Concept: Hospital Costing: Using the National Health Expenditure (NHEX) Database

Introduction

This concept describes a hospital costing methodology using data from the National Health Expenditure (NHEX) database. NOTE: 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.

The Canadian Institute for Health Information (CIHI) publishes annual data from the National Health Expenditure (NHEX) database. NHEX "provides an overview of all health spending in Canada, by spending category and source of funding." The NHEX data is available on the CIHI Web Site at: https://www.cihi.ca/en/spending-and-health-workforce/spending/health-spending-data/national-health-expenditure-database - accessed October 22, 2015. Information is reported at the provincial and territorial levels, and for Canada.

CIHI's NHEX Trends report divides the total health expenditure by use of funds into nine major categories:


• capital,
  
• administration,
  
• public health,
  
• other health/spending,
  
• other institutions,
  
• other professionals,
  
• physicians,
  
• drugs, and
  
• hospitals.

The NHEX measure is a gross measure of expenditure and includes all costs associated with hospitals. Some of these costs may not be directly attributable to inpatients. CIHI reports only the aggregate hospital costs so it is not possible to calculate the percentage of this category made up of these other types of costs - for example, hospitals may provide services to out-patients, conduct research and offer health professional training. Other expenditures may be reported inconsistently such as "capital-related" expenditures (mortgages, long term leases, interest on long term debt) or costs for physicians who provide services in hospitals, making inter-facility or inter-provincial comparisons difficult.

Manitoba researchers have taken the value of the total health expenditures in the hospital category for the province as a measure of the total cost of inpatient care, and using a top-down approach to costing, combined with the relative value of cases provided by the Case-Mix Group (CMG™) and Day Procedure Group (DPG™) patient classification systems, developed an estimate for hospital costs.

Data Sources

Expenditure data for this project came from the National Health Expenditure Trends, 1975-2007 report. Table D.3.7.1 in the 2007 NHEX report is titled Public Sector Health Expenditure, by Use of Funds, Manitoba 1975 to 2007 - Current Dollars. The column heading Hospitals contains the reported yearly public sector expenditures by Manitoba hospitals.

This document is no longer available online. A more recent version of the report, National Health Expenditure Trends, 1975-2013, can be downloaded from the CIHI web site, available at: https://secure.cihi.ca/free_products/3.0_TotalHealthExpenditureFundsEN.pdf .

Hospital inpatient data came from the Hospital Abstracts Data.

Methodology

Following the method of hospital case-mix costing for hospital inpatient care that is described in the Costing Methods: An Overview of Costing Health Services in Manitoba concept, a Cost Per Weighted Case (CPWC) can be developed from the NHEX costing data. In summary, the total dollar amount is divided by the total sum of all relative values weights for all inpatient and day surgery cases, to arrive at a CPWC. The formula is presented below:

CPWC (provincial) = (Total provincial $) / (Sum of all RIW™ and DPG™ weights)

The resulting CPWC can then be applied to individual hospital cases by multiplying the CPWC by the Resource Intensity Weight (RIW™) or DPG™ weight, to estimate the average cost of a particular case. Costs can also be aggregated over individuals to get a person-based measure of total hospital costs.

Cautions / Limitations

Although this approach is less time consuming than a detailed method of calculating direct hospital costs, this measure is cruder and includes costs not necessarily directly related to inpatient care. However, the NHEX measure can be used when more specific information regarding the direct costs of inpatient care is not available or the particular research question does not require a precise measure of inpatient costs.

The NHEX report provides little detail on costs. Given the lack of detail provided about what goes into the total Hospitals dollar amounts, it is difficult to compare this approach with other approaches that are able to identify specific cost categories. However, specifically excluded from the NHEX Hospitals category are capital costs and health research (captured under the Capital and Other Health Spending categories, respectively). While necessary for the long-term operation of a hospital, these types of costs are not directly related to an individual stay, and thus are not included in this approach.