Nhcdc round 19 Independent Financial Review

New South Wales

1. Jurisdictional overview

   1. Management of NHCDC process

New South Wales (NSW) has fifteen Local Health Districts (LHDs) (eight covering metropolitan areas and seven in rural areas) with three Speciality Health Networks (SHNs) which focus on children’s and paediatric services, forensic mental health, justice health and the public hospital services provided by the St Vincent’s Health Network. Published financial statements are reported at the LHD/SHN level.

Since the inception of Activity Based Funding (ABF), the NSW Ministry of Health (NSW Health) has invested heavily in patient level costing to inform its Activity Based Management (ABM) functions at both state and national levels. Each of the LHDs/SHNs are required to operate and maintain patient level costing systems as part of their conditions of subsidy with NSW Health.

The ABM Team at NSW Health includes a costing team and data acquisition team, which provide support to the LHD/SHN who prepare, process and submit the District and Network Return (DNR) – the NSW patient level cost submission. This support includes:

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  Cost Accounting Guidelines (CAG) – which specifies costing standards, costing guidelines and technical specifications for the DNR. NSW Health advised that the Australian Hospital Costing Standards Version 3.1 are embedded within the CAG and the CAG is reviewed each year.
  
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  Extractor – a tool to extract the inpatient and emergency activity files for costing from the LHD/SHN Health Information Exchange (HIE) in a standard format.
  
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  Non Admitted Patient (NAP) Datamart – which provides costing views to non-admitted activity in a standard format.
  
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  Feeder data – a number of tools have been developed to assist with the standard formatting of feeder data such as operating theatre and imaging.
  
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  A collaborative space – which provides access to the extractor, the general ledger (GL), documentation and a range of tools.
  

Additionally, a mandatory DNR Audit Program is undertaken annually by LHD/SHN, Internal Audit teams or an external consultant. The DNR Audit Program is mandated within LHD/SHN service agreements and is a condition of subsidy. The DNR Audit Program has three lines of inquiry:

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  Is the financial and patient data reliable and accurate?
  
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  Are costing methodology used appropriate and robust? and
  
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  Does the preparation of the DNR comply with the NSW CAG?
  

Universal access to standard queries and reporting tools has been provided to all LHD/SHN staff to ensure that there is a consistent approach to costing. This is in recognition of the fact that there are various levels of experience and costing skills within the sector. A NSW Costing Standards User Group is convened and meets on a regular basis. All matters related to costing are considered and determined with the members. The ABM Team also supports the Costing Standards User Group by undertaking a series of workshops and training sessions each year for LHD/SHN costing staff.

NSW Health utilises a standard build of PowerPerformance Manager (PPM2) across all LHDs/SHNs. Patient level costing at all LHDs/SHNs is conducted on a bi-annual basis. The six-month costing provides an opportunity to test initiatives and sometimes identifies data quality issues that may affect the final annual submission. Annual costing is then undertaken deleting all six-month general ledger and patient activity data and loading the GL, activity and feeder data for a full twelve months.

Reloading optimises all revisions in both the financial and activity data. A draft DNR submission is supplied by LHDs and SHNs to NSW Health in October and following further revisions, a final DNR is signed off, reconciled and submitted in November. The DNR submission is made using a secure file transfer environment.

During the draft submission period, over sixty patient-level data quality tests are performed on the cost data and average cost per class for each facility is reported back to LHD/SHNs through the Reasonableness and Quality (RQ) Application. To support LHD/SHN costing staff the results of these data quality tests are returned to the LHD/SHN the following business day. The quality of the cost data is scored and a graphical summary of the cost data against previous collections is provided. During the draft submission period, LHD/SHNs may submit repeatedly to correct cost allocation issues.

The draft submission period also includes a teleconference with each LHD/SHN Chief Executive to review the current draft submission cost results. Material year on year changes are flagged and discussed with issues for further investigation identified.

Once finalised, the LHD/SHN Chief Executive submits a signed letter and reconciliation schedule that demonstrates reconciliation to the published financial statements to formally advise of the finalisation of the DNR submission. The ABM Team does not alter cost data submissions received from LHDs/SHNs.

The data reported through the DNR will inform a range of State and National data reporting obligations, including the NHCDC (based on a policy of single submission for multiple uses). The ABM Team is responsible for the collation, formatting, consolidating, review and submission of the LHD/SHN patient level costed data for the NHCDC.

Only patient level data for ABF facilities is submitted to the NHCDC. The ABM Team adjusts for Work In Progress (WIP) patient records from prior years. Records that fail the IHPA validation checks are excluded from the submission and so too activity that is deemed out of scope for ABF purposes. Once the NHCDC submission is finalised, a data quality statement is provided and published in the cost report.

NSW nominated Hunter New England LHD to participate in the review for Round 20. The Hunter New England LHD includes John Hunter Hospital, Tamworth Hospital, Calvary Mater Newcastle, Inverell District Hospital and Moree District Hospital, which meet the sampling criteria for Round 20.

Key initiatives since Round 19 NHCDC

The following initiatives have been implemented since the Round 19 NHCDC submission:

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  The ABM Team worked with all LHDs/SHNs collaboratively to review system generated encounters and the associated linking rule analysis to improve precision in linking of encounter and feeder data. This work was undertaken in collaboration with the NSW Costing Standards User Group. The ABM Team reported that following this work, their internal review of costs demonstrated greater improvement in linking and therefore associated costs at episode level as a result.
  
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  The DNR module was completely rebuilt to improve the efficiency of the reporting process and the testing processes for the RQ Application and the DNR module were improved. This improvement included further cost data edit checks and subsequent review of cost data.
  
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  Improvements to the NSW costing guidelines resulted in further refinement of the costing methodologies in the following areas:
  
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  The inclusions and exclusions definitions for Teaching, Training and Research (TTR) products were further refined.
  
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  Cost allocation methodology relating to Non Admitted Patients was further refined to better align with the actual resource consumption.
  
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  Cost allocation methodology relating to the Emergency Department (ED) was refined using the Relative Value Units (RVUs) developed as part of the IHPA Emergency Care Costing Study in which NSW Health took part as a pilot. As a result, the current costing methodology no longer uses RVUs associated with the triage process as the drivers for allocation, but examines a combination of factors including location of patient in the emergency department (such as cubicles or resuscitation bay) and diagnosis. The refined costing methodology was applied state-wide to all ABF hospitals except for Royal Prince Alfred Hospital, Blacktown Hospital, Port Macquarie Base Hospital and The Sydney Children’s Hospital, which used their own RVUs developed as part of the study. In the Round 21 NHCDC, each hospital will use their own RVUs.
  
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  Standardised state-wide adoption of refined RVUs to allocate costs for oral health developed for each dental item.
  
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  The RVUs used for the cost allocation methodology for Non-Emergency Patient Transport services in metropolitan LHDs was revised to reflect the actual number of kilometres travelled.
  
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  Inpatient mental health nursing RVUs developed during IHPAs Mental Health Costing Study were updated following consultation with the NSW Mental Health Working Group.
  

2.