The Hidden Bias in Day Hospital Price Benchmarking

PHDB Data and the Hidden Bias in Day Hospital Price Benchmarking

The Private Health Data Bureau Annual Report (PHDB-AR) is often used as a convenient national benchmark for comparing charges across day hospitals. It appears comprehensive, transparent, and standardised. But beneath the surface, PHDB’s inclusiveness is also its biggest flaw.

Unlike the Hospital Casemix Protocol Annual Report (HCP-AR), which only captures episodes where a private health insurer has paid a benefit, the PHDB-AR includes all admitted patient episodes — regardless of who pays the bill.

That means self-funded admissions, cosmetic or non-insured elective cases, and even compensable or other funding arrangements are all bundled into the same averages.

In the day hospital environment — where self-funded care has grown sharply in recent years — that inclusion distorts the dataset.

When Self-Funded Admissions Distort the Average

Here’s why this matters:

Day hospitals are uniquely exposed to the self-funded segment, particularly in specialties like ophthalmology, endoscopy, plastic and cosmetic procedures, and dental surgery. In many facilities, 30–50% of total admissions can fall outside the private health insurance system.

Those episodes are billed at rates set entirely by the day hospital, often higher than the rebates paid by insurers for comparable insured services. When those self-funded charges are included in the PHDB dataset, they inflate the average charge per separation across the relevant AR-DRGs.

This creates an artificial uplift in “average” pricing levels for day hospitals nationally.

The result? When a hospital uses PHDB benchmarks to compare its insured pricing performance, it may appear to be undercharging relative to the market — when in fact, the benchmark itself is distorted by high-priced, non-insured cases.

The Negotiation Trap

From a commercial standpoint, this misalignment matters because private health insurers do not use PHDB data when forming their own view of market prices. Their internal benchmarking is built from HCP-AR data — reflecting the charges and benefits associated only with insured episodes.

That means a hospital benchmarking its PHI pricing against PHDB averages is effectively using a different dataset from its negotiation counterpart.

In practice, this can lead to two common and costly outcomes:

1. Overconfidence in pricing — A hospital assumes its prices are below the market average and pushes for increases, only to find the insurer’s data tells a different story.

2. Missed leverage opportunities — Alternatively, executives may understate their position, assuming they’re already above market, when insurer-aligned data would show they’re not.

Both scenarios erode negotiation strength and obscure the real story of how a facility performs within the insured market.

Why HCP Data Tells a Clearer Story

The Hospital Casemix Protocol Annual Report (HCP-AR) eliminates this distortion by only including episodes funded by private health insurers.

For day hospitals, this alignment with insurer-paid activity ensures that:

• Benchmarking reflects the same data insurers use internally.

• Price comparisons are like-for-like, excluding non-insured episodes.

• Trends in negotiated charges can be monitored without distortion from self-funded case mix.

It’s a cleaner, insurer-aligned view of how your facility actually performs in the marketplace that matters most — the PHI-funded market.

The Strategic Takeaway for Day Hospital Leaders

In an environment where margins are tightening and insurers are applying increasingly sophisticated pricing analytics, benchmarking accuracy matters more than ever. For day hospitals, continuing to rely solely on PHDB benchmarks introduces a structural bias — one that can quietly undermine pricing confidence and negotiation outcomes.

By pivoting to HCP-aligned benchmarking, executives gain a more precise understanding of their insured revenue base and can negotiate with insurers on equal informational footing.

Does this mean that PHDB data has no value in benchmarking? Not at all. In fact, if you are reviewing your uninsured rates then PHDB is a far better indication of what, on average, your competitors are charging. However, if using the PHDB data in Private Health Insurance negotiation, then Insurers may not recognise or accept these averages as relevant for Day Hospitals.

Want to See the Full Analysis?

Our latest white paper — “HCP vs PHDB Price Benchmarking for Private Hospitals” — explores this issue in depth, with detailed comparisons across day and overnight facilities, state-based variations, and DRG-level insights.

👉 Download the white paper here to see how PHDB data may be overstating your market position — and what to do about it.