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Casemix Model: A Case Study of Australia

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Casemix is a common term endemic to the highly established healthcare systems operational in Australia, Netherlands, Austria, Sweden, Ireland, U.S. and Denmark. It also refers to a special kind of a billing system adopted by the health care providers such as hospitals or units of the hospitals to charge classified cohorts of patients based on the “cost per item” criterion. In Australia, for instance, the concept of casemix is used as a funding model in the public health care services.  According to Tabbner et al. (2008), casemix is defined as a scientific system used to specify cases in which health care services is provided to a particular diagnostic group of patients.  Casemix method of classification is also reported to have gained substantial grounds and tremendous popularity in countries like Netherlands, Austria, U.S., Denmark, Ireland, and Sweden (France, 2011). It is most important, however, to note that the initiative helps policy makers in various countries to know the effectiveness of health care service delivery to the public. Australian casemix model commonly known as Diagnosis Related group (DRGs) has been very beneficial to the Australian healthcare system. This article seeks to give the background of the Australian casemix, how it functions, its benefits and demerits.

Background Information

Casemix is used as a cost control strategy, especially in the Australian public hospitals (Keleher, 2009). It is utilized as a measure of the production process within the healthcare system through putting patients into categories according to the nature of health care they are likely to be dispensed. The Australian casemix classification, commonly known as Australian Refined Diagnosis Related Groups (AR-DRGs), was adopted from the DRGs applied by the U.S. healthcare system (Keleher, 2009). From the time of its adoption to date, Australian casemix has undergone through a continuous wave of transformation in a bid to meet the increased demand of healthcare services by the Australian people- it is in its fifth version currently (Keleher, 2009). The first version of the Australian casemix is dubbed AN-DRG and it is constituted of 527 diagnostic groups, which increased to 646 diagnostic groups in the fourth version (Keleher, 2009).

Initially, the Australian government experienced a rapid growth in the total expenditure in public hospitals. An increased pressure from the Commonwealth to contain the high cost in healthcare provision left the Australian government with no choice but to look for a better method of resource allocation (Palmer & Short, 2010).  The uniform allocation of resources to all hospitals seemed bias to some hospitals handling patients with chronic medical conditions and severe cases, which turn out to be very expensive. It has been widely reported that some hospitals with specialized facilities and medical experts tend to handle patients with acute cases than others. However, the claims could not be ascertained because there was no information backing up the type of services offered in the hospitals (Palmer & Short, 2010). Therefore, the need to resolve these conflicts led to the adoption of Diagnosis Related Groups (DRGs) in various Australian States.   

Further, DRGs are prospective payment system in which the hospital is prepaid an amount calculated on the average cost of health services for a number of patients with a particular diagnosis (Keleher, 2009). The DRGs are classified according to sex, age, co-morbidities and complications and each group is assigned a code that represents the cost of treatment (Keleher, 2009). Patients with complications are treated as inpatients and are likely to spend a longer time in the hospital resulting into a higher cost of healthcare services (Keleher, 2009). The government then reimburses these hospitals based on the inpatient treatments.

It is worthy of comment that there are so many benefits accrued from the casemix system within the Australian healthcare system though. Before the adoption of casemix systems, the health industry was using the traditional ways of determining the healthcare costs such as counting the number of days a patient spends on a hospital bed, diagnostic tools used on the patient and medical prescriptions. The traditional methods made it very difficult to determine the efficiency of the services offered at the hospitals. As such, it was equally difficult for the clinician to identify the variation in diagnosis. Therefore, a desire to see a healthcare service provision with a lot of efficiency drove the Australian government to adopt the casemix system similar to that of the U.S. healthcare system- a model which is still used by various Australian states such Victoria, South Australia, and Queensland.

Victoria adopted the casemix system in 1993 to fund acute care hospitals. Casemix is used to monitor, manage and administer the funding of healthcare provided by public hospitals (Palmer & Short, 2010). From 1993 to date, the budget allocation in Victoria has been based on the inpatient casemix of the hospitals and grants to cover outpatients, teaching and research activities (Palmer & Short, 2010).  Other states like South Australia introduced the case mix system in 1994 for the purposes of improving the performance of public hospitals in regard to the provision of quality health care services to the ever swelling populations of Australians seeking medical attention in the public facilities. Nevertheless, Queensland and other Australian states are seen to have adopted casemix to varying degrees compared to how it in use across the Federal states of the U.S.

Benefits and Pit-falls of Casemix System

First and foremost, casemix system has been fully credited for the improved efficiency in healthcare facilities as far as service delivery is concerned. It encourages clinicians to carry out their duties within the average cost structure, which is seen as the best-measured way of foreseeing amount of money that will be spent (Cleverley, Cleverley & Song, 2011).  Secondly, it provides a workable tool within the health care system through which medical cases and procedures of the hospitals are simplified contrary to the traditional complex treatment protocols. Without which the performance of hospitals would be undermined as result of the traditional ways of determining the cost of healthcare services. 

In the economic sense, the casemix has greatly helped in the allocation of resources to various public hospitals and the changing of services based on tangible and measurable outcomes. Different hospitals use different amount of resources; therefore, casemix system helps in the classification of hospitals on what they do and the amount of resources they need. The greatest achievement of all, it enables hospital accountants and superintendants to provide detailed financial information such as cost of each product used during the care for patients (Keleher et al., 2009).  It has led to better information system, data management and the capacity to grade hospitals. Finally, casemix system initiates competition among hospitals resulting into an improved quality of services offered in the hospitals.  Finally, casemix system helps hospitals in knowing the number of staff they need for an efficient healthcare service provision.  

However, casemix also portrays its dark side in the Australian healthcare system. The incentive set by the DRG system to abridge the number of days that a patient takes in a hospital is very harmful (Busse et al., 2011). Patients receiving intensive cares are likely to be affected because the duration set by the DRG system may not be enough to receive all the prescribed treatment.  Moreover, the coding process poses a problem to the hospital management (Busse et al., 2011). The DRG prices cannot be reliably calculated for some diagnosis; for instance, cases of multiple trauma care. In addition, some diagnosis such as psychiatric care may turn out to be inaccurate predictor for the cost of care leading to hospitals offering services at a low cost for such patients (Trauer, 2010).  

Conclusion and Recommendation

Casemix system refers to the use of classification that puts together patient care episodes into clinically coherent and resource homogeneous groups. It also considered as an information tool that allows hospital policy makers to bring out the nature of healthcare delivery and the performance of the hospital. Australian government saw its benefits and adopted it from U.S. healthcare system- commonly known as DRG. In Victoria for example, casemix based funding model is used to reimburse the cost of patient care.

After the adoption of DRGs, the Australian healthcare service provision has increased tremendously. Transparency, efficiency and quality in hospitals have gone up because of the adoption casemix system in some states such Victoria and South Australia. Therefore, Australian government should encourage the adoption of casemix system by all the states and monitor its full implementation. Although, some states like Victoria and South Australia use it, others such as Queensland use it minimally.

Casemix system was adopted to ensure that acute patients get proper medical care at a standard cost and the government mostly reimburses cost of acute treatments. However, the government does little to address the rising number of outpatient services and non-acute patients fully. A good number of hospitals devote hospital resources for outpatient, accident and emergency cases. Therefore, there is a need to for better methods of counting and classifying these patients for funding purposes. 

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