Nhcdc round 19 Independent Financial Review

Application of AHPCS Version 3.1

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

1. SCP 1.004 – Hospital Products in Scope

The three Victorian health services reviewed report against all products, with the exception of Teaching, Training and Research which is costed but not identified by product. This was demonstrated through the templates submitted and interview process. It was noted that health services cost according to the VCDC Business Rules.

System-generated records are created from unlinked feeder data and are allocated costs. The generation of system-generated 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 health services and VIC Health representatives demonstrated the reconciliation process for financial data used for costing purposes. Discussions indicated that all products are costed, including costs assigned to products in scope for the NHCDC, unlinked activity and costs assigned to system-generated patients where there is no activity. Unlinked activity and system-generated patients are not submitted to the NHCDC.

Teaching, Training and Research costs that can be identified as direct costs and identifiable in dedicated costs centres are spread across all costed activity. Embedded TTR is included within the expenses allocated to patients as it is not separately identified. Health service representatives in all interviews stated they are guided by the VCDC Business Rules. These costs are submitted to the NHCDC, but are not identified by product.

Depreciation and other capital related expenditure is not costed in accordance with the VCDC Business Rules.

3. SCP 3.001 - Matching Production and Cost

All three health services provided reclass and transfer detail in the templates. The application of this standard was demonstrated during the interview process including discussion of examples.

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

All three health services demonstrated that overhead costs were fully allocated to direct patient care areas via the pre allocation and post allocation data included in the templates.

Jurisdiction and health service personnel indicated that the order of preference for overhead allocation is based on the former clinical costing guidance from Clinical Costing Standards Association of Australia and the AHPCS Version 3.1.

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

The application of this standard was demonstrated in the templates for each of the three health services. VIC Health also provided an overview of their internal reconciliation process, which demonstrated the allocation of costs to products.

Again, it should be noted that Victorian health services cost to the VCDC Business Rules and whilst costs for teaching, training and research were not reported by product, these costs are spread across other products.

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

Commercial entities exist at all three health services. These costs were excluded from the costing system via special purpose funds.

The Royal Women’s Hospital has a PPP for the financing and infrastructure maintenance of the new hospital which was completed in 2008. The capital related expenditure of this PPP is excluded by The Royal Women’s Hospital in accordance with the VIC Health instructions, and costs such as security, car parking, portering, cleaning, engineering etc. are added to the GL for allocation to patients. The exclusion of the capital related expenditure may impact on the completeness of the NHCDC.

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

Victorian health services are advised not to offset revenue against costs as per the applicable standard. All three health services indicated that they did not offset revenue where the activity occurred at the relevant health service.

Community dialysis medical equipment hire revenue offsets expenditure at Austin Health. This relates to revenue received from other hospitals under a hub and spoke arrangement, where the activity sits outside the hospital and therefore should be offset against the expenditure of Austin Health.

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

VIC Health representatives outlined the reconciliation process for financial and activity data used for costing purposes. All three health services were able to produce statements that reconcile the activity and cost data outputs used in their patient level costing processes. These statements are submitted to VIC Health as part of the VCDC in a form of reconciliation templates including a Director’s attestation sign-off. The process has been improved in Round 20 and appears robust.

8. 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.

All three health services indicated that they costed according to the VCDC Business Rules and specifications, including associated cost centre mappings and account codes. VIC Health representatives indicated that these cost centres and account codes enabled mapping to both the VCDC and NHCDC requirements.

VIC Health undertook the mapping of the cost data submitted by participating health services. This mapping demonstrated that total costs were mapped to the standard specified line items and reconciled.

National Blood Authority products are reported in the pathology line item for Austin Health and Swan Hill District Health.

9. GL 4A.002 – Critical Care Definition

The Royal Women’s Hospital and Austin Health indicated that they had critical care areas comprising dedicated ICU’s and HDU’s (NICU and SCN at The Royal Women’s Hospital). The expenditure is reported in a critical care cost centre (HDU/ICU) at Austin Health and The Royal Women’s Hospital. Each hospital can identify the patients based on bed classifications. Both hospitals apply no weighting between the bed classifications.

Austin Health also has HDU beds throughout the hospital which are classified by the bed acuity system in place, these beds are included in the relevant ward costs and allocated to all patients who occupied that ward. Austin Health also has a Coronary Care located in a ward of the hospital. Coronary Care expenditure can be separately identified.

Critical care costs are captured in accordance with the applicable standard.

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

All three health services do not adjust costing specific patients based on their financial classification, i.e. whether they are a public or a privately insured patient. Applicable costs are allocated to private patients, including a share of a share of any associated costs such as pathology, radiology etc., in the same manner as public patients. Private patient revenue is not offset against any related expenditure.

At Swan Hill District Health Service, costs such as medical costs, pathology, and anaesthetist costs are billed directly to the patient and so private patients receive zero share of these costs in the costing system.

Private practice arrangements for medical officers are accounted for in special purpose funds and are excluded from the costing process.

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

Patients are allocated costs based on their consumption of resources for that reporting period. Where costs are incurred in prior years, only the costs for patients admitted in 2014-15 are included in the final costed data and NHCDC submission.

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