Nhcdc round 19 Independent Financial Review

8.Recommendations

Noting the changes and developments implemented for Round 20 by jurisdictions and IHPA, the review team sought to identify potential areas where NHCDC processes could be improved to further enhance the value of NHCDC data and better streamline the submission process going forward. Three key recommendations are made to improve data and processes for future NHCDC rounds.

11. Unmatched/unlinked and out-of-scope activity

The review found that financial reconciliation processes are suitable for all jurisdictions and occur at the hospital/LHN level and also at the jurisdictional level. Hospitals/LHNs and jurisdictions made a number of adjustments to the financial data, including for unlinked/unmatched and out-of-scope activity. While the basis of these exclusions appears reasonable, it is important that the reasons for this unlinked/unmatched and out-of-scope activity are continually investigated and addressed if necessary. This recommendation was identified in Round 19 and is repeated here as it is a continual process to ensure appropriate treatment in future rounds.

12. The Independent Financial Review

The IFR commenced in Round 14 and has evolved significantly since then from a pure financial reconciliation exercise to a more detailed end-to-end financial reconciliation and now also includes a complete activity reconciliation. As jurisdictions and hospitals are continuously improving their reconciliation processes, linking of feeders and the utilisation of cost data for decision-making purposes, it is important the IFR also continues to evolve. Feedback during the Round 20 site visits suggested that jurisdictions see the need for further evolution of the IFR, to ensure it remains valuable and meets its intended objectives.

The objectives of the Round 20 IFR are detailed in Section 1 of this report. Moving forward, KPMG considers it important that these objectives are maintained. However, there are measures that can be implemented both at the point of NHCDC submission to IHPA and via the scope of the future IFRs that can cement it as a learning tool which continues to add value to IHPA’s stakeholders.

IHPA has commenced the implementation of measures that will assist in addressing the first three objectives at the point of NHCDC submission. IHPA will require for future rounds:

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  A financial and activity reconciliation to be submitted with the NHCDC data for each hospital/costing site. This is currently being piloted for Round 20 and includes a summary of costing and adjustments made at the hospital/costing site and the jurisdiction levels.
  
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  A declaration statement from jurisdictions to confirm that they have applied the AHPCS, or identify where the standards were not applied and reasons therefore.
  

These measures are an important step for the IFR process and form a basis for considering changes to the scope of future IFRs.

The current scope of the IFR includes a reconciliation of expenditure and activity to ensure that all relevant costs/activity are included/excluded as necessary. However, it only considers that relevant hospital expenditure is allocated to patients, not how the expenditure is allocated to patients. How expenditure is allocated is extremely valuable to jurisdictions and IHPA to better understand the variances that exist between hospitals, locations, and jurisdictions.

Changing the scope will also encourage IHPA and jurisdictions to focus their efforts on identifying the most appropriate costing methodologies in the future and can inform changes to AHPCS as necessary.

KPMG has summarised additional review methods that IHPA and jurisdictions may wish to consider for future IFR rounds:

(a)Cost Methodology Review

One of the learnings from the Peer Review process is that peer reviewers find value in discussing cost allocation approaches within various jurisdictions and health services. To expand on the scope of reconciled data and activity, a series of templates could be designed to demonstrate the cost allocation approaches within various health services. This could potentially serve a number of purposes including:

1. 
   Providing costing practitioners insight into the allocation approaches within other health services to promote dialogue and discussion.
   
2. 
   Enabling greater transparency as to how a health service costing approach aligns with the AHPCS.
   
3. 
   Providing IHPA with some further systems intelligence as to which health services have more detailed feeders and their approach to cost allocation. This would provide detail when trying to understand certain cost variation, provide insight as to which data may be best used to help develop pricing or funding model adjustments (e.g. such as co-payment development) or to help target specific health services when looking to undertake a costing study.
   

(b)Sample Patient Reconciliation at the Intermediate Product Level

The current IFR process takes a random sample of patient level data and checks costs from jurisdiction to IHPA to ensure patient costs have flowed through the submission process. This process could be improved by targeting a particular cohort of patients (such as non-admitted patients from a range of Tier 2 clinics) and requesting that the intermediate product costs per patient are presented. This would enable greater transparency into the composition of costs per patient per clinic and provide reviewers and peer reviewers the ability to review, discuss and understand how costs are constructed across the various stages of costing; including cost centres, feeders, relative weightings and linking.

(c)Measuring Cost Completeness

There is value in taking a sample of like patients across various health services to measure the underlying costs at intermediate product level to understand the types of resources that comprise patient level costs. This data would also include utilisation information at resource / intermediate product level which would also give further insight into the composition of resources.

If a particular patient cohort was selected, there is value in mapping the clinical pathway of this cohort and matching the intermediate product data to this. This would help gather further intelligence to the degree of cost completeness within costed records.

This form of analysis has yet to be undertaken as part of the NHCDC and would provide a number of opportunities going forward to cement the IFR process as a learning tool. Benefits may include

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  health services adopt learnings for cost improvement;
  
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  Updates to the AHPCS to reflect learnings; and
  
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  Further funding model development at the jurisdiction and IHPA level.
  

Ideally this form of work would take the form of a series of workshops that could be facilitated by the IFR consultant and include relevant costing staff from the jurisdictions.

(d)Other considerations

KPMG still considers it important that the IFR includes reviews of the financial and activity data as part of the IFR, however, it may not need to be as detailed as per the current scope. IHPA may wish to consider the following:

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  Reviewing costing sites, rather than hospitals. For example, in NSW, QLD, WA and SA, costing is undertaken at the Local Health Network level, rather than at the hospital level. This would simplify the reconciliations required from jurisdictions at NHCDC submission and may require a reconsideration of the sampling framework that was piloted in Round 20.
  
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  Review of financial and activity data on an exceptions basis for each hospital/health service (i.e. where there are discrepancies in the reconciliations provided by jurisdictions at the point of NHCDC submission).
  
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  IFR templates that detail adjustments (such as WIP, out of scope items etc.) to the financial and activity data. KPMG can then target review questions at items that require clarification, rather than detailed line-by-line questioning of the templates.
  
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  Simplified reporting of application of the AHPCS. This would be on an exceptions basis, rather than for each standard/business rule and will be informed by the declaration accompanying the NHCDC submission.
  

13. Peer review process

During the Round 20 IFR, the ability of all jurisdictions to participate in the peer review has been limited compared to previous rounds (for reasons including timing and travel constraints), with only four jurisdictions nominating representatives for the peer review. Despite this, participating peers reported that they received substantial value from attending the site visits and see the opportunity to participate in the peer review process as a useful learning tool. Recommendations from peer reviewers included reviews to the IFR scope and making video conferencing a viable alternative for peer review participation.

It is recommended that the peer review process continues in its current form in future IFR rounds as the process is still considered valuable. IHPA, jurisdictions and the IFR consultant should seek to confirm site visits earlier during the project, to ensure peer reviewers have adequate time for travel approvals within their State/Territory Departments. The use of video conferencing should also be considered as a viable alternative for peer reviewers, where facilities are available.