Nhcdc round 19 Independent Financial Review

Application of AHPCS Version 3.1

The following section summarises NT Health’s application of selected standards from Version 3.1 of the AHPCS (outlined in Appendix C) to the Royal Darwin Hospital’s Round 20 NHCDC submission.

1. SCP 1.004 – Hospital Products in Scope

Costs are allocated to all products by NT Health, with the exception of Research. This was demonstrated through the templates submitted and interview process.

In the majority of feeders unlinked feeder data are allocated to system-generated records to which costs are allocated. The generation of these records is specific to the feeder. These system-generated records with costs are not submitted to the NHCDC.

2. SCP 2.003 – Product Costs in Scope

The NT reconciliation process for financial data used for costing purposes was demonstrated through the interview process. It was also stated that all products are costed including costs assigned to products in scope for the NHCDC with the exception of Research, unlinked activity assigned to a system-generated patient and costs assigned to system-generated patients where there is no activity.

3. SCP 2B.002 - Research Costs

During the interview process NT Health advised that there were no research costs assigned to the research product at the Royal Darwin Hospital. Where research is undertaken, these expenditures are embedded within the teaching and training product.

4. SCP 3.001 - Matching Production and Cost

The application of this standard was demonstrated during the interview and an excel file was produced from the costing system which outlined all transfers and offsets utilised.

5. SCP 3A.001 - Matching Production and Cost – Overhead Cost Allocation

The jurisdiction was able to demonstrate that overhead costs were fully allocated to direct patient care areas via the pre allocation and post allocation data included in the templates.

6. SCP 3B.001 - Matching Production and Cost – Costing all Products

This application of this standard was demonstrated in the template and NT Health provided an overview of their internal reconciliation process which demonstrated the allocation of costs to products.

7. SCP 3C.001 - Matching Production and Cost – Commercial Business Entities

NT Health does have commercial entities. During the review, NT Health representatives stated that these costs were excluded from the costing process.

8. SCP 3E.001 - Matching Production and Cost – Offsets and Recoveries

Revenue is not offset against any expenditure (with the exception of revenue received for non-health related facilities that NT Health receives revenue for). Costs associated with services provided to external clients are excluded from the costing process.

9. SCP 3G.001 – Matching Production and Cost – Reconciliation to Source Data

NT Health representatives outlined the reconciliation process for financial and activity data used for costing purposes. Based on a review of the templates, the process appears robust.

10. GL 2.004 - Account Code Mapping to Line Items

The purpose of this standard is to ensure that all cost data can be mapped to standardised line items for both NHCDC collection and comparative purposes. The template submitted by NT Health reflected that account codes and associated costs from the costing system were only allocated to the specific line items, in accordance with the standard. This was confirmed during the site visit.

11. GL 4A.002 – Critical Care Definition

Direct costs associated with the ICU are captured in dedicated cost centres. The Royal Darwin Hospital operates a combined ICU and HDU. Patients in HDU are costed in the same way as ICU patients as there is no method to differentiate the patients in the source systems. The total costs of ICU (which includes the HDU) is allocated across the ICU/HDU patients based on the time spent by each patient in the ICU/HDU.

The Royal Darwin Hospital does not have any dedicated close observation units. Critical care costs are captured in accordance with the applicable standard.

12. COST 3A.002 – Allocation of Medical Costs for Private and Public Patients

Costs are allocated to public and private patients in the same manner. This includes costs associated with medical and nursing salaries and wages, pathology, medical imaging and prosthesis. There is no offsetting of private patient revenue against the expenditure.

13. COST 5.002 - Treatment of Work-In-Progress Costs

Discussions revealed that patients are allocated costs based on their consumption of resources for that reporting period. Where costs are incurred in prior years, these are also included in the final costed data and NHCDC submission.

7. Conclusion

The findings of the NT Round 20 IFR are summarised below:

NT Health did not implement new costing initiatives during the Round 20 NHCDC, however, submitted teaching and training costs to IHPA which were previously excluded in Round 19.

The financial reconciliation demonstrates the transformation of cost data from the original GL extract through to the final NHCDC submission for the Royal Darwin Hospital. Major exclusions from this hospital data included out-of-scope costs not directly related to hospital services and out of scope costs, for the Top end and Central LHN, such as primary care services, cross border services, patient travel, aged care and Drug and Alcohol services. There were no unexplained variances in the financial reconciliation of the hospital’s NHCDC submissions. The costs submitted to the jurisdiction and IHPA represented approximately 41.59 percent of the total GL expenditure for the NT LHNs (excluding WIP from prior years’ expenditure as it relates to prior year costs). There were no unexplained variances in the financial reconciliation of Royal Darwin Hospital.

The basis of the adjustments made by NT Health appears reasonable.

WIP was treated in accordance with the COST 5.002 of the AHPCS Version 3.1.

Activity for Royal Darwin Hospital was not adjusted between the hospital and the jurisdiction as the activity presented was for the hospital only. This activity was the final costed activity, post the adjustments made for the whole of NT Health.

The number of records linked from source to product was significant with all feeders having a greater than 95 percent link or match. This suggests that there is robustness in the level of feeder activity reported back to episodes.

The five sample patients selected for review for the Royal Darwin Hospital reconciled to IHPA records.

The IFR is conducted in accordance with the review methodology detailed in Section 1.3 of this report. Based on this methodology and in accordance with the limitations identified in Section 1.1, NT Health has suitable reconciliation processes in place and the financial data is considered fit for NHCDC submission. Furthermore, the data flow from the jurisdiction to IHPA demonstrated no unexplained variances.

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