Public and private hospitals are estimated to have similar total costs, according to this report, but there are differences in the composition of costs between the two sectors, with medical and diagnostics, and prostheses more costly in private hospitals; and general hospital costs and capital costs higher in public hospitals.

This discussion draft responds to a request by the Australian government to examine three aspects of the health care system: the relative performance of public and private hospitals; rates of informed financial consent for privately insured patients; and the most appropriate indexation factor for the Medicare Levy Surcharge income thresholds.

With major differences within and between the public and private hospital sectors, like-for-like comparisons are difficult. Existing data collections are limited by inconsistent collection methods and missing information. The Commission has sought to address these limitations, but its initial cost estimates should be considered experimental.

Based on available data, the Commission also found that:

•    private hospitals appear to have lower infection rates than public hospitals (but private hospitals generally treat patients who have a lower risk of infection)

•    private hospitals have higher labour productivity and shorter lengths of stay than public hospitals (partly due to differences between what they do and who they treat).

The Commission will refine its comparison of costs and other indicators for the final report. Data enhancements for public hospitals foreshadowed by governments over the next few years and expanded reporting for private hospitals would better enable future comparisons.

Responding to other aspects of the reference, the Commission found that:

•    only a small proportion of private patients incur out-of-pocket expenses without providing informed financial consent

•    the most appropriate indexation factor for the Medicare Levy Surcharge income thresholds is Average Weekly Ordinary Time Earnings.

The Commission has released this discussion draft to encourage further discussion and input before it completes its final report in December 2009.