Beyond the Day Hospital: Why Overnight Hospitals Are the Real Test of Benchmarking Accuracy

Australia’s overnight private hospitals handle the most complex and highest-value episodes in the system — yet benchmarking data for these facilities is often inconsistent. Differences between DoHAC’s HCP-AR and PHDB datasets can distort comparisons, undervaluing hospital performance and contract positions. This article explains why PHDB’s broader inclusions tend to flatten overnight pricing, how HCP-AR provides a truer picture of insured-market benchmarks, and how the ROADS platform applies that precision so executives can negotiate with confidence.

The real test of benchmarking accuracy

Every contract negotiation in the private hospital sector begins and ends with one question: what’s the benchmark?

For overnight hospitals — where patients stay longer, care is more complex, and contract values run into tens of millions — the answer carries real financial weight. Yet too often, benchmarking relies on datasets that blur the true market signal.

In our earlier articles, we explored why dataset choice matters and how PHDB can bias day-hospital comparisons. This final piece in the series turns to the real proving ground of benchmarking integrity: Australia’s overnight hospitals.

Why overnight hospitals matter

Overnight facilities account for about 72 per cent of total private hospital revenue (DoHAC HCP-AR 2024). Their case-mix is intensive — cardiac, orthopaedic, and oncology episodes dominate — and small differences in benchmarked charges can shift contract values by millions.

In this context, data accuracy is not academic. A five per cent benchmark misalignment can represent a seven-figure contract swing. Precision is strategic.

The dataset divide — and why direction matters

Australia’s two key national datasets each capture legitimate but distinct realities:

• HCP-AR (Hospital Casemix Protocol Annual Report) — insurer-centred, capturing only privately insured admitted episodes.

• PHDB-AR (Private Health Data Bureau Annual Report) — provider-centred, including all admitted care in private hospitals, regardless of payer.

  
  

In day hospitals, PHDB’s data sometimes runs higher because of inclusion of self-funded short-stay procedures and prosthesis-heavy episodes.But for overnight hospitals, the pattern reverses.

PHDB’s inclusion of non-insured and compensable cases tends to flatten the average, making PHDB-reported charges lower than those in HCP-AR. In the 2024 data, HCP-AR benchmarks for overnight DRGs were typically 15–25 per cent higher than PHDB, reflecting the insured-market revenue hospitals actually realise.

When averages understate value

Take a cardiology DRG (F62A – complex cardiac procedures).If PHDB reports an average hospital charge of $22,900 while HCP-AR shows $27,000, that 18 per cent gap can make a high-performing hospital appear inefficient when it isn’t.

When used in contract negotiations, the lower PHDB average undervalues legitimate clinical complexity and service intensity, compressing margins and misrepresenting efficiency. Across a 600-case annual volume, that single variance represents more than $2.5 million in foregone contract value — a tangible loss driven purely by dataset choice.

Why HCP-AR gives a truer benchmark

1. It mirrors actual insurer-paid activityHCP-AR isolates privately insured separations — the financial core of the private hospital model.

2. It provides a consistent structureStratified by state, facility type, and AR-DRG version, HCP-AR enables year-on-year comparison without changing inclusion logic.

3. It carries regulatory legitimacyRecognised by DoHAC and APRA as the insurer-aligned standard, HCP-AR supports credible performance analysis.

4. It delivers statistical clarityFor overnight facilities, PHDB dispersion (standard deviation) is roughly 1.7× greater than HCP-AR, signalling higher data noise. Filtering to HCP-AR reveals a cleaner view of contract-relevant variance.

How ROADS turns that precision into advantage

Empowered Health Analytics’ ROADS (Revenue Optimisation and Decision Support) platform uses HCP-AR data as its benchmarking foundation. ROADS performs level-matched DRG analysis (v6.0X–v10.0), normalises results by state and facility type, and quantifies variance via RMS dispersion and percentile profiling (p01–p99).

Executives can instantly see whether their own pricing deviations reflect real performance differences or dataset distortion. Every figure in ROADS is traceable to its HCP-AR source entry — giving hospitals full transparency and confidence in their benchmarks.

Strategic takeaway

For overnight hospitals, benchmarking precision equals pricing power.When comparisons rely on PHDB, facilities risk under-valuing their insured-market activity.

When grounded in HCP-AR, they capture the true economics of private care delivery.

Hospital executives should be asking:

1. Are our overnight benchmarks based on insured episodes only?

2. Can we trace every variance to HCP-AR source data?

3. Are we measuring ourselves against the true contracting market?

If the answer to any of these is no, it’s time to reassess. ROADS makes that process faster, clearer, and more reliable.

Key Data Highlights

Metric	HCP-AR 2024	PHDB-AR 2024	Variance (approx.)
Average charge per overnight separation (all DRGs)	$13,800	$11,950	+15.5 % (HCP higher)
Cardiology (F62A example)	$27,000	$22,900	+18 % (HCP higher)
Orthopaedics (I04B example)	$18,400	$15,600	+17.9 % (HCP higher)
Revenue share (overnight vs day facilities)	72 %	28 %	—

Sources: Department of Health and Aged Care (HCP-AR 2024); Empowered Health Analytics (HCP vs PHDB White Paper 2024); AIHW (Private Hospitals 2023).

Closing thought

Benchmarking overnight hospitals demands more than a good dataset — it demands the right one.By anchoring analytics to HCP-AR data, the ROADS platform ensures that benchmarking reflects true insured-market performance, empowering leaders to negotiate on facts, not distortions.

References

• Department of Health and Aged Care (2024). Hospital Casemix Protocol Annual Report. Canberra: DoHAC.

• Empowered Health Analytics (2024). HCP vs PHDB Price Benchmarking White Paper.

• Australian Institute of Health and Welfare (2023). Private Hospitals Australia 2021–22.

• Australian Prudential Regulation Authority (2024). Private Health Insurance Quarterly Statistics.