HOSPITAL COSTS AND INFORMATION THEORY CASE MIX INDEXES: RESULTS FOR QUEENSLAND

Abstract

The use of information theory as a basis for the construction of scalar case mix indexes for hospitals is well established but to date no results arising from an application of these indexes to Australian hospitals have been published. This paper provides a simplified explanation of the information theory approach and constructs the indexes for Queensland public hospitals. The usefulness of the indexes is then demonstrated with two applications. First, they are used to explain the variation in average cost per case between the hospitals in the study and are found to account for a small but statistically significant amount of such variation. Second, they are employed to provide estimates of state mean average and marginal costs by case type in Queensland. The resulting estimates are all both positive and plausible, characteristics not commonly found in estimates obtained using other techniques.