Patients who are admitted to St George and Campbelltown hospitals receive the cheapest treatment in NSW, while those who have procedures at Hornsby Ku-ring-gai Hospital are the most expensive.
But the cost of treatment varies wildly between hospitals, with some public hospitals spending nearly twice as much as others to deliver the same procedure to similar patients.
The National Health Performance Authority has measured the efficiency of individual hospitals by calculating the cost of delivering a notional "average" service at each hospital.
The report, released on Thursday, comes ahead of next week's federal budget, when $2.9 billion in federal funding is expected to be added to state and territory public hospitals between 2017 and 2020.
Hornsby Ku-ring-gai had the average cost of a procedure surge by 17 per cent between 2011-12 and 2013-14 - the biggest efficiency loss of any public hospital in Australia.
Westmead Hospital increased its activity without spending more and Campbelltown managed to do more with less.
Western Sydney Local Health District chief executive Danny O'Connor said his district, which includes Westmead, was the least efficient in 2011 "by a very long way", although some of this may have been because it was not documenting all the work that it did.
However, he said the administration had overhauled its business model, engaged its senior clinicians and become more organised in the way it packaged the care process for patients.
"There is ample evidence across the world that the safest and best quality care delivered by the most proficient practitioners is most likely to be at the lowest cost," Dr O'Connor said.
A shorter length of stay, for example, minimised the chance of medical errors or acute infections.
"Any dollar wasted is an opportunity for gone to treat another patient."
Westmead Hospital and the Western Hospital in Victoria made the greatest efficiency gains across the three year period.
A spokesman for the Northern Sydney Local Health District said its costs had increased at Hornsby after a "significant" increase to its mental health services in 2013, including 10 adult beds and 12 child and adolescent beds.
The NHPA report said that improved efficiencies did not necessarily translate to better patient outcomes and needed to be considered with other indicators of quality.
Nepean Hospital is among the best performers in NSW in terms of efficiency, but clinicians say it is stretched to the limit with more patients than it can physically accommodate.
Medical Staff Council chair Nhi Nguyen said although the hospital was treating its patients for cheaper than elsewhere, it was missing its elective surgery and emergency targets.
"We can't be any more efficient," Dr Nguyen said. "We can't move patients on faster, we can't see patients any faster because we've reached the limit for beds.
"That's the challenge for us. We just are totally bed blocked."
A spokesman for Nepean Blue Mountains Local Health District said the administration was working with other hospitals in the area to share theatre space and the NSW Government had announced $4 million for the redevelopment of Nepean Hospital.
The four major metropolitan hospitals which spent the least on care on average in 2013-14 were all in Victoria, while the four that spent the most were in ACT and Western Australia.
Tom Symondson, chief executive officer of the Victorian Healthcare Association, said Victorian hospitals had long been more efficient than in other states, largely because it had moved away from block funding to introduce the "activity based funding" model years earlier in 1994.
This article originally appeared on www.smh.com.au
