Concept: Calculating Hospital Costs Using Cost Per Weighted Case (CPWC) / Cost of a Standard Hospital Stay (CSHS) Values

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Concept Description

Last Updated: 2017-10-12

Introduction
    This concept describes the methods for calculating hospital costs using a Cost Per Weighted Case (CPWC) / Cost of a Standard Hospital Stay (CSHS) value. The concept includes a definition and general description of the methodology used at MCHP for calculating the CPWC, identifies the use of this measure in different MCHP reports and provides links to specific report information regarding CPWC. MCHP example SAS code for working with the CPWC is available. Additional information about the Canadian Institute for Health Information (CIHI) CPWC / CSHS methodology is described, along with access to historical and current information on the CIHI web site. Cautions and limitations on using the CPWC / CSHS measures are also provided.

    NOTE 1: This concept contains a link to an INTERNAL ACCESS ONLY document that lists yearly CPWC / CSHS values covering the period 1995-96 to 2015-16 fiscal years. This list compiles all of the CPWC / CSHS values that are presented in this concept into a single list. Please see the Yearly CPWC / CSHS Values document in the LINKS section below (INTERNAL ACCESS ONLY).

    NOTE 2: For an overview of general costing methods (sources of data, types of costs, and approaches) and the methods of costing specific health services (hospitals, physicians, home care, personal care homes and pharmaceutical/prescription drugs) that have been used in MCHP research over time, please see the Costing Methods: An Overview of Costing Health Services in Manitoba concept.
Definition of CPWC / CSHS
    The Cost Per Weighted Case (CPWC) / Cost of a Standard Hospital Stay (CSHS) is a financial indicator that provides a measure of the cost to provide care to a standard hospital patient. It is a relative, average cost calculated by summing the weights assigned to all cases treated by a hospital, and dividing this number into the hospital's total inpatient expenditure (Finlayson et al., 2009). It is used for describing and comparing the cost of care, as it removes the effects of differences in the acuity, severity and complexity of the populations served in different hospitals on the cost of providing care, and permits the assignment of a cost to each case that is discharged from a hospital. CPWC / CSHS may be measured at multiple levels, such as an individual hospital, hospital type, Regional Health Authority (RHA) or province-wide.

    In MCHP research, Cost per Weighted Case (CPWC) has also been termed:

    • Cost per Weighted Case (CWC) and
    • Average Cost Per Weighted Case (ACWC or ACPWC).

    NOTE: As of October, 2015, CIHI has replaced the term CPWC with the term Cost of a Standard Hospital Stay (CSHS). For more information on CSHS, please read the Cost Per Weighted Case (CPWC) / Cost of a Standard Hospital Stay (CSHS) – Canadian Institute of Health Information (CIHI) Methods section below.
Data Sources
General Method for Calculating the Cost Per Weighted Case (CPWC) / Cost of a Standard Hospital Stay (CSHS) Value
    This section relates primarily to calculating the CPWC values from "raw" data, as was done in earlier (~ 2001) MCHP research. Obviously, with the CIHI CPWC / CSHS values more readily available, there is no need to calculate values from the data.

    The CPWC is calculated by dividing the total hospital costs by the total weighted cases (TWC) using the following formula:
    CPWC = Total Hospital Costs ÷ Total Weighted Cases (TWC)
    Hospital Costs

    Hospital costs can be divided into two broad categories: direct and indirect costs. In most cases, only direct costs (e.g. nursing inpatient services, diagnostic imaging) are included in CPWC calculations. Other costs used in the calculation of total hospital costs may include a share of the administrative and support services costs (e.g., hospital administration, information technology, human resources, physical plant) that can be attributed to patients. Building capital costs and physician services during the hospital stay are not included.

    For more information on direct and indirect costs, please read the section titled 1.2 – Types of Cost Data in the Costing Methods: An Overview of Costing Health Services in Manitoba concept.

    Total Weighted Cases

    Starting with the 1995/96 hospital abstract data, the Case Mix Groups (CMG™) case mix system, developed by the Canadian Institute for Health Information (CIHI), is applied to the hospital abstract data and then it is returned to the province with value added data; CMGs and RIWs. The CMG system defines and identifies homogeneous groups of inpatient and day surgery records based on most responsible diagnosis, additional comorbidities, age, length of stay, and resource use. Additional data included as part of the CMG system is a CMG or DPG code value, depending on the type of abstract, and a measure of resource use called Resource Intensity Weights (RIW™) (or DPGWGT for day surgery cases in older abstract records) which are associated with each record. The RIW reflects the average resources consumed during each hospital episode (see the Case Mix Groups (CMG™) - Overview concept for more information). RIWs are additive, so the total number of RIWs can be calculated producing a value for the total weighted cases (TWC).

    Determining and Using the CPWC to Calculate Episode Costs

    Once the total hospital costs and the value for total weighted cases (TWC) are determined, the CPWC can be calculated using the formula above. The average CPWC / CSHS is the cost of a hospital stay with a RIW weight of 1.00.

    To convert the weight of each hospital stay into a dollar amount, the average CPWC / CSHS is multiplied by the RIW value for each record to determine the cost of an individual episode of care.
MCHP Research Using the CPWC Measure
    The following sections describe how the CPWC is used in MCHP research over time, along with links to specific sections in these reports.
1. Shanahan et al. (1994) and Lloyd et al. (1995)
2. Finlayson et al. (1999)
    In the deliverable Hospital Case-Mix Costing Project: Using the Manitoba Management Information System: A first step by Finlayson et al. (1999), they investigated the feasibility of using Management Information System (MIS) data to perform case mix costing. This was the first year (1995-96) of data collection in the MIS data, as well as the use of CMGs and RIWs from CIHI in the hospital abstract data. The study was designed to determine if MIS could be used to:

    • estimate the cost of providing inpatient care to different types of patients, and
    • estimate the average cost of providing inpatient care in different types of hospitals.

    For more information on the methods used to develop the CPWC in this research, see Chapter 2 - Methods in the deliverable.
3. Finlayson et al. (2001)
    In the deliverable Using the Manitoba Hospital Management Information System: Comparing Average Cost Per Weighted Case and Financial Ratios of Manitoba Hospitals. The Next Step, by Finlayson et al. (2001), they calculated the CPWC for 1997/98 hospital abstract data using the CMG / RIW system and financial data from the Management Information System (MIS) data. The CPWC for all hospital cases in Manitoba in 1997/98 was $2,194.

    This deliverable also presented information on the average CPWC:

    • as an average of all hospitals;
    • by type of hospital (teaching, urban community, major rural, intermediate rural, small rural, northern isolated and small multi-use facility). See the Hospital Types concept for additional information; and
    • by Regional Health Authority.

    For more information, please read section 3.1 Cost Per Weighted Case Comparison Between Hospitals and Health regions in the deliverable.

    In subsequent work on costing, Finlayson et al. were able to develop additional CPWC values for use in MCHP research. This information is presented in the table below. The first two years in the table, 95/96 and 96/97, were developed using information based on the Refined Diagnosis Related Groups (RDRG®) case mix system (NOTE: RDRGs are no longer in use at MCHP), a precursor to the CIHI CMG case mix system. The rest of the table is based on the CMG case mix system.
    Year Cost Per Weighted Case (CPWC)
    95/96
    $2,182
    96/97
    $2,188
    97/98
    $2,194
    98/99
    $2,237
    99/00
    $2,293
    -----
    ----------------
    98/99
    $2,207
    99/00
    $2,424
    00/01
    $2,562
    01/02
    $2,729
    02/03
    $2,919
    03/04
    $3,069

    NOTE:

    • It may be important to apply the CPWC value specific to each year when computing costs, but this depends on the purpose of the study.
    • The CPWC values in the second set of numbers for 98/99 to 03/04 were provided July 4, 2006 by G. Finlayson. NOTE: There are two years of data presented twice in the table; 98/99 and 99/00. The second set of CPWC values for 98/99 and 99/00 are different than the first set of values based on updated financial statements of hospital expenditures in annual reports.

      An example of the SAS code developed and used in this research is available below - see the section MCHP SAS Code Example Using the CPWC Measure.

    NOTE RE: ADDITIONAL TABLES of CPWC / CSHS VALUES

    The values in the table above relate to the work that was done by Finlayson et al., from ~2001. For more recent information about CPWC / CSHS values, please see the Cost Per Weighted Case (CPWC) / Cost of a Standard Hospital Stay (CSHS) – Canadian Institute of Health Information (CIHI) Methods section below.
4. Finlayson et al. (2001)
    In the deliverable A Comparison of Preliminary and Adjusted Cost per Weighted Case Determinations for Manitoba Hospitals: Impact for Evaluation and Report Cards by Finlayson et al. (2001), they calculated the CWC for each hospital and type of hospital in Manitoba. Four different CWC measures were calculated using different sets and combinations of data:

    • raw MIS data;
    • confirmed MIS data;
    • in-year adjusted total weighted cases (TWC); and
    • confirmed MIS data and in-year adjusted total weighted cases (TWC).

    For more information on the methods used to develop the CWC in this research, see Chapter 3 - Methods in the deliverable.
5. Finlayson et al. (2009)
    In the deliverable The Direct Cost of Hospitalizations in Manitoba, 2005/06, by Finlayson et al. (2009), they developed separate cost lists for hospital inpatient services and day surgery services based on data available for 2004/2005. They calculated the provincial average CPWC as: $2,954.45.

    For more detailed information, see the following information in the Hospital Costing: Using the 2009 Cost List for Manitoba Hospital Services concept:

    • the Methods section describes the CPWC methodology used in this research; and
    • The Cost Lists section describes information about the two cost lists that were developed and provides links to the cost lists that are available in this deliverable.
6. Martens et al. (2015)
    In the deliverable The Cost of Smoking: A Manitoba Study, by Martens et al. (2015), they investigated the cost of health services related to smoking, including physician services, prescription drugs, and hospital services. In this research, they used a standard costing approach to estimate hospital costs. This involved using the resource intensity weight (RIW) for inpatient procedures and an average cost per weighted case (CWC). The CWC value used in this research was $5,438, based on 2010 data available on the Canadian Institute for Health Information (CIHI) web site.

    For more information on how CWC was calculated and used in this research, please read the sub-section titled Hospital Use under the main heading Healthcare Costs: Putting Prices on Use of Healthcare Resources.

    For more information on CIHI's development and use of CPWC, see the Cost Per Weighted Case (CPWC) / Cost of a Standard Hospital Stay (CSHS) – Canadian Institute of Health Information (CIHI) section below.
MCHP SAS Code Example Using the CPWC Measure
    Below is an example of the SAS code program that calculates the total cost of a patient episode of care, based on work done in Finlayson et al. (2001). This example uses 1999/2000 hospital abstract data and the 1999/2000 CMG support file data, and a CPWC value of $2293 for 1999/2000. This example presents only the variables available on the CMG file. If more hospital variables are needed they can be added from the appropriate hospital file. The CMG™ and hospital files have the same sort order and number of observations.

    data hsp99;
    set cpe.cmg9900;

    if '19990401'<=dtsep<='20000331';

    * Remove non-MB residents;
    if postal=:'R' and muncode ne '900';

    * Remove OOP hospitals;
    if hosp>=1007 then delete;

    * Keep valid PHINs;
    if phin91>'000000000';

    keep phin91 dateadm datesep riw los hosp
    abstype adstat sepcode transact dpgwgt;
    run;
    * Multiply RIW™ and DPGWGT by CPWC ($2293 for 99/00) to get cost per case;

    * Note that only one of RIW™ or DPGWGT is greater than 0 on each record, but adding them together is a fast way of handling both variables;
    data hsp99;
    set hsp99;
    cost=2293*(riw+dpgwgt);
    run;

    * Add up costs per person;

    data totals;
    set hsp99;
    by phin91;
    if first.phin91 then totcost=0;
    totcost+cost;
    if last.phin91;
    run;

    proc means data=totals mean min max sum;
    var totcost;
    run;
Cost Per Weighted Case (CPWC) / Cost of a Standard Hospital Stay (CSHS) – Canadian Institute of Health Information (CIHI) Methods

    The Canadian Institute for Health Information (CIHI) also produces information about CPWC. NOTE: In 2015, CIHI replaced the term "Cost Per Weighted Case (CPWC)" with the term "Cost of a Standard Hospital Stay (CSHS)". This information has been used in MCHP research, as mentioned above.

    Here are some of the methodological highlights on how CIHI develops and uses the CPWC / CSHS measure:

    • Financial and statistical data is obtained from the Canadian MIS Database (CMDB) at CIHI.
    • Weighted cases are obtained from the Discharge Abstract Database (DAD) at CIHI.
    • CIHI does not normally recommend comparing the CPWC / CSHS over time because the methodology for calculating the RIW (Resource Intensity Weight) changes from one grouper year to another, and financial data sources / values may change from year to year due to adjustments.
    • Beginning in 2012, CPWC was calculated and reported two different ways, using an unadjusted labour rate and an adjusted labour rate.

    For more information on the methodology used at CIHI to develop the Cost of a Standard Hospital Stay, please read:


    There are two sources of information on the CPWC / CSHS values generated by CIHI. The first is publicly available on the CIHI web site. The second is historical CPWC / CSHS information, collected and maintained by MCHP, that is available for use in approved research projects.

    1. CIHI provides an on-line interactive tool that provides CSHS values for the most recent five years. The tool provides CSHS values at a national level as well as provincially, regionally and by individual hospital within the province. The following describes two different views that are available from this tool, and provides a link to the information described:

      • Cost of a Standard Hospital Stay (CSHS) - Manitoba - provides an overall CSHS value for Manitoba and Canada; a trend over time (5-year) graphical representation of the Manitoba and Canada CSHS values; a graphical representation of the CSHS by Manitoba regions (e.g. by city (Regional Health Authority) or by individual hospital); and an interactive map for all provinces and territories in Canada.
      • Provincial Comparison of the Cost of a Standard Hospital Stay - provides a CSHS value for all provinces and territories in Canada; a trend over time (5-year) graphical representation of the CSHS values for up to 3 provinces or territories; and an interactive map for all provinces and territories in Canada. A city (Regional Health Authority) and an individual hospital can also be selected.

      Information available October 3, 2017 from the CIHI web site reported Manitoba CSHS values for the period 2011-2012 to 2015-2016 as follows:
      Year
      Cost of a Standard
      Hospital Stay (CSHS)
      2011-2012
      $5,767
      2012-2013
      $6,004
      2013-2014
      $6,093
      2014-2015
      $6,238
      2015-2016
      $6,358

    2. Historical CIHI Cost Per Weighted Case (CPWC) / Cost of a Standard Hospital Stay (CSHS) Values for Manitoba - over time, MCHP has retained historical information on the CIHI methods / values for calculating Cost Per Weighted Case (CPWC) and Cost of a Standard Hospital Stay (CSHS). This includes:

      • a document identifying the CIHI CPWC values for Manitoba from 2004-05 to 2012-13, the methodology used each year, and other important methodological information pertaining to the production of CIHI CPWC values. See the document titled Manitoba CPWC Values From CIHI Data Sources - 2004-05 to 2012-13 available from the LINKS section below (internal access only).

      • a document identifying the CIHI CSHS values for Manitoba from 2011-2012 to 2015-2016. See the document titled CIHI - Yearly Cost of a Standard Hospital Stay (CSHS) in Manitoba - 2011-2012 to 2015-2016 available from the LINKS section below (internal access only).

    Additional Historical CPWC / CSHS Values

    This concept contains a link to an INTERNAL ACCESS ONLY document that lists yearly CPWC / CSHS values covering the period 1995-96 to 2015-16 fiscal years. This list compiles all of the CPWC / CSHS values that are presented in this concept into a single list. Please see the Yearly CPWC / CSHS Values document in the LINKS section below (INTERNAL ACCESS ONLY).
Cautions / Limitations
    The following cautions and limitations should be considered when working with the CPWC data:

    • Due to increased costs (e.g.: inflation or changes in delivery practices) and changes in the hospital case-mix over time, the CPWC will most likely be different each year.

    • CPWC values for the same year, developed from hospital abstract and/or financial data that is available in subsequent years, may also create different values for the CPWC over time. This may be due to additional information being available at the time data is collected and the resulting costs / RIW values that are calculated.

    • The inclusion of different types of expenditure data in the total hospital costs is dependent on the individual research project. For example, the CPWC may include a share of the administrative and support services costs (e.g., hospital administration, information technology, human resources, physical plant) that can be attributed to inpatients.

    • Medical services (physician claims) during the hospital stay are not included in hospital costs, but could be added if required by the research. The fees that are paid out to physicians over the same period as the hospital admission could be determined and added to the total hospital costs to arrive at an adjusted total expenditure for services. If you want to add physician costs in to a particular hospital stay, then some merging of physician claims with hospital claims based on PHIN and date of service is necessary prior to the calculation of total costs.

    • It may be important to apply the CPWC value specific to each year when computing costs, but this is dependent on the purpose of the research and the methodology that is used. In most cases, CIHI and MCHP do not recommend comparing the CPWC yearly values over time, because different methodologies for CMG assignments and calculation of hospital expenditure data have been used.

Related concepts 

Related terms 

References 

  • Finlayson G, Jacobs P, Watson D, Bogdanovic B. A Comparison of Preliminary and Adjusted Cost per Weighted Case Determinations for Manitoba Hospitals: Impact for Evaluation and Report Cards. Winnipeg, MB: Manitoba Centre for Health Policy, 2001. [Report] [Summary] (View)
  • Finlayson G, Nowicki D, Roos NP, Shanahan M, Black C. Hospital Case-Mix Costing Project: Using the Manitoba Management Information System: A first step. Winnipeg, MB: Manitoba Centre for Health Policy and Evaluation, 1999. [Report] [Summary] (View)
  • Finlayson G, Reimer J, Dahl M, Stargardter M, McGowan K. The Direct Cost of Hospitalizations in Manitoba, 2005/06. Winnipeg, MB: Manitoba Centre for Health Policy, 2009. [Report] [Summary] [Supplements/Data extras] (View)
  • Finlayson G, Roos NP, Jacobs P, Watson D. Using the Manitoba Hospital Management Information System: Comparing Average Cost Per Weighted Case and Financial Ratios of Manitoba Hospitals. The Next Step. Winnipeg, MB: Manitoba Centre for Health Policy and Evaluation, 2001. [Report] [Summary] (View)
  • Lloyd M, Shanahan M, Brownell M, Roos NP. Hospital Case Mix Costing Project 1991/92: Methodological Appendix. Winnipeg, MB: Manitoba Centre for Health Policy and Evaluation, 1995. [Report] [Summary] (View)
  • Martens P, Nickel N, Forget E, Lix L, Turner D, Prior H, Walld R, Soodeen RA, Rajotte L, Ekuma O. The Cost of Smoking: A Manitoba Study. Winnipeg, MB: Manitoba Centre for Health Policy, 2015. [Report] [Summary] [Errata] (View)
  • Mustard CA, Derksen S. A Needs-Based Funding Methodology for Regional Health Authorities: A Proposed Framework. Winnipeg, MB: Manitoba Centre for Health Policy and Evaluation, 1997. [Report] [Summary] (View)
  • Shanahan M, Lloyd M, Roos NP, Brownell M. Hospital Case Mix Costing Project 1991/92. Winnipeg, MB: Manitoba Centre for Health Policy and Evaluation, 1994. [Report] (View)

Keywords 

  • costing methods
  • length of stay
  • physician claims
  • resource intensity weights


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