ASSIGNMENT 2

Q1: Explain the difference between revenue and expenditure in the health system.
Revenue is the income of an organization that generates from the sale of goods or
services or through use of assets/ capital before any costs or expenses are deducted. For
example, when a patient is billed the invoice may not be settled for some time but the
asset is recognised at the time bill is created. It is usually known as top item in profit and
loss statements. In the health system Revenue comes from patient’s bills, donations,
government subsidy, returns on investments and takings from the kiosk etc.
However, expenditure in health system is an act of spending funds or money by a
hospital. It is known as payment in form of salaries, wages or bills to bur pharmaceutical,
food and laundry services by a health organization. Just like revenue transactions,
expense transactions are recognised when the transaction is entered into, not when the bill
is ultimately paid. Similarly when the invoice is ultimately paid, there is not another
expense. The timing will, however, have an effect on the cash position.

Q2: What is activity based funding and how are funding allocations determine in
the NSW Health System?
Activity Based Funding (ABD) is the way of funding a public hospital by the
Commonwealth Government under The National Health Reform Agreement, signed by
the Commonwealth Government, all states and territories in August 2011. This is a
national approach to fund public hospital services and block funding for small regional
and rural hospitals; while setting new performance, accountability and transparency
mechanisms. The hospitals were paid for the number and mix of patients treated by them.
Other important components kept in consideration while allocating funds in the NSW
Health System are; medical services, prescription pharmaceuticals and ranking of
hospital treatment. If a hospital treats more patients in a better way, it receives more
funding because some patients are more complicated to treat than others.
Q3: Describe Casemix and the Australian DRG system of classification.
Casemix also known as patient mix is a term refers to the mix of patient’s type
treated by a hospital or other health care facility. It provides a consistent method for
classifying the types of patients, their treatment and associated cost within the health care
industry. Thus, Casemix classifications are significant to explain the relationship between
health care activity and costs. They make use of data about patients that are clinically
meaningful and explain variation in resource use.
While, The Australian DRG system of classification is used to classify acute
admitted patients with other casemix classifications used to define patient care. All
patients who are admitted to hospital have record of their diseases and procedure
undertaken during the admission using code of ICD-10-AM/ACHI/ACS. This coding is
undertaken by specialist clinical coding staff along with some patient demographic data,
e.g. age, sex, patient’s length of stay. The details were later used to allocate acute patient
admissions to an AR-DRG class. DRG assignment is either performed by the clinical
coder (if they are using coding and grouping software), or by the hospital and/or relevant
state health authority.