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Hospital costing focuses on the cost and mix of resources used to deliver patient care. Costing plays a vital role in activity based funding. Costing informs the development of classification systems and provides valuable information for pricing purposes. Hospital patient costing is essential for understanding the total costs involved in treating a patient including the services or products used. 

A key output of the Independent Hospital Pricing Authority (IHPA) is the collection, validation, analysis and reporting of the National Hospital Cost Data Collection (NHCDC). This process is performed in conjunction with states and territories and private hospitals, who submit cost data to the NHCDC on an annual basis, known as a round. 

IHPA is committed to improving data quality wherever possible to ensure that the national efficient price (NEP) and national efficient cost (NEC) are robust and transparent. In 2012–13, IHPA commissioned a strategic review of the NHCDC to assess the collection’s suitability as the primary data collection used to determine the NEP and NEC. The Strategic Review of the National Hospital Cost Data Collection recommended 20 key deliverables to guide IHPA in improving the processes, transparency and quality of the collection in future years.

IHPA continues to implement these recommendations and aims to improve the collection each round. IHPA also undertakes costing studies in areas where opportunities for improvement in understanding the cost of services are identified. Through these efforts, and the collaboration of the states and territories, significant improvements have been made to the standards, the collection structure and NHCDC validation and reporting tools.

The Australian Hospital Patient Costing Standards (AHPCS) provide direction for hospital patient costing through the development of standards for specific elements of the costing process and reporting requirements. The current version of the standards is the Australian Hospital Patient Costing Standards Version 4.1