Nhcdc round 19 Independent Financial Review

10.Application of AHPCS Version 3.1

The following section summarises TAS-DHHS’s application of selected standards from version 3.1 of the AHPCS (outlined in Appendix TBC) to the Royal Hobart Hospital Round 20 NHCDC submission.

23. SCP 1.004 – Hospital Products in Scope

Costs are allocated to all products by TAS-DHHS. This was demonstrated through the templates submitted and interview process. TAS-DHHS staff noted that the AHPCS Version 3.1 is used as the basis for costing. Teaching and training, research and mental health costs are allocated to a system-generated patient and are not submitted to the NHCDC.

24. SCP 2.003 – Product Costs in Scope

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

25. 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.

26. 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. TAS-DHHS staff also indicated in the interview that the order of preference listed in the AHPCS version 3.1 is applied to allocated overhead costs. Where possible, TAS-DHHS will use direct allocation of overhead costs where a feeder is available such as meals and linen.

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

The application of this standard was demonstrated in the templates. TAS-DHHS also provided an overview of their internal reconciliation process which demonstrated the allocation of costs to products.

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

No commercial entities were reported. TAS-DHHS Finance staff make adjustments to the GL for some shared service arrangements by hospital. TAS-DHHS costing staff make further adjustments for shared service arrangements through the use of inpatient fractions. Based on discussions during the review, adherence with the standard was demonstrated.

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

During the interview, TAS-DHHS staff confirmed that no revenue offsetting was undertaken.

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

TAS-DHHS staff demonstrated during the interview that the Tasmanian reconciliation for financial and activity is robust through the use of the templates.

31. 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, with the exception of imaging costs. Imaging consumables are not separately identified and are recorded in the medical and surgical supplies. TAS-DHHS staff demonstrated (in the templates) that costs reconciled by NHCDC line item

32. GL 4A.002 – Critical Care Definition

Royal Hobart Hospital operates a standalone adult Intensive Care Unit (ICU), a Neonatal Intensive Care Unit (NICU), a Psychiatric ICU, a Coronary Care Unit (CCU) and a High Dependency Unit (HDU). All direct costs associated with each of these critical care areas are recorded in dedicated cost centres, with the exception of the Psychiatric ICU. The critical care costs could not be separated from the psychiatric ward cost centre.

The CCU and HDU are attached to the ICU. There are 18 beds in total and the bed classification varies based on the clinical classification of the patient. TAS-DHHS applies transfer rules to these direct cost centres to move costs such as pharmacy, nursing costs and patient transport for allocation via direct utilisation feeder. The hospital does not have any dedicated close observation units.

Critical care costs are captured in accordance with the applicable standard, with the exception of the Psychiatric ICU.

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

TAS-DHHS staff indicated that costs are allocated to public and private patients in the same manner at all hospitals within Tasmania. This includes costs associated with nursing salaries and wages, pathology, medical imaging and prosthesis.

Medical expenditure is handled in a similar way for both public and private patients. Medical salaries paid from special purpose funds are included in the costing process. Private patient revenue is not offset against the expenditure.

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

Patients are allocated costs based on their consumption of resources for that reporting period.
Royal Hobart Hospital submitted costs for admitted and discharged patients in 2015-16 and WIP costs for those patients admitted in 2014-15, and discharged in 2015-16.

11.Conclusion

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

• 
  TAS-DHHS staff that Tasmania will be merging its hospitals into one costing study for future rounds, however, will continue to submit costs to the NHCDC for the four hospitals separately.
  
• 
  The financial reconciliations demonstrated the transformation of cost data for Royal Hobart Hospital based on the final GL. The final GL reconciled to the audited financial statements as per advice from TAS-DHHS representatives. It should be noted that audited financial statements are not prepared at the Local Health Network (LHN) level in Tasmania and therefore, the audited financial statement amount could not be verified. Minor variances were noted for the Royal Hobart Hospital between the hospital expenditure and the costs allocated to patients.
  
• 
  The basis of the adjustments made by TAS-DHHS appears reasonable with the exception of the exclusion of Teaching and Training and Research, which may impact on the completeness of the NHCDC. In addition, TAS-DHHS should continue to investigate reasons for unmatched activity to ensure appropriate treatment in future rounds.
  
• 
  A variance of $25,567 was noted between the costs submitted to IHPA by TAS-DHHS and the costs received by IHPA. Royal Hobart Hospital was the pilot site visit for the Round 20 IFR. TAS-DHHS resubmitted NHCDC data post the completion of the templates and the site visit due to an identified error in allied health data. The variance is 0.002 percent of the total NHCDC submission for Tasmania and is considered immaterial by IHPA.
  
• 
  Total NHCDC activity data for the hospitals was adjusted by TAS-DHHS for the removal of records associated with excluded costs such as mental health, teaching and training, research, current year WIP, outside referred patients and other system-generated patients associated with non-ABF or out of scope activity.
  
• 
  A variance of two records was noted between the Non-admitted activity submitted to IHPA by TAS-DHHS and the activity received by IHPA. This variance related to the resubmission of data post the completion of the site visit.
  
• 
  The number of records linked from source to product was significant with all feeders having a 100 percent link or match. This suggests that there is robustness in the level of feeder activity reported back to episodes.
  
• 
  WIP was treated in accordance with the COST 5.002 of the AHPCS Version 3.1.
  
• 
  The five sample patients selected for review for Royal Hobart 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, TAS-DHHS 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.

5.