Difference between expenditure and revenue in health system, Activity based funding and funding allocation in NSW Health Systems, Case mix and AR-DRG system of classification

This article explains the difference between expenditure and revenue in the health system, activity based funding and funding allocation in the NSW Health Systems, and case mix and AR-DRG system of classification. It also discusses how these concepts impact the healthcare system.

HEALTH FINANCIAL MANAGEMENT
Question 1
Explain the difference between expenditure and revenue in the health system
Answer 1
Like any other organisation, a health care system has also its revenue and expenses which
impact the quality of services offered and the survival of the system and its units. For a
particular organisation like hospital , research centre which are part of health care the
following revenue and expenditure shall arise:-
(a) Revenue which is income for health system comes from Insurance Billing, Patients care
services, State and Central aids; billing of patients when no amount is received form
government or private insurance body;
(b) Research and Teaching Bodies under the health care system through fees ,state central
and private aids; (Hearst Newspapers, LLC, 2018)
(c) The expenditure which is an outflow for the system includes payment of wages and
salaries to staffs, doctors and other personnel;
(d) Cost associated with testing and day to day management activity;
(e) Cost for violation of legal laws of environment and consequential penalty;
(f) Expenses w.r.t supplies and capital expenses.
Question 2
What is activity based funding and how funding allocation is determined in the NSW Health
Systems?
Answer 2
Activity based Funding is a technique of funding healthcare under which the providers are
allocated funds on the basis of type and volume of service they offer and the complexity of
treatment of the patient involved. (Activity-based funding) It has become an international
norm for funding care provided by hospital and is also known as patient focussed funding.
Under, the NSW Health system, Activity Based funding (an approach based on unit price for
the number and types of service provided) allocation is based on the following elements:
(a) Targets : It shall mean to specify level of activity which needs to be undertaken by each
Local Health Districts and Speciality Networks;
(b) A classification system for grouping activity into classes with similar clinical profile and
use of resource; (Finance & Performance Management, 2014)
(c) Weighing the activity in order to ascertain the relative weight of resourced used in the
treatment;
(d) Price at which the activity which is weighed shall be paid.

Question 3
Describe Case mix and Australian Refined Diagnostic Related Group (AR-DRG) system of
classification?
Answer 3
Case mix also known as patient mix. It is a term used in health care system and used as a
synonym for cohort. Under such mix a group of statistically related patients are created. For
instance, case mix of patients below the age of 50 who are suffering from cancer and is also
undergoing radiation treatment may be created.
Further, at local level case mix may consist of an individual consultant, a specific speciality
or a particular unit. On a wider range case mix of hospital, region and even countries may be
created.
Australian Refined Diagnostic Related Group System is a patient classification system which
provides clinically relevant way of sorting the types of patient which are treated in a hospital
and resources used for treatment of patients. The system comprise 700 patient classification
or categorisation with each patient is being categorised on the basis of diagnoses, performing
surgical procedures, and other data that has been collected routinely. (AR-DRG classification
system)
The system enables hospital procedures to be measured by linking characteristics of a
treatment of patient with the services that have been rendered. This standard is of very high
quality and is prevalent in several countries like Middle East, Europe and Asia.
References:
Activity-based funding. (n.d.). Retrieved September 19, 2018, from healthcarefunding.ca:
http://healthcarefunding.ca/key-issues/activity-based-funding/
AR-DRG classification system. (n.d.). Retrieved September 19, 2018, from www.ihpa.gov.au:
https://www.ihpa.gov.au/what-we-do/products/AR-DRG-classification-system
Finance & Performance Management. (2014, july). Retrieved September 19, 2018, from
www.health.nsw.gov.au:
https://www.health.nsw.gov.au/policies/manuals/Documents/corporate-governance-
compendium-section7.pdf
Hearst Newspapers, LLC. (2018). Categories of Expenses & Revenues in the Hospital Business Setting.
Retrieved September 19, 2018, from smallbusiness.chron.com:
https://smallbusiness.chron.com/categories-expenses-revenues-hospital-business-setting-
4882.html