Nhcdc round 19 Independent Financial Review

Application of AHPCS Version 3.1

The following section summarises ACT Health’s application of selected standards from Version 3.1 of the AHPCS (outlined in Appendix I) to the Canberra Hospital Round 19 NHCDC submission.

1. SCP 1.004 – Hospital Products in Scope

ACT Health representatives demonstrated through the templates submitted and interview process that costs are reported against all products. It was noted that costs are also created for non-patient products (such as commercial entities) which are not submitted to the NHCDC.

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

Through the interview process, ACT Health representatives demonstrated the reconciliation process for financial data used for costing purposes. Discussions indicate 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.

Blood products and organ retrieval services were removed by ACT Health.

3. SCP 2B.002 - Research Costs

Research costs are assigned to a product and submitted to the NHCDC. Research costs are calculated based on 10 percent of medical specialist salaries (based on the percentage detailed in the Enterprise Bargaining Agreement).

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 ACT 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

Discussions with ACT Health representatives during the review, demonstrated 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. ACT Health operates separate business units for pathology and medical imaging. The costs associated with these services are allocated to public and private patients. It should be noted that the cost allocation of expenditure to tests is in proportion to the relevant Medicare Benefits Scheme item number's fee. 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

ACT 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 template submitted by ACT 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 adult ICU is captured in dedicated cost centres. The neonatal ICU has a dedicated nursing cost centre. The neonatology medical salaries and wages and VMO payments are accounted for in a single cost centre. Their costs relate to intensive care and non-intensive care babies. For costing purposes, their costs are allocated between the two. The Canberra Hospital does not have any dedicated close observation units.

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. It should be noted that some payments are made to medical specialists directly from the Private Practice Trust Fund and are excluded from the costing process.

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. These costs were not escalated in the Round 19 NHCDC submission.

4. Conclusion

The findings of the ACT Round 19 IFR are summarised below:

• 
  No ACT Health hospitals were included in the Round 18 IFR. However, a number of key initiatives were implemented in Round 19 including: a new costing framework to improve linking rules; the allocation of TTR and corporate costs; increased engagement with the hospitals; and improved quality of feeder data systems.
  
• 
  The financial reconciliation demonstrates the transformation of cost data from the original GL extract through to the final NHCDC submission for the Canberra Hospital. Major exclusions from this hospital data included out-of-scope costs such as departmental costs not directly related to hospital services, pathology services provided to external agencies, Home and Community Care services and drug and Alcohol Services. Other costs excluded related to created occasions of service, sexual health patients and out of scope costs such as aged care, community health, commercial entities and drug and alcohol services. There were no unexplained variances in the financial reconciliation of the hospital’s NHCDC submissions.
  
• 
  The basis of the adjustments made by ACT Health appears reasonable, with the exception of blood products and organ retrieval services. The exclusion of these costs may impact on the completeness of the NHCDC.
  
• 
  Total activity data for the Canberra Hospital was adjusted for the activity associated with excluded costs.
  
• 
  The number of records linked from source to product was significant with all feeders having a greater than 99 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. ACT Health did not apply any escalation factors to the costs associated with WIP for prior years as part of the Round 19 submission to the NHCDC.
  
• 
  The five sample patients selected for review for the Canberra Hospital reconciled to IHPA records.
  

Based on discussions held during the site visits, and a review of the financial reconciliations provided, ACT Health has robust reconciliation processes in place. As such, nothing was identified to suggest that the financial data is not fit for NHCDC submission. Furthermore, the data flow from the jurisdiction to IHPA demonstrated no unexplained variances.

2.