Length of Stay

Hospital Performance: Length of Stay
Hospital Performance:
Length of Stay
February 2016
Victorian Auditor-General’s Report February 2016 2015–16:22

2015–16:22
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VICTORIA
Victorian
Auditor-General
Hospital Performance:
Length of Stay
Ordered to be published
VICTORIAN
GOVERNMENT PRINTER
February 2016
PP No 128, Session 2014–16

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The Hon Bruce Atkinson MLC The Hon Telmo Languiller MP
President Speaker
Legislative Council Legislative Assembly
Parliament House Parliament House
Melbourne Melbourne
Dear Presiding Officers
Under the provisions of section 16AB of the Audit Act 1994, I transmit my report on the
audit Hospital Performance: Length of Stay.
Yours faithfully
Dr Peter Frost
Acting Auditor-General
10 February 2016
Victorian Auditor-General’s Report Hospital Performance: Length of Stay iii

Contents
Auditor-General's comments .................................................................... vii
Audit summary .......................................................................................... ix

Conclusion ................................................................................................................x
Findings ....................................................................................................................x
Recommendations ................................................................................................... xi
Submissions and comments received .................................................................... xii
1. Background .......................................................................................... 1
1.1 Introduction ..................................................................................................... 1
1.2 Funding and performance monitoring ............................................................. 4
1.3 Previous audit ................................................................................................. 5
1.4 Audit objectives and scope ............................................................................. 5
1.5 Audit method and cost .................................................................................... 5
1.6 Structure of the report ..................................................................................... 6
2. Variation in length of stay ....................................................................... 7

2.1 Introduction ..................................................................................................... 8
2.2 Conclusion ...................................................................................................... 8
2.3 Unexplained LOS variation between hospitals across all clinical activity ........ 8
2.4 Unexplained LOS variation between hospital peer groups ............................ 11
2.5 Unexplained LOS variation within hospitals .................................................. 15
3. Responding to length of stay variation ................................................. 21

3.1 Introduction ................................................................................................... 22
3.2 Conclusion .................................................................................................... 22
3.3 LOS variation factors within and beyond the control of hospitals .................. 22
3.4 Hospital governance of LOS performance .................................................... 26
3.5 Assisting hospitals to reduce inefficient LOS ................................................ 29
Appendix A. Audit methodology ............................................................... 33
Appendix B. Audit Act 1994 section 16—submissions and comments ...... 37
Victorian Auditor-General’s Report Hospital Performance: Length of Stay v

Auditor-General’s comments
This audit is the second in a series of performance audits examining hospital
efficiency and has again clearly identified a number of opportunities for the
Department of Health & Human Services (DHHS) and hospital management to
collectively improve the way hospitals operate.
It has identified widespread variation in acute patient length of stay (LOS) between
many of Victoria's largest public hospitals. This indicates inefficiencies—lost
opportunities to free up hospital beds, to treat more patients and to reduce
significant unnecessary costs. Even after adjusting for patient characteristics and
peer-grouping hospitals, almost 145 000 extra bed days could be made available
and $125 million per year could be directed to other services.
The reasons for differences in LOS performance, even among similar hospitals,
vary and are not always captured by performance data. However, public hospitals
can improve LOS performance by implementing better practice around patient
management, from admission through to discharge.
The data used in this audit comes from DHHS and yet it is not using it to identify
what is significant variation in hospital efficiency. As the health system manager,
DHHS should use its data and—in collaboration with hospital management—
actively seek to understand, explain and reduce LOS variances.
Audit team
Michael Herbert Dr Peter Frost
Engagement leader Acting Auditor-General
Janet Wheeler February 2016
Analyst
Jason Cullen
Analyst
Engagement Quality
Control Reviewer
Dallas Mischkulnig
Victorian Auditor-General’s Report Hospital Performance: Length of Stay vii

Audit summary
Hospital expenditure is the largest single contributor to the growth in national and
state public spending. Of all patients admitted to hospitals, those needing acute
care consume the most resources. Acute care addresses health problems that
require prompt action, where a patient receives a diagnosis and intensive
short-term treatment or surgery for a severe injury, illness or urgent medical
condition.
Acute patient length of stay (LOS) is a well-accepted indicator of hospital efficiency.

It is a key driver of hospital costs and affects the capacity of the health system. The
Council of Australian Governments (COAG) uses LOS as one of the indicators in
its 2011 Performance and Accountability Framework.
A shorter stay is more efficient, as it makes beds available more quickly, reducing
the cost per patient and enabling care for more patients. However, stays that are
too short may reduce the quality of care and diminish patient outcomes. We know
from the literature, including a recent national report, that there is substantial
variation in LOS, but the reasons for this variation are not well understood. Some
of the identified reasons are beyond the control of a hospital—such as a patient’s
medical condition and age. We also know from recent Australian research that the
arrival mode (emergency or planned) and discharge destination (such as a
residential aged care facility) influence LOS.
Although longer hospital stays can be due to factors outside a hospital’s control,
there are opportunities to increase efficiency by reducing LOS, provided patients
are not put at risk by being sent home too soon. A primary objective of the
Department of Health & Human Services (DHHS), as the health system manager,
is to ‘improve the efficiency of healthcare services for Victorians’.
This audit examined the relative efficiency of LOS at public hospitals by assessing
whether:
• DHHS actively supports hospitals to achieve efficient acute patient LOS
• public hospitals manage acute patient LOS efficiently.
The audit focuses on the variation in LOS by analysing DHHS data from 21 major
metropolitan and regional hospitals in Victoria. Variation was initially assessed for
all hospitals stays and then we focused on eight clinical treatment groups
(Australian Refined Diagnosis Related Groups). In addition, a survey was sent to
each hospital to determine their reasons for better and poorer LOS performance.
Victorian Auditor-General’s Report Hospital Performance: Length of Stay ix

Audit summary
Conclusions
There is widespread variation in LOS between Victoria's large public hospitals. This
indicates inefficiencies—lost opportunities to free up hospital beds, to treat more
patients and to reduce significant unnecessary costs.
The reasons for differences in LOS performance, even among similar hospitals,
vary and are not always captured by performance data. However, public hospitals
can improve LOS performance by implementing better practice around patient
management, from admission through to discharge. Public hospitals can also
improve their efficiency by benchmarking performance.
Weaknesses with the way that DHHS performs its role as the health system
manager have resulted in further lost opportunities for hospitals to improve their
LOS performance.
DHHS funds programs that demonstrably improve LOS efficiency, but it has not
actively promoted them to all hospitals. It has not evaluated other programs to
identify which of these initiatives can assist hospitals to improve LOS efficiency. In
addition, DHHS does not provide hospitals with sufficient information to benchmark
their performance. It is incumbent on DHHS, as the health system manager and
custodian of performance data, to collaborate with hospitals to understand, explain
and reduce LOS variances.
This audit has identified a number of clear opportunities for DHHS and hospital
management to collectively improve hospital efficiency.
Findings
Using a relative stay index (RSI)—which allows hospitals’ LOS to be compared—
DHHS data shows that there is 29 per cent variation in LOS between the
21 Victorian hospitals examined by this audit.
This variation represents a significant lost opportunity in both bed availability and
cost. If all hospitals managed LOS as efficiently as the highest-performing
hospitals, almost 145 000 extra bed days could be made available and almost
$125 million per year could be directed to other services. This is equivalent to a
396-bed hospital operating at 100 per cent capacity throughout the year—more
than all the beds available collectively at two of the major regional hospitals in our
sample, the Shepparton and Latrobe Regional hospitals.
x Hospital Performance: Length of Stay Victorian Auditor-General’s Report

Audit summary
Hospitals report a number of common factors influencing LOS, either negatively or

positively, for the eight high-volume treatment groups we examined. Factors
include:
• intensive case management, particularly pre-admission assessments and
targeted admission, and discharge planning using risk assessments
• continuing care in the community, delivered through nurse-led
multidisciplinary teams and through the DHHS-funded Hospital Admission
Risk Program
• scheduling of diagnostic tests and referrals
• access to sub-acute facilities such as rehabilitation, residential aged care and
palliative care facilities.
The negative effect of these factors on LOS performance can all be reduced or
eliminated by hospital management or DHHS.
DHHS does not provide hospitals with comparative information so that they can
meaningfully benchmark LOS performance. A lack of a single approach for
hospitals to readily benchmark their performance against other hospitals means
that it is difficult for them to identify how they could improve.
All hospitals monitor and report LOS performance to their chief executive officer
(CEO) or board, who are accountable for a hospital’s performance. However, the
frequency of this reporting differs widely. Across the 21 hospitals, there is a clear
trend—hospitals that report to their CEOs or boards more frequently tend to have
better LOS performance.
Although DHHS has assisted hospitals to manage LOS by funding targeted

programs, it could be doing more to assist health services to improve LOS
efficiency.
Recommendations
Number Recommendation Page
1. That the Department of Health & Human Services regularly 20
analyses its data and seeks reasons from hospitals for
significant length of stay variation.
2. That public hospitals benchmark their length of stay 20
performance and explain to the Department of Health &
Human Services reasons for significant length of stay
variation.
Victorian Auditor-General’s Report Hospital Performance: Length of Stay xi

Audit summary
Recommendations – continued
Number Recommendation Page
3. That the Department of Health & Human Services: 31
• provides and promotes annual benchmarking
information for length of stay
• reviews sub-acute capacity across the health system to
identify and address limitations
• funds and promotes programs, based on identified
reasons for shorter and longer length of stay, to assist
hospitals to improve length of stay efficiency
• evaluates the effectiveness of targeted programs and
better practice guidance.
4. That public hospitals: 31
• report on length of stay performance frequently to their
chief executive officer and board
• routinely identify reasons for shorter and longer length of
stay
• implement programs to increase length of stay
efficiency.
Submissions and comments received

We have professionally engaged with the Department of Health & Human Services
throughout the course of the audit. In accordance with section 16(3) of the Audit
Act 1994 we provided a copy of this report, or relevant extracts to the Department
of Health & Human Services, and the 17 surveyed health services and requested
their submissions or comments.
We have considered those views in reaching our audit conclusions and have
represented them to the extent relevant and warranted. Their full section 16(3)
submissions and comments are included in Appendix B.
xii Hospital Performance: Length of Stay Victorian Auditor-General’s Report

11.1
Background
Introduction
Hospital expenditure is the largest single contributor to the growth in national and state
public spending. In Victoria, funding for hospital services and assets was just over
$10.5 billion in 2013–14. This makes up around three-quarters—73 per cent—of the
Department of Health & Human Services (DHHS) budget and 20 per cent of the
$50.3 billion State Budget. An ageing and increasing population and increasing rates of
chronic diseases are contributing to growing demand for hospital beds and are
intensifying pressure on the health budget.
Given the size of health care costs and the constrained medium-term outlook for
government budgets in general, it is more important than ever that hospitals operate
efficiently while still providing high quality care.
Acute care
Acute care addresses health problems that require prompt action, where a patient
receives a diagnosis and intensive short-term treatment or surgery for a severe injury,
illness or urgent medical condition. Hospitals generally provide acute care in
emergency departments and through both planned and unplanned admissions. Acute
patients should be discharged as soon as they are considered well enough, while
maintaining appropriate standards of care. Hospitals also provide lower-intensity
sub-acute care, which includes rehabilitation and palliative care.
Acute patient length of stay

Acute patient length of stay (LOS) is the number of days an acute patient spends in
hospital. LOS is a well-accepted indicator of hospital efficiency. The Council of
Australian Governments (COAG) uses LOS as one of the indicators in its Performance
and Accountability Framework, which is endorsed by all Australian governments.
LOS is a key driver of hospital costs and affects the capacity of the health system.
While LOS is not the only indicator of efficiency, it is an important one. Reducing the
time a patient stays in hospital, within clinically appropriate time frames, is more
efficient, as it makes beds available for other patients and reduces the cost per patient.
A hospital stay that is too short may affect the quality of care and health outcomes for
patients—however, a prolonged hospital stay can increase the risk of complications,
worsen the patient’s quality of life and use valuable resources. It is important for
hospitals to get the balance right.
Victorian Auditor-General’s Report Hospital Performance: Length of Stay 1

Background
In 2013–14, there were 641 497 overnight stays, also called episodes of care, in public
hospitals in Victoria. These patients used a total of 11 314 hospital beds and had an
average LOS of 5.9 days, which is slightly above the national average of 5.5 days. As
shown in Figure 1A, however, when all episodes of care are considered, including
single day and overnight stays, Victoria was below the national average.
Figure 1A
Average length of stay in days at Australian public hospitals, 2013–14
Days
7
0
NSW VIC QLD WA SA TAS ACT NT
Overnight episodes All episodes
National average National average
Source: Victorian Auditor-General's Office based on information from the Australian Institute of
Health and Welfare Admitted patient care 2013–14: Australian Hospital Statistics, page 30.
Average length of stay

The average length of stay (ALOS) is the total number of days patients spent in
hospital divided by the number of stays, excluding patients who are admitted and
discharged on the same day. Research has shown substantial variation in ALOS
between Australian hospitals. For some conditions, ALOS at some major metropolitan
hospitals was up to four times longer than at similar hospitals, according to the
National Health Performance Authority report Hospital Performance: Length of stay in
public hospitals in 2011–12.
Relative stay index

A relative stay index (RSI) allows hospitals’ LOS to be compared and can indicate how
efficiently each hospital manages LOS. The Australian Institute of Health and Welfare
and DHHS have developed an RSI tool that compares actual LOS for each patient with
the expected LOS for each patient. The average RSI value is 100 per cent—RSI
values above this indicate longer LOS and potential inefficiency, while RSI values
below this indicate shorter LOS and relative efficiency.
2 Hospital Performance: Length of Stay Victorian Auditor-General’s Report

Background
To enable fair comparisons, the RSI can adjust for patient characteristics and other
factors outside of a hospital's control which may influence LOS. These include:
• specific clinical treatment groups, called Australian Refined Diagnosis Related
Groups (AR-DRG)
• patient age
• patient complexity, driven by the presence of multiple medical conditions
• discharge destination—to home or other destinations, such as an aged care
facility
• arrival mode—emergency or planned admission
• arrival source—such as from another hospital.
Australian Refined Diagnosis Related Groups

AR-DRG is a national patient classification system used to group similar patients
together. Examples of different AR-DRGs include hip replacements and heart failures.
This system provides a more clinically meaningful way of relating patient groups to the
resources the hospital requires to provide treatment.
Within the AR-DRG classification system, there are adjacent and related treatment
groups. Patients with the same clinical condition can be assigned to different groups
because of different levels of complexity. This can then drive different LOS and use
different levels of hospital resources. AR-DRG classifications may appear as pairs—for
example, a hip replacement with complications and a hip replacement without
complications.
Hospital peer groups

Classifying hospitals into peer groups enables fairer comparisons of LOS performance.
Hospital peer groups for this audit are based primarily on DHHS categories, including
tertiary, major metropolitan and major regional groups. Tertiary hospitals are among the
largest metropolitan hospitals and often offer the broadest range of acute care. In
addition, tertiary hospitals are statewide specialist referral centres for specific
conditions—for example, Monash Medical Centre Clayton specialises in heart
conditions.
1.1.1 Roles and responsibilities

Department of Health & Human Services
DHHS is the health system manager. It is responsible for setting strategic priorities,
implementing policy, monitoring the performance of health services and providing
overall system-wide guidance and funding.
A primary objective of DHHS is to ‘improve the efficiency of healthcare services for

Victorians’. Hospital performance, measured using LOS, is central to the performance
of the health system and the provision of good health outcomes.

Background
Health services and public hospitals

Under the Victorian Government’s devolved governance system, public hospitals are
largely managed by health services, which are incorporated public statutory authorities
established under the Health Services Act 1988. Health services are responsible for
providing acute hospital care and a range of other services, including sub-acute care.
One health service can manage multiple hospitals. For the purposes of this audit, each
hospital is identified by its name rather than the health service that manages it.
This model makes the board of each health service responsible for its governance, and
for actively managing and overseeing LOS performance.
1.2 Funding and performance monitoring

Activity-based funding
Activity-based funding (ABF) is a system that Australian governments use to fund
public hospitals. The government sets a price for each patient admitted—which is
based on the approximate costs of treating each case—and payment is made for each
patient hospitals treat. ABF takes into account that some patients are more
complicated to treat than others.
This funding model is designed to drive efficiency by encouraging the most appropriate
method of care while reducing the cost of treating patients. ABF provides hospitals with
an incentive to identify inefficient practices and reduce unnecessary costs, as they are
able to keep any financial surplus for other purposes.
Performance monitoring
DHHS, on behalf of the Minister for Health, makes annual agreements with each
health service, which are known as Statements of Priorities (SoP). SoPs set out the
expected levels of activity and performance that are required to receive funding. They
also include expectations about administration and clinical conduct.
DHHS’s High-performing health services: Victorian health services performance

monitoring framework 2014–15 has specific performance measures and outlines the
mechanisms it uses to monitor health service performance against SoP targets. There
are no LOS performance measures—although one measure relates to the timely
management of patients in the emergency department.
This performance-monitoring framework is the key source of information about how

DHHS monitors the performance of health services and how health services and the
department work together to improve future performance.

Background
1.3 Previous audit

Our 2008 report Managing Acute Patient Flows examined the effectiveness and
efficiency of patient flow and bed management in public hospitals, by reviewing the
role and activities of the former Department of Human Services and five hospitals—
Alfred, Austin, Ballarat Base, Frankston and Northern.
The audit found that there was room for improvement in hospitals' timeliness in
discharging patients, which was contributing to unnecessary delays. It also found that
hospitals did not have access to data to benchmark their performance across the
public health system, limiting their ability to identify areas in which they could improve
patient flow.
1.4 Audit objectives and scope

This audit examined the relative efficiency of LOS in the largest Victorian public
hospitals. To determine this, the audit assessed whether:
• public hospitals manage LOS efficiently
• DHHS, as the health system manager, actively supports hospital management to
achieve efficient LOS.
This audit focused on hospitals' management of acute LOS, and examined the
information and initiatives that DHHS provides to assist hospitals. The focus of this
audit was on technical efficiency—it did not assess allocative efficiency (whether health
service resources are put to their best possible use). It also did not examine the
effectiveness and quality of acute or sub-acute services that hospitals provide.
1.5 Audit method and cost

We contracted a data analytics firm to calculate RSI values and analyse an extract
from DHHS's Victorian Admitted Episodes Dataset (VAED) from 2011–12 to 2013–14.
DHHS routinely collects this data from all hospitals for each patient episode. DHHS
then validates and compiles this data into VAED. The RSI methodology used in this
audit is detailed in Appendix A.
An initial analysis was undertaken of all LOS activity at the hospitals, which included
over 1.5 million patients. We then excluded same-day hospital stays and non-acute
patient stays. We used two approaches to the analysis of LOS performance at
hospitals. First, we compared all hospitals to each other, and then we compared
hospitals within peer groups—tertiary, major metropolitan and major regional. The
21 hospitals compared in this report are detailed by peer group in Figure 2C. The
selection of hospitals excluded specialist, smaller regional, rural and private hospitals
because of differences in service provision, size and funding model.

Background
This initial analysis was followed by a detailed examination of eight AR-DRGs, as it

was beyond the capacity of this audit to assess all hospital activity in detail. The
chosen AR-DRGs represent major non-overlapping areas of clinical activity—refer to
Appendix A for the specific descriptions of the AR-DRGs considered and their
materiality. To understand reasons for LOS variation, the audit team surveyed the
21 hospitals, all of which responded. These hospitals provided documentation to
support their survey responses. This audit did not include site visits or any real-time
observations at the hospitals, and did not involve auditing actual admissions and
discharges.
Throughout the audit the audit team was advised by an expert audit reference
committee comprising:
• a certified health information manager who is experienced in coding clinical
patient information into VAED
• a health economist with extensive experience analysing hospital activity data
• a clinical administrator with extensive experience managing hospital activity and
optimising LOS for health services
• a senior health sector researcher with extensive experience in health
administration and interpreting health data.
The audit was conducted in accordance with the Australian Auditing and Assurance
Standards. Pursuant to section 20(3) of the Audit Act 1994, any persons named in this
report are not the subject of adverse comment or opinion.
The total cost of the audit was $460 000.
1.6 Structure of the report

Part 2 of this report assesses the relative LOS efficiency of the 21 hospitals and the
extent of LOS variation between them.
Part 3 examines the reported reasons for this variation and the adequacy of DHHS'
role in supporting hospitals to achieve LOS efficiency.

2 Variation in length of stay
At a glance
Background
Acute patient length of stay (LOS) is a key driver of hospital costs and affects the
capacity of the health system, both in terms of bed availability and cost. Hospitals
should seek to minimise the time patients spend in hospital, without compromising
health outcomes. This approach improves efficiency by making beds available for other
patients, reducing the cost per patient and enabling care for more patients.
Conclusion
indicates that there are inefficiencies in current practices—lost opportunities to free up
hospital beds, to treat more patients and to reduce significant unnecessary costs. The
reasons for differences in LOS performance, even among similar hospitals, vary and
are not always captured by performance data. The Department of Health & Human
Services—as the health system manager and custodian of performance data—should
collaborate with hospitals to understand, explain and reduce variances.
Findings
• After adjusting for the differences between the patients at various hospitals, there
is a 29 per cent variation in LOS between the 21 hospitals examined.
• Some hospitals within each peer group are achieving relatively efficient length of
stay, while others in the same peer group are not.
• LOS within hospitals varies significantly—while some areas such as surgical units
are relatively efficient, other areas within the same hospital are not.
Recommendations
• That the Department of Health & Human Services regularly analyses its data and
seeks reasons from hospitals for significant length of stay variation.
• That public hospitals benchmark their length of stay performance and explain to
the Department of Health & Human Services reasons for significant length of stay
variation.

Variation in length of stay
2.1 Introduction
Acute patient length of stay (LOS) is a key driver of hospital costs and affects the
capacity of the health system, both in terms of bed availability and cost. Different
hospitals should be able to treat similar patients in the same amount of time. A relative
stay index (RSI) is one indicator of how efficiently hospitals manage LOS. Hospitals
can use RSI tools that compare the relative efficiency of their treatment of various
patient groups. The average RSI value is 100 per cent—RSI values above this indicate
longer LOS and relative inefficiency, while lower RSI values indicate shorter LOS and
comparatively better efficiency.
2.2 Conclusion
indicates that there are inefficiencies in current practice—lost opportunities to free up
hospital beds, to treat more patients, and to reduce significant unnecessary costs.
The reasons for differences in LOS performance, even among similar hospitals, vary
and are not always captured by performance data. The Department of Health &
Human Services (DHHS)—as the health system manager and custodian of
performance data—should collaborate with hospitals to understand, explain and
reduce variances.
2.3 Unexplained LOS variation between hospitals

across all clinical activity
After adjusting for patient factors, analysis of DHHS activity data for the 21 hospitals
found a 29 per cent variation in LOS between the most efficient and least efficient
hospitals. Patient factors that were considered in this analysis include:
• specific clinical treatment groups, called Australian Refined Diagnosis Related
Groups (AR-DRG)
• patient age
• patient complexity, driven by the presence of multiple medical conditions
• discharge destination—to home or other destinations, such as an aged care
facility
• arrival mode—emergency or planned admission
• arrival source—such as from another hospital.
This analysis includes all acute clinical activity in each hospital—over 1.5 million
patients from 2011–12 to 2013–14. Appendix A details the full methodology used to
calculate RSI values. Figure 2A ranks the hospitals according to their RSI values, from
the relatively poorest performer (Mildura Hospital with an RSI of 114 per cent) to the
best performer (Casey Hospital with an RSI of 85 per cent). An RSI value of
100 per cent, shown by the pale blue line in Figure 2A, indicates that the actual LOS
equals the expected LOS.

Figure 2A
Length of stay performance of 21 large Victorian hospitals
2011–12 to 2013–14
Relative stay
index
120%
100%
80%
60%
40%
20%
0%
Note: RMH = Royal Melbourne Hospital, MMC Clayton = Monash Medical Centre Clayton.
Source: Victorian Auditor-General’s Office analysis of an extract of the VAED provided by DHHS.
2.3.1 Lost opportunities

This unexplained variation represents a significant lost opportunity in both bed days
and cost.
If all 21 hospitals were as efficient as the better performing hospitals in Victoria—

Western, Shepparton, Bendigo, Wangaratta and Casey—then almost 145 000 bed
days (144 574) could be released every year to treat other patients. This equates to an
entire 396-bed hospital operating at 100 per cent occupancy, or a 435-bed hospital at
90 per cent occupancy. The costs of LOS inefficiency are substantial—almost
$125 million per year could be made available for other patients and other services.
This estimate was made using the following limitations:

• The data was extracted from the Victorian Admitted Episodes Dataset (VAED)
and the Victorian Cost Data Collection (VCDC) that DHHS provided. It should be
stressed that, although hospital data is complex and relatively detailed, there may
be some mitigating reasons for this variation that are not captured in activity and
cost data.

• The estimate includes direct costs such as average daily labour costs—primarily
medical and nursing—and indirect costs such as lighting, heating and cleaning.
These costs average $864 per bed day over the audited three-year period. The
cost estimate excludes:
• one-off costs such as theatre costs, as these would occur regardless of any
reduction in LOS
• pharmacy and pathology costs, as DHHS states that these costs are unlikely
to be saved by earlier discharge
• depreciation, capital and maintenance costs.
• The estimate uses the RSI average of the five better-performing hospitals as a
proxy for better practice—this proxy assumes that there are no opportunities for
these five hospitals to improve LOS efficiency. There are no widely accepted
benchmarks identifying better practice for LOS.
• The estimate only applies to acute activity within these 21 hospitals, as sub-acute
care was excluded from the analysis. It is likely that a proportion of this estimated
opportunity cost would be offset by an increase in sub-acute activity as a result of
earlier discharge from acute beds.
Figure 2B provides more information on LOS performance for each hospital, including:
• the precise RSI value for all acute episodes of care
• the number of episodes of care used to calculate the RSI value
• the average LOS (ALOS), based on VAED data
• the expected LOS, based on the RSI methodology detailed in Appendix A.
The best-performing hospital, Casey Hospital, is taking a day less than expected, on
average, when compared with the poorest performer, Mildura. This means that Casey
Hospital is discharging each patient undergoing similar treatment on average 1.7 days
earlier than Mildura Hospital. This is a significant difference given that there are almost
1.5 million episodes of patient care every year.
Figure 2B
Relative stay index of 21 large Victorian hospitals
2011–12 to 2013–14
Expected
RSI Episodes ALOS LOS Outliers Excluded
Ranking Hospital (per cent) (number) (days) (days) (number) (number)
1 Mildura 114 22 614 3.8 3.3 50 324
2 St Vincent's 111 73 753 4.3 3.8 215 1 069
3 Maroondah 110 52 147 3.7 3.4 62 845
4 Warrnambool 109 25 965 3.3 3.0 29 181
5 Latrobe Regional 108 36 375 3.3 3.1 80 430
6 Austin 107 109 221 4.1 3.8 316 1 908
7 RMH 101 108 922 4.1 4.1 147 1 985
8 MMC Clayton 100 123 622 3.7 3.7 385 3 061
9 Alfred 99 112 109 4.5 4.5 308 2 011
10 Frankston 99 96 593 3.2 3.3 113 2 458

Figure 2B
Relative stay index of 21 large Victorian hospitals
2011–12 to 2013–14 – continued
RSI Episodes ALOS Expected Outliers Excluded
Ranking Hospital (per cent) (number) (days) LOS (days) (number) (number)
11 Box Hill 99 87 465 3.5 3.5 127 1 842
12 Ballarat Base 98 51 264 3.3 3.4 60 585
13 Geelong 98 98 203 3.5 3.6 126 1 532
14 Dandenong 96 91 910 3.4 3.5 153 1 865
15 Northern 96 88 042 3.2 3.4 63 1 881
16 Sunshine 95 76 301 2.7 2.9 83 1 504
17 Western 95 75 946 3.9 4.1 181 1 252
18 Shepparton 94 35 341 3.1 3.3 37 582
19 Bendigo 94 52 370 2.8 3.0 59 891
20 Wangaratta 92 22 409 3.2 3.5 29 142
21 Casey 85 4 681 2.1 2.4 26 1 069
Average 100 3.6 3.6
Total 1 489 253 2 649 27 417
Note: The expected LOS for hospitals varies because each hospital treats patients of differing complexity and
clinical need. The RSI calculation is adjusted accordingly.
The outlier figure refers to episodes excluded from the analysis to avoid statistically skewing the RSI calculation.
The formula and definition used to classify outliers is detailed in Appendix A.
Excluded episodes are those where leave days, counted in whole days, exceeded the observed LOS, which is
measured in hours.
The total number of outlier and excluded episodes (30 066) was insignificant (2 per cent) compared with the
overall number of episodes of care.
2.4 Unexplained LOS variation between hospital

peer groups
LOS variation is not dependent on hospital size, service provision or location. Grouping
hospitals by peer groups does not reduce the wide variation in LOS efficiency. The
audit team analysed the data using the DHHS hospital peer group categories to
assess whether the type of hospital providing the care made any difference to its
relative LOS efficiency. This means that, in addition to taking patient characteristics
into account, hospital characteristics such as size, service provision and location were
considered when comparing the time hospitals take to discharge patients. The full list
of hospitals can be found in Appendix A and includes three peer groups:
• tertiary hospitals, all five of which were included
• major metropolitan hospitals, all nine of which were included, except specialty
hospitals such as the Royal Children's Hospital
• major regional hospitals, seven of which were included.

Figure 2C ranks the relative LOS efficiency of hospitals by peer group. Belonging to a
particular peer group does not on its own determine the hospital's RSI value or
ranking. This is important to both DHHS—as the manager of the health system—and
hospital management. There is significant variation in LOS within each hospital peer
group, although the extent of variation differs between peer groups:
• The tertiary peer group (average RSI of 103 per cent) varies 12 per cent—from
the Alfred at 99 per cent to St Vincent’s at 111 per cent.
• The major metropolitan peer group (average RSI of 97 per cent) varies
25 per cent—from Casey at 85 per cent to Maroondah at 110 per cent.
• The regional peer group (average RSI of 100 per cent) varies 22 per cent in
LOS—from Wangaratta at 92 per cent to Mildura at 114 per cent.
Figure 2C
Relative LOS efficiency of 21 large Victorian hospitals by
peer group 2011–12 to 2013–14
(per cent) (number) (days) LOS (days) (number) (number)
Tertiary peer group
St Vincent's 111 73 753 4.3 3.8 215 1 069
Austin 107 109 221 4.1 3.8 316 1 908
RMH 101 108 922 4.1 4.1 147 1 985
MMC Clayton 100 123 622 3.7 3.7 385 3 061
Alfred 99 112 109 4.5 4.5 308 2 011
Average 103 4.1 4.0
Total 527 627 1 371 10 034
Major metropolitan peer group
Maroondah 110 52 147 3.7 3.4 62 845
Frankston 99 96 593 3.2 3.3 113 2458
Box Hill 99 87 465 3.5 3.5 127 1842
Geelong 98 98 203 3.5 3.6 126 1532
Dandenong 96 91 910 3.4 3.5 153 1865
Northern 96 88 042 3.2 3.4 63 1881
Sunshine 95 76 301 2.7 2.9 83 1504
Western 95 75 946 3.9 4.1 181 1252
Casey 85 48 681 2.1 2.4 26 1069
Average 97 3.3 3.4
Total 715 288 934 14 248

Figure 2C
Relative LOS efficiency of 21 large Victorian hospitals by
peer group 2011–12 to 2013–14 – continued
Major regional peer group
Mildura 114 22 614 3.8 3.3 50 324
Warrnambool 109 25 965 3.3 3.0 29 181
Latrobe Regional 108 36 375 3.3 3.1 80 430
Ballarat Base 98 51 264 3.3 3.4 60 585
Shepparton 94 35 341 3.1 3.3 37 582
Bendigo 94 52 370 2.8 3.0 59 891
Wangaratta 92 22 409 3.2 3.5 29 142
Average 100 3.2 3.2
Total 246 338 344 3 135
Note: The expected LOS for hospitals varies because each hospital treats patients of differing
complexity and clinical need. The RSI calculation is adjusted accordingly.
The outlier figure refers to episodes excluded from the analysis to avoid statistically skewing the
RSI calculation. The formula and definition used to classify outliers is detailed in Appendix A.
Excluded episodes are those where leave days, counted in whole days, exceeded the observed
LOS, which is measured in hours.
Figure 2D shows that there is no clear relationship between the relative LOS efficiency
of a hospital and its activity (as measured by number of episodes of care) or peer
group. Each colour represents a peer group. The figure shows that tertiary hospitals
treat the largest number of acute episodes, while major regional hospitals treat the
smallest number. However, respective RSI values do not correspondingly decrease or
increase.

Figure 2D
Lack of a clear relationship between the relative stay index
and hospital size and peer group, 2011–12 to 2013–14
Relative stay index
115%
110%
105%
100%
95%
90%
85%
80%
0 20 000 40 000 60 000 80 000 100 000 120 000 140 000
Acute episodes
Major regional Major metro Tertiary
2.4.1 Lost opportunities

After adjusting for hospital size, service provision and location, the LOS variation within
each peer group is as big as LOS variation across all hospitals. When the hospitals are
analysed as peer groups, almost 145 000 bed days and $125 million per year could be
made available to treat other patients if each hospital was as efficient as the best
performing hospital in its peer group.
There is a considerable opportunity for improvement at individual hospitals and for the
state health budget. Figure 2E shows the potential annual costs and the number of bed
days that would be released for other patients if each hospital performed as efficiently
as the best performer in its peer group. Based on this analysis:
• tertiary hospitals such as St Vincent's Hospital and Austin Hospital could each
potentially release around $10 million and over 10 000 bed days every year
• major metropolitan hospitals could, on average, potentially release over
$10 million and 12 000 bed days every year
• major regional hospitals could, on average, potentially release over $3 million
or almost 4 000 bed days every year.

Figure 2E
Annual bed days and costs released if hospitals were as efficient as the best
of their peer group 2011–12 to 2013–14
Difference
to peer
group Total bed Total bed
Episodes RSI exemplar days days released Total cost
(number) (per cent) (per cent) (number) (number) saving ($)
Tertiary peer group
St Vincents 73 753 111 12 104 919 12 377 10 693 307
ARMC 109 221 107 7 149 253 10 913 9 429 077
RMH 108 922 101 2 149 740 2 454 2 120 511
MMC Clayton 123 622 100 1 150 872 953 823 444
Alfred 112 109 99 0 168 208 0 0
Tertiary subtotal 26 697 23 066 340
Maroondah 52 147 110 25 64 638 16 133 13 939 332
Frankston 96 593 99 14 104 407 14 204 12 271 910
Box Hill 87 465 99 14 100 932 13 681 11 820 537
Geelong 98 203 98 13 115 972 14 645 12 653 556
Dandenong 91 910 96 11 102 765 11 295 9 759 095
Northern 88 042 96 11 95 146 10 396 8 982 031
Sunshine 76 301 95 10 69 308 7 072 6 109 820
Western 75 946 95 10 98 851 10 030 8 665 659
Casey 48 681 85 0 33 618 0 0
Major metropolitan
subtotal 97 456 84 201 942
Major regional peer group
Mildura 22 614 114 23 28 275 6 374 5 507 255
Warrnambool 25 965 109 17 28 650 4 927 4 257 291
Latrobe Regional 36 375 108 16 40 596 6 502 5 617 765
Ballarat Base 51 264 98 7 57 238 3 796 3 280 156
Shepparton 35 341 94 3 36 652 949 820 237
Bendigo 52 370 94 2 49 751 1 012 874 400
Wangaratta 22 409 92 0 23 800 0 0
Major regional subtotal 23 561 20 357 102
Total 147 715 127 625 384
Source: Victorian Auditor-General’s Office analysis of an extract of the VAED and cost information from the VCDC
provided by DHHS.

2.5 Unexplained LOS variation within hospitals

We selected a small sample of medical and surgical conditions, or AR-DRGs, from a
set previously examined by the National Hospital Performance Authority, to assess
whether identified LOS variation could be explained at the clinical level. The eight
chosen AR-DRGs represent major non-overlapping areas of clinical activity within
hospitals—see Appendix A for details. AR-DRGs include the following, both with and
without complications:
• heart failure
• chronic obstructive airways disease
• gall bladder removal
• hip replacement.
2.5.1 By peer group

Analysis of data for these eight AR-DRGs across the 21 hospitals found greater
variation in LOS than for all hospital activity—40 per cent versus 29 per cent. This is
primarily because the major regional hospitals showed significantly greater LOS
variation for the eight AR-DRGs. In contrast, tertiary and major metropolitan hospitals
performed similarly for these eight groups as for all hospital activity. There is a strong
correlation coefficient of 0.81 out of 1.0 between the RSI values of the selected DRGs
and the RSI values for all hospital activity. This means that the AR-DRGs we chose are
broadly representative of all clinical activity with respect to LOS performance.
When examining only the selected AR-DRGs, the extent of variation in LOS is
significantly different between the DHHS peer groups. Figure 2F shows the relative
performance of hospitals by peer group. Variation in LOS for the selected AR-DRGs is
greater as the hospitals get smaller:
• There is 11 per cent variation in LOS between the tertiary peer group, from the
Alfred Hospital RSI at 96 per cent, to the poorest performer, Austin Hospital at
107 per cent.
• There is 30 per cent variation in LOS between the major metropolitan peer group,
from Casey Hospital RSI at 86 per cent, to the poorest performer Maroondah
Hospital at 116 per cent.
• There is 40 per cent variation in LOS between the regional peer group, from
Wangaratta Hospital RSI at 92 per cent, to the poorest performer Mildura Hospital
132 per cent.

Figure 2F
Relative stay index for eight AR-DRGs across 21 large Victorian hospitals by
peer group, 2011–12 to 2013–14
Tertiary peer group
Austin 107 5 218 4.1 3.8 3 73
St Vincent’s 107 3 246 4.5 4.2 1 60
RMH 101 3 346 4.3 4.3 2 46
MMC Clayton 96 3 426 3.6 3.7 4 82
Alfred 96 3 856 4.1 4.3 8 76
Average 102 4.1 4.0
Total 19 092 18 337
Maroondah 116 2 986 4.7 4.0 2 20
Geelong 104 3 823 4.7 4.5 3 22
Frankston 104 4 234 4.1 4.0 1 67
Box Hill 97 2 807 3.9 4.1 0 45
Western 94 3 621 4.0 4.3 4 42
Dandenong 93 3 700 4.3 4.6 1 72
Northern 92 4 757 3.6 3.9 3 74
Sunshine 89 2 314 3.4 3.8 0 32
Casey 86 1 997 2.8 3.3 2 37
Average 98 4.0 4.1
Total 30 239 16 411
Regional peer group
Mildura 132 1 186 4.7 3.5 0 8
Latrobe Regional 117 2 409 4.4 3.8 5 12
Warrnambool 113 1 198 4.3 3.8 0 4
Ballarat Base 94 2 021 4.1 4.3 1 18
Shepparton 94 1 915 3.6 3.9 0 22
Bendigo 93 2 703 3.3 3.6 0 36
Wangaratta 92 1 222 4.3 4.7 1 3
Average 103 4.0 3.9
Total 12 654 7 103
Note: This analysis included almost 62 000 episodes of care. The RSI methodology used was the
same as that used to calculate the RSI values for all clinical activity within the 21 hospitals—see
Appendix A for details.

Overall, the average RSI value for each peer group is similar, indicating that the peer
groups, on average, are not taking longer to discharge similar patients—102 per cent
for tertiary hospitals, 98 per cent for major metropolitan hospitals and 103 per cent for
regional hospitals. However, the extent of variation within each peer group and the
variation across the 21 hospitals indicates substantial room to improve the efficiency of
hospitals.
The poorest-performing major regional and major metropolitan hospitals are, on

average, taking an extra day and a half to discharge each patient in the selected
AR-DRGs. With major metropolitan hospitals treating, on average, over 33 000
patients each year, this could be a substantial difference. These findings demonstrate
the importance of DHHS, as the health system manager, providing leadership and
using its data to identify poorer performers and assist hospital management. It also
shows the potential improvements in efficiency that hospital management can achieve.
2.5.2 By AR-DRG
Figure 2G shows the RSI values for each AR-DRG for each hospital. We have allowed
a buffer of 15 per cent either side of the expected LOS (RSI of 100 per cent):
• RSI values 125 per cent and above are in the red zone—relative to the group,
these points indicate the longest LOS and poor efficiency.
• RSI values between 116 and 125 per cent are in the yellow zone—relative to the
group, these points indicate relatively long LOS and poorer efficiency.
• RSI values between 76 and 85 per cent are in the green zone—relative to the
group, these points indicate relatively short LOS and better efficiency.
• RSI values 75 per cent and below are in the blue zone—relative to the group,
these points indicate the shortest LOS and the best efficiency.

Figure 2G
The relative stay index for each AR-DRG examined, 2011–12 to 2013–14
Relative stay index

160%
140%
120%
100%
80%
60%
40%
Chronic obstructive airways disease with complications Chronic obstructive airways disease without complications
Heart failure with complications Heart failure without complications
Gall bladder removal with complications Gall bladder removal without complications
Hip replacement with complications Hip replacement without complications
Relative stay index value for all conditions
Source: Victorian Auditor-General's Office.
Hospitals are ranked according to their overall RSI score for the selected AR-DRG
groups, from the relative poorest across to the best performing hospitals. Figure 2G
shows a clear trend—those hospitals that perform poorly for one AR-DRG tend to also
perform poorly for other groups. Conversely, with the exception of hip replacements at
Western Hospital, better-performing hospitals tend to perform better across all
AR-DRGs:
• The poorest-performing hospitals were, in order, Mildura (major regional), Latrobe
Regional (major regional), Maroondah (major metropolitan), Warrnambool (major
regional) and Austin (tertiary) hospitals.
• The best-performing hospitals were, in order, Casey (major metropolitan),
Sunshine (major metropolitan), Northern (major metropolitan), Wangaratta (major
regional) and Bendigo (major regional) hospitals.

The data provides no clear explanation for variation in LOS. However, DHHS could use
its data and collaborate with hospitals to understand and reduce relative LOS
inefficiency. Grouping similar patients and similar hospitals does not eliminate the
substantial differences. It is possible that the AR-DRG classification system for
grouping similar patients does not capture all patient factors influencing LOS. It is
unlikely, however, that differences within an AR-DRG category could possibly account
for the magnitude of LOS variation observed.
Neither DHHS nor published reports could provide any clear and compelling reasons
why large hospitals, whether peers or not, should vary so widely in the average time
each takes to discharge similar patients. It is also unclear why the extent of variation
between hospital peer groups differs. The next part of this report examines the reasons
hospitals report shorter and longer LOS for these eight selected AR-DRGs.
Recommendations
1. That the Department of Health & Human Services regularly analyses its data and
seeks reasons from hospitals for significant length of stay variation.
2. That public hospitals benchmark their length of stay performance and explain to
the Department of Health & Human Services reasons for significant length of stay
variation.

3 Responding to length of stay
variation
At a glance
Background
While some reasons for variation in acute patient length of stay (LOS) are beyond the
control of a hospital—such as their patient’s medical condition and age—other factors
can be influenced by hospital management and the Department of Health & Human
Services (DHHS).
Conclusion
Public hospitals can improve LOS efficiency by implementing better practices—such
as intensive case management, continuing care in the community, and earlier
scheduling of diagnostic tests and referrals to service providers. Public hospitals report
that constraints in sub-acute capacity are increasing LOS, and DHHS could do more to
assist hospital management to improve LOS efficiency.
Findings
• Hospitals report a number of common factors that influence LOS.
• Hospitals that report LOS performance to their chief executive officers (CEO) or
boards more frequently tend to have better relative LOS efficiency.
• While DHHS has funded programs to improve LOS efficiency, there is limited
evaluation of these programs.
Recommendations
That the Department of Health & Human Services:
• provides and promotes annual benchmarking information for LOS
• reviews sub-acute capacity across the health system to address limitations
• funds and promotes programs, based on identified reasons for shorter and longer
LOS, to assist hospitals to improve LOS efficiency
• evaluates the effectiveness of targeted programs and better practice guidance.
That public hospitals:

• report on LOS performance frequently to their CEO and board
• routinely identify reasons for shorter and longer LOS
• implement programs to increase LOS efficiency.

Responding to length of stay variation
3.1 Introduction
While some reasons for variation in acute patient length of stay (LOS) are beyond the
control of a hospital—such as their patient’s medical condition and age—other factors
can be influenced by hospital management.
A primary objective of the Department of Health & Human Services (DHHS) is to

‘improve the efficiency of healthcare services for Victorians’. As LOS is an important
driver of hospital efficiency, DHHS, as the health system manager, should actively
support hospital management to optimise their LOS. This includes providing
appropriate tools and information to assist hospitals to monitor and manage LOS, and
funding targeted programs and better practice guidance to support hospitals to reduce
inefficient LOS.
3.2 Conclusion
Public hospitals can improve LOS performance by implementing better practice—such
as intensive case management, continuing care in the community, and earlier
scheduling of diagnostic tests and referrals to service providers. However, DHHS has
not adequately fulfilled its role in providing hospitals with sufficient benchmarking
information to identify underperformance.
DHHS funds programs that demonstrably improve LOS efficiency, but it has not
actively promoted them to all hospitals. It also has not evaluated other programs to
identify which of these initiatives can assist hospitals to improve LOS efficiency. Public
hospitals report that constraints in sub-acute capacity are increasing LOS.
There are a number of clear opportunities for DHHS and hospital management to
collectively respond to and improve hospital efficiency.
3.3 LOS variation factors within and beyond the

control of hospitals
We surveyed all 21 hospitals in our audit sample to seek reasons for relatively shorter
and longer LOS and the results are summarised in Figure 3A. Hospitals reported
surprisingly similar factors that positively or negatively influenced LOS performance,
including:
• intensive case management, particularly pre-admission assessments and
targeted admission, and discharge planning using risk assessments
• continuing care in the community, delivered through nurse-led multidisciplinary
teams and through the Hospital Admission Risk Program (HARP) funded by
DHHS
• delays in or, conversely, streamlined scheduling of diagnostic tests
• good or poor access to sub-acute facilities, such as rehabilitation, residential
aged care and palliative care facilities.

Case management of patients, continuing community care and the scheduling of

diagnostic tests are all largely within the control of hospitals. Better performing
hospitals by Australian Refined Diagnosis Related Group (AR-DRG) as shown in
Figure 2G— Casey, Sunshine, Northern, Wangaratta, Bendigo, Dandenong, Western
and Ballarat hospitals—all report these factors contributing to relatively low relative
stay index (RSI) values. Conversely, the poorer performing hospitals—Mildura, Latrobe
Regional, Maroondah, Warrnambool and Austin hospitals—report the same factors
contributing to their relatively high RSI values.
Access to sub-acute facilities and external service providers can be beyond the control
of hospitals and may indicate a constraint in the health system.
Figure 3A
Hospital-reported reasons for shorter and longer length of stay,
2011–12 to 2013–14
Reasons hospitals Reasons hospitals
report decreasing LOS report increasing LOS
Intensive case management 6 –
Presentation to admission  –
Discharge planning  –
Continuing care in the community 5 –
DHHS HARP program  –
Multidisciplinary teams  –
Access to sub-acute facilities 4 5
Rehabilitation  
Residential aged care facilities – 
Palliative care – 
Referrals 4 2
Internal diagnostic tests  
External service providers – 
Note: Numbers represent the number of hospitals that report that category as a factor and ticks
represent the number of hospitals that report that particular reason as a factor.
Source: Victorian Auditor-General’s Office.
3.3.1 Intensive case management

Intensive case management is widely acknowledged as influencing LOS and was
discussed in our 2008 audit Managing Acute Patient Flows. It includes setting
expected dates of discharge, identifying potentially complex discharges and creating
standardised pathways for common patient types that are based on evidence.
Hospitals reported the following examples of intensive case management:
• Western Hospital, which has an RSI of 82 per cent, reports that it reduces LOS
for heart failure patients (F62A and F62B) by categorising patients using risk
assessments at the outset and actively planning discharge from the day of
admission.

• Sunshine Hospital, which has an RSI of 80 per cent, also reports that it reduces
LOS for gall bladder removal patients (H08A) using the same approach as
Western Hospital. In addition, it provides weekend discharge planning, including
ward rounds to enable weekend discharges, if appropriate. Sunshine and
Western Hospitals are both managed by Western Health.
• Western Hospital, which has an RSI of 120 per cent, reports recently reducing its
relatively long LOS for hip replacement patients (I03A) by standardising its care
pathway for these patients.
• Northern, Wangaratta, Ballarat and Bendigo Hospitals all report that a strong
focus on discharge planning in surgical wards—from preoperative stages through
to discharge—has led to shorter LOS for hip replacement patients (I03A and
I03B). The average RSI of these four hospitals is 84 per cent.
The case study in Figure 3B highlights how changes to two processes have led to a
rapid improvement in hospital LOS efficiency.
Figure 3B
Implementing strategies to reduce length of stay
Austin Hospital reports that it decreased its RSI value for chronic obstructive airways
disease patients from 125 per cent to 102 per cent in one year. This represents a decrease
of over two days on average for every patient, from 7.19 days to 5.05 days. It reports that
two service-level improvements produced this result:
• the implementation of standardised clinical pathways, allowing for a more streamlined
approach to care provision and improved referral processes to services such as
'Hospital in the Home'
• closer case management, enabled by electronic clinical monitoring of care and pathway
usage data.
3.3.2 Continuing care in the community

Hospitals report that providing continuing care in the community can reduce LOS
without diminishing the quality of care. Multidisciplinary teams from MMC Clayton,
which has an RSI of 75 per cent, including cardiac nurse consultants, manage heart
failure patients (F62B) in a community setting after hospital discharge. Teams from
MMC Clayton and Western Hospital, which has an RSI of 80 per cent, both report
treating patients with the support of DHHS's HARP—a program that aims to identify
those at risk of repeated hospitalisation and provides continuing community care.
3.3.3 Access to sub-acute facilities

The most common reason hospitals reported for longer LOS is poor access to
sub-acute facilities. These facilities provide support and care after hospital discharge,
and include rehabilitation, residential aged care and palliative care facilities. A patient
staying longer in hospital—because they cannot be transferred to more appropriate
sub-acute care—costs more to treat per day and blocks access to that hospital bed
and associated acute care. This factor was identified in our 2008 audit Managing Acute
Patient Flows.

A number of hospitals reported a shortage of sub-acute facilities generally:

• Latrobe Hospital, for chronic obstructive airways disease (E65A and E65B) and
heart failure patients (F62A and F62B), with an average RSI value of
126 per cent
• Austin Hospital, for hip replacement patients (I03A), with an average RSI value of
111 per cent
• St Vincent’s Hospital, for chronic obstructive airways disease patients (E65A and
E65B), with an average RSI value of 110 per cent.
Two hospitals reported a shortage of residential aged care facilities:

• Mildura Hospital, for chronic obstructive airways disease (E65A and E65B) and
heart failure patients (F62A and F62B), with an average RSI value of
130 per cent
• St Vincent’s Hospital, for chronic obstructive airways disease patients (E65A),
with an average RSI value of 118 per cent.
Latrobe Hospital reported a shortage of palliative care facilities for its chronic
obstructive airways disease (E65A and E65B) and heart failure patients (F62A and
F62B), with an average RSI value of 127 per cent.
3.3.4 Managing referrals to other services

As identified in our 2008 Managing Acute Patient Flows audit, managing referrals to
other service providers facilitates early discharge. Western Hospital reports that it
carries out early planning for discharge across all clinical groups, but it identifies late
referrals to other service providers and delays in getting admitted to sub-acute facilities
as a cause of increased LOS for hip replacement (I03A and I03B) patients. While
delays in getting admitted to sub-acute facilities can be out of a hospital’s control,
referrals to other service providers are less likely to occur when there is effective early
discharge planning by the hospital. Western Hospital could minimise future delays by
reviewing its processes for this patient group.
Warrnambool Hospital reports that it uses strategies to minimise discharge delays, but
that delays with diagnostic tests and prescriptions can cause increased LOS for four of
the DRGs we examined—chronic obstructive airways disease, with and without
complications (E65A and E65B) and heart failure, with and without complications
(F62A and F62B). Warrnambool Hospital could minimise future delays by reviewing its
processes for these patient groups.
In addition to the factors influencing LOS that the hospitals reported—identified in

Figure 3A—two tertiary hospitals could not provide reasons for longer LOS:
• the Royal Melbourne Hospital, with an RSI value of 126 per cent for hip
replacements with complications (I03A)
• St Vincent’s Hospital, with an RSI value of 126 per cent for gall bladder removals
with complications (H08A).
Hospitals need to understand the reason for longer LOS, given that LOS is a key driver
of efficiency and cost.

3.4 Hospital governance of LOS performance

3.4.1 Monitoring LOS performance
Hospitals were requested to provide information on how they monitored and reported
LOS performance. All hospitals report monitoring LOS performance at multiple levels,
including long-stay patient level, unit level and hospital level.
All hospitals report LOS performance to their chief executive officer (CEO) or board.
However, the frequency of reports to the CEO or board—which are accountable for a
hospital’s performance—differs widely. Across the 21 hospitals, there is a clear trend—
hospitals that report to their CEOs or boards more frequently tend to have better LOS
performance. Figure 3C compares the RSI values of hospitals who report to their CEO
or board weekly, monthly, quarterly and less often.
Figure 3C
Relationship between LOS performance and reporting to CEO and/or board
Reporting to the Hospitals Hospitals RSI
CEO and/or board (number) (per cent) Hospital (per cent)
Weekly 4 19 Shepparton 94
Western 95
Sunshine 95
Ballarat 98
Weekly group average RSI 96
Monthly 11 52 Casey 85
Wangaratta 92
Bendigo 94
Dandenong 96
Northern 96
Box Hill 99
Frankston 99
MMC Clayton 100
Royal Melbourne 100
Maroondah 110
St Vincent's 111
Monthly group average RSI 98
Quarterly 4 19 Geelong 98
Alfred 99
Austin 107
Latrobe 108
Quarterly group average RSI 103
Six monthly 1 5 Warrnambool 109
Annually 1 5 Mildura 114

Eleven of the 21 hospitals set annual targets for LOS performance, primarily using the
previous years’ actual figures to help drive improvements. The average RSI value for
these 11 hospitals is 99 per cent, indicating that target-setting is not on its own leading
to best performance. Seven hospitals have a dedicated committee that they report
LOS information to, which indicates a commitment to monitoring LOS performance.
However, the average RSI value across this group of hospitals is also not significantly
different to the average, at 99 per cent.
DHHS, on behalf of the Minister for Health, develops Statements of Priorities (SoP)
that each health service agrees to and signs. DHHS’ High-performing health services:
Victorian health services performance monitoring framework 2014–15 outlines the
mechanisms it uses to monitor health service performance against the SoPs. However,
the only performance measure for LOS is related to management of patients in the
emergency department. DHHS has not developed performance measures to monitor
acute patient LOS performance. Such measures could provide health services with an
incentive to improve performance in this area.
3.4.2 Benchmarking LOS performance

Contrary to DHHS' response to our 2008 audit Managing Acute Patient Flows, it has
not provided hospitals with sufficient benchmarking information to improve efficiency.
DHHS states that it currently provides hospitals with four sources of benchmarking
information to facilitate LOS management, which are detailed below. However, only
one of these sources, its RSI tool, provides sufficient comparative information so that
hospitals can meaningfully benchmark their LOS performance. In our survey of the
21 hospitals, only one reported using this tool.
Currently, the majority of health services get benchmarking information through

membership of The Health Roundtable, a private not-for-profit organisation of health
services across Australia and New Zealand.
Program Report for Integrated Service Monitoring

DHHS distributes the Program Report for Integrated Service Monitoring (PRISM)
quarterly and annually to CEOs and board chairs of health services. PRISM is
designed to provide a broad view of performance across a range of services provided
by health services to the Victorian community. It reports on a suite of measures,
including LOS, for benchmarking the performance of similar health services.
While PRISM may be useful for other purposes, it does not provide the comparative
LOS information needed by hospital management as it:
• is at a whole-of-hospital level and cannot be used to target particular areas for
improvement
• provides a comparison to the previous year for each hospital—rather than
between hospitals—making it difficult to know whether each hospital is
performing well

• does not take into account important patient factors that influence LOS and are
beyond a hospital’s control, such as patient complexity, age, discharge
destination or admission mode
• does not adjust for changes in the types of patients a hospital provides care for
over time.
Dr Foster Quality Investigator

Dr Foster Quality Investigator (Dr Foster) is an outsourced online portal provided by
DHHS to the 14 largest health services across the state to assist in improving clinical
quality. Dr Foster has three risk-adjusted indicators available for analysis—mortality,
unplanned re-admissions and LOS. Clinical quality indicators such as mortality and
re-admissions are important for improving the quality of care, performance
management and driving clinical improvement. DHHS advised that the focus of
Dr Foster is on the first two indicators and not on LOS.
Dr Foster allows hospitals to analyse those LOS episodes that are statistical outliers
and to benchmark the results against the best performing peer hospitals for that patient
group. While Dr Foster may be useful for improving clinical quality, it does not provide
comparative acute LOS information at the DRG level for the purposes of improving
efficiency. Only six of the 17 health services in our survey reported that they found this
tool useful for benchmarking or monitoring LOS performance.
Victorian Admitted Episodes Dataset

DHHS offers hospitals a de-identified version of the full activity dataset that was used
to examine LOS in this audit—the Victorian Admitted Episodes Dataset—on an annual
basis. Over 70 per cent of hospitals accepted this offer in 2014. However, the
usefulness of this raw data to hospital management in benchmarking LOS is limited,
since it does not provide readily comparable information. Similar to the PRISM report,
it is not adjusted for patient factors that influence LOS, such as patient complexity, age,
discharge destination or admission mode.
Relative stay index tool

Hospitals have access to an RSI tool through a business intelligence portal,
HealthCollect. In 2014, 16 hospitals downloaded the tool. However, only one of the
21 hospitals in our survey reported using this tool for monitoring LOS. While the tool
uses an almost identical methodology to that used in this audit, examines acute LOS at
the DRG level, and allows health services to benchmark against their peers, it is not
easy to use. DHHS stated that the functionality of the RSI tool is limited by available
technological tools and infrastructure, and that it is planning to develop a secure
cloud-based environment to overcome these limitations. However, DHHS has not set a
target date for its implementation.

3.5 Assisting hospitals to reduce inefficient LOS

While the activity-based funding model—described in Section 1.3 of this report—helps
to drive efficiencies and reduce LOS, our analysis has identified that there is clearly
still scope for improvement in LOS performance. While some variation may be
explained by factors outside a hospital's control, there are substantial opportunities for
hospitals to make further efficiency gains by reducing LOS.
DHHS funds targeted programs that have reduced LOS. It has also released a range
of better practice guidelines that may assist hospitals to manage LOS more efficiently.
However, there is limited evaluation of the effectiveness of these initiatives, and DHHS
could be doing more to assist health services to improve LOS efficiency.
Programs
Figure 3D details three DHHS programs that have been independently evaluated and
found to reduce LOS—the Redesigning Hospital Care Program, Enhanced Recovery
After Surgery and the Hospital Admission Risk Program, which is part of the Health
Independence Program.
When health services were asked to identify programs or initiatives that they
considered the most effective in reducing LOS, they cited the Redesigning Hospital
Care Program most frequently, with seven hospitals mentioning it in our survey. DHHS
should actively promote and roll out these three programs to all hospitals to assist
them to improve LOS efficiency.
Figure 3D
DHHS programs that have reduced acute patient LOS
Description Evaluations
Redesigning Hospital Care Program
Aims to assist health services to map, A 2012 independent evaluation funded by the former
review and redesign the patient Department of Health found a reduction in average
journey, to meet demand and ensure LOS, from 4.4 to 3.5 days. This evaluation included five
that care is safe, effective and efficient. health services (that were not named), with estimated
savings of 8 774 patient bed days and $1 075 per bed
day.
Enhanced Recovery After Surgery
Aims to facilitate recovery and A 2015 peer-reviewed journal article published research
accelerate discharge from hospital after funded by DHHS that showed a statistically significant
major and minor surgery, without an reduction in LOS for a type of hip and knee surgical
increase in complications or procedure—4.9 days compared to 5.3 days. Over 700
re-admissions. Includes: acute patients from three hospitals—Alfred, Bendigo
• patient education and MMC Clayton—took part in this trial. This result
was achieved with no adverse effect on re-admission
• optimising organ function before
rates.
surgery
A 2011 evaluation of abdominal surgical patients also
• improved anaesthetic and
found a reduction in LOS—5.7 days compared to
postoperative analgesic techniques.
7.4 days. Over 320 acute patients from three
Enhanced Recovery After Surgery is hospitals—Alfred, Box Hill and Geelong—took part in
not currently standard practice in all this trial. This result was also achieved with no adverse
hospitals. effect on re-admission rates.

Figure 3D
DHHS programs that have reduced acute patient LOS – continued
Description Evaluations
Health Independence Program
The Health Independence Program In 2013, a review was conducted by Melbourne Health
comprises four components: in collaboration with the University of Melbourne. It
• Hospital Admission Risk Program examined data over 2.5 years (July 2010 – Dec 2012)
(HARP)—aims to identify those at of 1 380 patients before and after enrolment into HARP.
risk of repeated hospitalisation and It found a statistically significant reduction in the
divert them to alternative models of average LOS from 7.1 days to 4.5 days.
care. In 2011, an independent evaluation was undertaken of
• Residential in-reach—provides the impact of the Disease Management Unit—a HARP
alternative care for people living in program at Alfred Health which was funded by the
residential aged care services. former Department of Health . It examined the average
LOS for 2 341 patients who were enrolled in the
• Post-acute care services—provides
program over 10 years (2000–2010) by comparing
recuperative care in the community.
those patients in the 48 months before intervention to
• Sub-acute ambulatory care those in the 48 months after enrolment. It found that the
services—assists people with newly average LOS after enrolment was 0.61 days shorter
emerging and chronic symptoms than before intervention—a statistically significant
through a range of specialist clinics. result.
Source: Victorian Auditor-General’s Office based on information from DHHS.
DHHS has other programs that it states reduce LOS. However, these have not been
evaluated, so it cannot be determined whether these programs have reduced acute
patient LOS. These programs include:
• Patient Treatment Coordinator initiative—aims to improve coordination of the
patient journey, particularly for patients with chronic and complex conditions
• Consultant-led Emergency General Surgery—aims to streamline patient care
by increasing the focus of consultant general surgeons on patient management
and clinical decision-making
• Transition Care Program—a joint Victorian–Commonwealth Government
program that offers low-level therapy and support to older people, to continue
their recovery out of hospital while appropriate long-term care is arranged.
Better practice guidelines

DHHS has released a range of better practice guidelines that may assist hospitals to
increase efficient management of LOS. These include:
• Transfer of care from acute patient services: Guidelines for managing the transfer
of care of acute patients from Victoria's public health services, 2014
• A framework for emergency surgery in Victorian public health services, 2012
• Supporting the medical patient journey: A guide for health services, 2011
• Guidelines for ED care co-ordination services and ED care co-ordination
self-assessment tool, 2009
• Extended day surgery: Guidelines for the implementation and evaluation of
23-hour service models in Victoria, 2007.
However, DHHS has not evaluated these guidelines for effectiveness.

Recommendations
3. That the Department of Health & Human Services:
• provides and promotes annual benchmarking information for length of stay
• reviews sub-acute capacity across the health system to identify and
address limitations
• funds and promotes programs, based on identified reasons for shorter and
longer length of stay, to assist hospitals to improve length of stay efficiency
• evaluates the effectiveness of targeted programs and better practice
guidance.
4. That public hospitals:
• report on length of stay performance frequently to their chief executive
officer and board
• routinely identify reasons for shorter and longer length of stay
• implement programs to increase length of stay efficiency.

Appendix A.
Audit methodology
Hospitals
VAGO contracted a data analytics firm to calculate relative stay index (RSI) values
using hospital activity data at the patient level from the Victorian Admitted Episodes
Dataset, which the Department of Health & Human Services (DHHS) collects from
hospitals. Data from 2011–12 to 2013–14 inclusive was used to increase the volume of
episodes and improve the robustness of the RSI: longitudinal analysis was not
performed. We examined variation of length of stay (LOS) within and between 21 of
the largest hospitals in Victoria:
• Alfred Hospital, The
• Austin Hospital
• Ballarat Hospital
• Bendigo Hospital, The
• Box Hill Hospital
• Casey Hospital
• Dandenong Hospital
• Frankston Hospital
• Latrobe Regional Hospital
• Maroondah Hospital
• Mildura Base Hospital
• Monash Medical Centre – Clayton
• Northeast Health Wangaratta Hospital
• Northern Hospital, The
• Royal Melbourne Hospital
• Shepparton Hospital
• South West Healthcare
• St Vincent's Hospital
• Sunshine Hospital
• University Hospital Geelong
• Western Hospital – Footscray
We excluded specialist, smaller regional, rural and privately owned hospitals because
of differences in service provision, size and funding model.
We also surveyed all 21 hospitals and key documentation was provided by all of the
hospitals to support survey responses.

Appendix A. Audit methodology
Figure A1
VAGO relative stay index methodology
Assumptions Stratification variables Analysis variables
Use 3 years of data (2011–12 to 2013– • Australian Refined • Hospital campus
14 inclusive) for observed and Diagnosis Related • Interpreter flag
expected LOS calculation—DHHS is Groups (AR-DRG).
• Condition onset flag
responsible for accurately adjusting for
• Age group—three • Gender
changes to admission policy that affect
classes: 0–16, 17–64,
LOS across the years used. • Procedure codes
65+
21 hospitals. • Hours in ICU
• Admission mode—two
classes: emergency and • Discharge month
Observed LOS = (discharge date and planned
time) − (admission date and time) −
(leave days). • Admission source—two
classes: transferred and
Exclude from RSI calculations, but type change
report episodes, where observed LOS • Clinical codes—two
<= 0 due to whole-integer leave days classes: complex (if
exceeding (discharge date and time) − there are codes within at
(admission date and time) as per the ≥3 ICD chapters different
above equation. to the principal
Observed LOS = (discharge date and diagnosis) and
time) − (Admission date and time) − not complex.
(Leave days).
• Discharge destination—
Acute care type only. four classes: home,
Excluded AR-DRGs are listed in Figure dead, acute transfer,
A3. other.
Extreme outliers (mEO) will be • Hospital in the home
excluded from the observed and LOS (HITH)—two classes:
calculations, using the following HITH and non-HITH
equation:
mEO = Q3 + k(Q3-Q1) • Note that strata with <=
10 episodes will be
Where
ignored, and episodes’
Q1 equals the 25th percentile value observed LOS =
Q3 equals the 75th percentile value expected LOS.
k = 10.
Minimum is 20 bed days (i.e. if an
episode is less than 20 days it will not
be excluded).
Source: Victorian Auditor-General’s Office based on the National Health Performance Authority
Length of stay in public hospitals in 2011–12 report.

Selection of AR-DRGs
Figure A2 shows the Australian Refined Diagnosis Related Groups (AR-DRG)—and
their respective materiality—selected for this audit. AR-DRG materiality was
determined by the number of bed days each AR-DRG consumed in 2011–12—which
was calculated by multiplying the number of episodes of care by the average LOS for
each AR-DRG across all 21 hospitals. Collectively, the AR-DRGs selected for further
analysis consumed 316 759 bed days in 2011–12, or 5.4 per cent of all bed days for
the 21 hospitals.
The audit team selected AR-DRGs for this audit, shown in Figure A2, based on advice
by an audit reference committee using the following criteria:
• relevance to the clinical community
• homogeneity of the AR-DRG
• number of episodes of care and the average LOS per episode
• number of hospitals able to report without suppression for a small number of
episodes of care
• balance in the number of surgical compared to medical AR-DRGs
• distribution of LOS values.
Figure A2
Materiality of the selected AR-DRGs, 2011–12
Average Total bed
AR-DRG Episodes LOS (days) days
H08A Gall bladder removal with complications 5 211 4.67 24 351
H08B Gall bladder removal without complications 10 928 2.03 22 185
Gall bladder removal subtotal 46 536
I03A Hip replacement with complications 3 457 9.69 33 493
I03B Hip replacement without complications 6 239 5.16 32 204
Hip replacement subtotal 65 697
E65A Chronic obstructive airways disease with complications 8 505 6.31 53 667
E65B Chronic obstructive airways disease without 14 869 3.25 48 394
complications
Chronic obstructive airways disease subtotal 102 061
F62A Heart failure with complications 8 731 7.95 69 398
F62B Heart failure without complications 9 263 3.57 33 067
Heart failure subtotal 102 465
Total of selected DRGs 67 203 5.33 316 759
Total of all hospital activity 1 500 3.94 5 907 687
194
Source: Victorian Auditor-General's Office.

Figure A3
Excluded AR-DRGs
801A D40Z J07B O66C
801B D60C J08C Q61C
801C D61C J11Z Q60C
960Z D62B M40Z Q62B
961Z D65Z J60B U40Z
963Z D66B J60C R03C
B05Z D66C J62B R60C
B06C D67B J65C R61C
B60A E42C J67B R63Z
B60B E71C K60C S65D
B62Z G47C K40C U60Z
B61A F42C K62C V65Z
B61B F73C K64C V66Z
B65B F76C L61Z X64B
B71C G46C L41Z Y60Z
B76C G48C L42Z Y62C
B82A G66B L64C Z01A
B82B G70C L67C Z01B
B82C H43C L68Z Z40Z
C10Z H61C M05Z Z61A
C11Z J69C M63Z Z61B
C16Z I27C N07B Z63A
D63C I40Z N10Z Z63B
H63C J68C O04C Z64A
H64C I81Z O05Z Z64B
D13Z I82Z O66B Z65Z
Source: Victorian Auditor-General’s Office based on information from the Australian Consortium
for Classification Development.

Appendix B.
Audit Act 1994 section 16—
submissions and comments
Introduction
In accordance with section 16(3) of the Audit Act 1994, a copy of this report, or part of
this report, was provided to the Department of Health & Human Services and the 17
surveyed health services.
The submissions and comments provided are not subject to audit nor the evidentiary
standards required to reach an audit conclusion. Responsibility for the accuracy,
fairness and balance of those comments rests solely with the agency head.
Responses were received as follows:
Department of Health & Human Services ................................................................... 38

Eastern Health ............................................................................................................ 42
St Vincent’s Hospital ................................................................................................... 45
Further audit comment

Acting Auditor-General’s response to the submission from the Department
of Health & Human Services ....................................................................................... 41
Victorian Auditor-General’s Report Hospital Performance: Length of stay 37

Appendix B. Audit Act 1994 section 16—submissions and comments
RESPONSE provided by the Secretary, Department of Health & Human Services
38 Hospital Performance: Length of stay Victorian Auditor-General’s Report


– continued


– continued


– continued
Acting Auditor-General’s response to the submission

from the Department of Health & Human Services
In its response to Recommendation 1 the Department of Health & Human Services
(DHHS) states that its policy and practice already concurs substantially with this
recommendation. However, DHHS could not provide evidence during the audit that it
analyses its data at the Australian Refined Diagnosis Related Groups (AR-DRG) level
on acute patient length of stay (LOS), or seeks reasons from hospitals for significant
LOS variation.
DHHS also claims that the report contains a ‘questionable calculation of financial
resources which could be released by achievement of the length of stay of “better
performing” hospital campuses.’
I do not accept the claim that the calculation is questionable. The audit team worked
closely with costing staff at DHHS to develop the estimate, which the audit report
clearly qualifies.
The audit team also spent considerable time with DHHS to develop the Relative Stay
Index (RSI) methodology used throughout the report. This methodology was supported
by DHHS in the planning phase of the audit. It is identical to the methodology that
DHHS itself uses, with the exception of some technical definitions, such as the
extreme outliers.

RESPONSE provided by the Board Chair, Eastern Health

RESPONSE provided by the Board Chair, Eastern Health – continued

RESPONSE provided by the Board Chair, Eastern Health – continued

RESPONSE provided by the Acting Chief Executive Officer, St Vincent’s Hospital

RESPONSE provided by the Acting Chief Executive Officer, St Vincent’s Hospital

– continued

Auditor-General’s reports
Reports tabled during 2015–16
Report title Date tabled
Follow up of Collections Management in Cultural Agencies (2015–16:1) August 2015
Follow up of Managing Major Project (2015–16:2) August 2015
Follow up of Management of Staff Occupational Health and Safety in Public Schools August 2015
(2015–16:3)
Biosecurity: Livestock (2015–16:4) August 2015
Applying the High Value High Risk Process to Unsolicited Proposals (2015–16:5) August 2015
Unconventional Gas: Managing Risks and Impacts (2015–16:6) August 2015
Regional Growth Fund: Outcomes and Learnings (2015–16:7) September 2015
Realising the Benefits of Smart Meters (2015–16:8) September 2015
Delivering Services to Citizens and Consumers via Devices of Personal Choice: October 2015
Phase 2 (2015–16:9)
Financial Systems Controls Report: Information Technology 2014–15 (2015–16:10) October 2015
Department of Education and Training: Strategic Planning (2015–16:11) October 2015
Public Hospitals: 2014–15 Audit Snapshot (2015–16:12) November 2015
Auditor General’s Report on the Annual Financial Report of the State of Victoria, November 2015
2014–15 (2015–16:13)
Local Government: 2014–15 Audit Snapshot (2015–16:14) November 2015
Responses to Performance Audit Recommendations 2012–13 and 2013–14 December 2015

(2015–16:15)
East West Link Project (2015–16:16) December 2015
Portfolio Departments and Associated Entities: 2014–15 Audit Snapshot (2015–16:17) December 2015
Water Entities: 2014–15 Audit Snapshot (2015–16:18) December 2015
Implementing the Gifts, Benefits and Hospitality Framework (2015–16:19) December 2015
Access to Public Sector Information (2015–16:20) December 2015
Administration of Parole (2015–16:21) February 2016
VAGO’s website at www.audit.vic.gov.au contains a comprehensive list of all reports issued by VAGO.
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All reports are available for download in PDF and HTML format on our website
www.audit.vic.gov.au
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AUSTRALIA
Phone: +61 3 8601 7000

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Hospital Performance: Length of Stay

Victorian Auditor-General’s Report February 2016 2015–16:22

Level 24 Telephone 61 3 8601 7000

PP No 128, Session 2014–16

ISBN 978 1 925226 50 8

Dear Presiding Officers

Victorian Auditor-General’s Report Hospital Performance: Length of Stay iii

Audit summary .......................................................................................... ix

2. Variation in length of stay ....................................................................... 7

3. Responding to length of stay variation ................................................. 21

Appendix A. Audit methodology ............................................................... 33

Appendix B. Audit Act 1994 section 16—submissions and comments ...... 37

Victorian Auditor-General’s Report Hospital Performance: Length of Stay v

Victorian Auditor-General’s Report Hospital Performance: Length of Stay vii

Acute patient length of stay (LOS) is a well-accepted indicator of hospital efficiency.

Victorian Auditor-General’s Report Hospital Performance: Length of Stay ix

x Hospital Performance: Length of Stay Victorian Auditor-General’s Report

Hospitals report a number of common factors influencing LOS, either negatively or

Although DHHS has assisted hospitals to manage LOS by funding targeted

Victorian Auditor-General’s Report Hospital Performance: Length of Stay xi

Submissions and comments received

xii Hospital Performance: Length of Stay Victorian Auditor-General’s Report

Acute patient length of stay

Victorian Auditor-General’s Report Hospital Performance: Length of Stay 1

Average length of stay

Relative stay index

2 Hospital Performance: Length of Stay Victorian Auditor-General’s Report

Australian Refined Diagnosis Related Groups

Hospital peer groups

1.1.1 Roles and responsibilities

A primary objective of DHHS is to ‘improve the efficiency of healthcare services for

Victorian Auditor-General’s Report Hospital Performance: Length of Stay 3

Health services and public hospitals

1.2 Funding and performance monitoring

DHHS’s High-performing health services: Victorian health services performance

This performance-monitoring framework is the key source of information about how

4 Hospital Performance: Length of Stay Victorian Auditor-General’s Report

1.3 Previous audit

1.4 Audit objectives and scope

1.5 Audit method and cost

Victorian Auditor-General’s Report Hospital Performance: Length of Stay 5

This initial analysis was followed by a detailed examination of eight AR-DRGs, as it

The total cost of the audit was $460 000.

1.6 Structure of the report

6 Hospital Performance: Length of Stay Victorian Auditor-General’s Report

Victorian Auditor-General’s Report Hospital Performance: Length of Stay 7

2.3 Unexplained LOS variation between hospitals

8 Hospital Performance: Length of Stay Victorian Auditor-General’s Report

2.3.1 Lost opportunities

If all 21 hospitals were as efficient as the better performing hospitals in Victoria—

This estimate was made using the following limitations:

Victorian Auditor-General’s Report Hospital Performance: Length of Stay 9

10 Hospital Performance: Length of Stay Victorian Auditor-General’s Report

2.4 Unexplained LOS variation between hospital

Victorian Auditor-General’s Report Hospital Performance: Length of Stay 11

12 Hospital Performance: Length of Stay Victorian Auditor-General’s Report

Victorian Auditor-General’s Report Hospital Performance: Length of Stay 13