fact that analysis of hospital costs is a complex issue. It is increasingly important to fully understand where differences such as these come from. Important enough, in fact, that Ontario Health has worked with hospitals to develop new funding models. It is time, perhaps, for Manitoba Health and Manitoba hospitals to move in a similar direction.


    Summary written by RJ Currie, based on the report: Update Hospital Case Mix Costing 1993/94: by Marian Shanahan.

    Questions About This Report?
    Return to Report Summaries Directory
    Web page design by RJ Currie: