1. 21/02/2015
1
Patient Cost Analysis
Shiquan REN, PhD
http://lnkd.in/bSEMhzb
ctusren@outlook.com
Contents
• IHPA Classification and Pricing
• Distribution of Cost
• Cost drivers
• Nonlinear regression of Cost
• The other models of Cost
• Future modelling of Cost
• Conclusion

2. 21/02/2015
2
My understanding of IHPA Classifications
There are six patient service categories in Australia
currently which have classifications being used
nationally or in development stage.
• Admitted acute care
• Subacute and non-acute care
• Non-admitted care
• Mental health care
• Emergency care
• Teaching, training and research
My understanding of IHPA Pricing
• Annual National Efficient Price (NEP) and National
Efficient Cost (NEC)
• Cost and Pricing models
• To determine the NEP, IHPA first develops a cost model
based on cost and activity data from three years prior
• Price weights and adjustments are combined to define
the National Weighted Activity Unit (NWAU)
• The price of a hospital service can then be determined
by multiplying the NEP, which is a reference cost, by the
number of NWAU.

3. 21/02/2015
3
My Experience of Cost Analysis
• Data source - simulated data
• Analysis objectives - set up price
• Analysis methods – based on nonlinear
regression
• Expected outcomes - set up a reasonable price
Understand Data Distribution

4. 21/02/2015
4
Cost drivers
• Remoteness
• Age
• Length of stay
• Disease complexity (DRG used as
classification)
• …
Outlier Detection: Box Plot of Cost by
Remoteness

5. 21/02/2015
5
Data Exploration: Cost vs Age
Data Association: Cost vs Length of Stay

6. 21/02/2015
6
Scatter plot of log(Cost) vs Age
Estimated Association of Cost vs Age:
Nonlinear Regression of Cost

7. 21/02/2015
7
Scatter Plot of log(Cost) vs Length of Stay
Estimated Association of Cost vs Length of
Stay: Nonlinear Regression of Cost

8. 21/02/2015
8
Generalized Additive Models of Cost
The Simulated goodness of fit
Such as R^2=0.86, MAPE=0.25

9. 21/02/2015
9
The Other Models of Cost
(Ren et al, 2006)
• Two-part Models - Parametric
• Mixed Models - Parametric
• Generalized Additive Models (GAM) -
Semiparametric
• Markov Chain Monte Carlo (MCMC) -
Bayesian
Extending Regression Models
Generalized Linear Model Linear Model
Additive ModelGeneralized Additive Model
Mixed Model Generalized Additive Mixed Model

10. 21/02/2015
10
New possible modelling of Cost for hospitals
• Generalized Additive Mixed Models (GAMM) - Semiparametric
• My own temporal (daily, weekly, monthly) modelling - Nonparametric
Outliers?
Interpolating Missing Data
Forecast
Conclusion
• Data clearance – Outliers
• Cost – Log-normal Distribution
• Cost drivers – Remoteness, Age, Length of Stay
and Disease complexity (DRG used as
classification)
• Cost models – MCMC, GAM, Two-part models
and Mixed models
• New cost models – GAMM, Monthly modelling,
…