Understanding variation: the key to cost reduction and quality improvement.

Analyses of acute hospital services in Australia reveal geographic differences in the rates of utilization. In order to meet the important challenge of improving the quality of services it is necessary to understand the nature and causes of the variation in these utilization measures. This paper provides examples of the variation in admission rates and lengths of stay for selected procedures in Australian States and shows that the length of stay is related to the variation in admission rates. It concludes that a greater understanding of both the admission and discharge processes is necessary to improve quality and produce cost savings.