Nhcdc round 19 Independent Financial Review

Conclusion

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

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  For the first time in Round 19, the ABF Taskforce instituted DNR teleconferences with each LHD/SHN Chief Executive to discuss cost data results prior to final DNR.
  
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  LHD/SHN Internal Audit teams conducted a mandatory DNR Audit on the 2014-15 DNR Submission. Attestation Certificates were received from all LHD/SHN Chief Executives indicating that ‘effective systems of internal control exist to ensure that the DNR information is true and fair in all material respects’. This audit is now one of the Conditions of Subsidy.
  
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  The financial reconciliation for each of the sampled LHDs demonstrates the transformation of cost data from the original GL extract through to the final NHCDC submission for the LHD. LHDs include costs such as medical indemnity insurance and shared services. All LHD expenditure is uploaded to the costing system to generate patient/encounter or non-patient product costs.
  
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  Upon submission of the DNR, NSW Health transforms the data for submission to the NHCDC. This incorporates the inclusion of WIP costs for patients admitted prior to and discharged in Round 19. Some major exclusions of data prior to NHCDC submission included encounters from non-ABF facilities, non-patient level and non-patient product encounters from ABF facilities and encounters with data quality or linking issues.
  
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  The basis of the adjustments at all LHDs appears reasonable. However, the exclusion of Teaching, Training and Research may impact on the completeness of the NHCDC. It is understood that NSW Health will submit Teaching, Training and Research (TTR) costs to the NHCDC following the completion of IHPA’s TTR project. In addition, NSW Health should investigate the reasons for unlinked activity to the NHCDC to ensure appropriate treatment in future rounds.
  
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  The LHDs reviewed, have a strong focus on data quality cleansing activity and ensuring episodes link appropriately. Linking rule analysis was undertaken to review linking rules with each LHDs during 2015 to seek greater precision in linking of encounter and feeder data to improve costing results.
  
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  WIP was treated in accordance with the COST 5.002 of the AHPCS Version 3.1. NSW Health included WIP costs for patients admitted in 2012-13 or 2013-14, and discharged in 2014-15. NSW 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 to ensure consistency with other jurisdictions. Escalation
  
• 
  The five sample patients selected for review for Central Coast LHD, Far West LHD and Sydney LHD reconciled to IHPA records.
  

Based on discussions held during the site visits, and a review of the financial reconciliations provided, NSW 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.

3. Northern Territory

   1. Jurisdictional overview

      1. Management of NHCDC process

The Northern Territory Department of Health (NT Health), through the Activity Based Funding (ABF) team, is responsible for the processing, reconciliation and submission of National Hospital Cost Data Collection (NHCDC) data for all hospitals in the NT. This is consistent with the approach used in prior rounds of the NHCDC submission and ensures that there is a consistent approach applied to costing for all NT hospitals. NT Health adopted the Power Performance Manager (PPM2) system for costing of Territory hospitals in Round 18. Round 19 is the second year this system has been used to cost hospitals in the NT.

Local Health Networks (LHNs) are responsible for the capture and maintenance of financial data in the hospital general ledger (GL). The hospital financial data is signed-off and submitted to NT Health via the LHN. NT Health includes expenditure related to employee leave liabilities (annual leave and long service leave) as these liabilities are held centrally by the NT Department of Treasury.

Hospitals are responsible for recording activity data in the relevant system, e.g. the Patient Administration System (PAS). Activity data is extracted to a central NT Health data warehouse. There is a quality assurance process undertaken by the LHN and NT Health. Product fractioned (PFRAC) data is reviewed by cost centre at the hospital and LHN level, prior to submission to NT Health.

Alice Springs Hospital was selected for review as part of the Round 19 Independent Financial Review (IFR).

Overview of the costing process

Hospitals in the NT do not have a costing function. The costing function is undertaken by NT Health staff and supported by PowerHealth Solutions, with patient level costing conducted on an annual basis. NT Health Finance provides a GL extract to the ABF team. The GL is reconciled to final financial results for the hospital. Any adjustments made to the total operating expenditure are made by the ABF team as advised by NT Health Finance.

The preparation and loading of the activity and feeder data uses combined sources. Activity information for admitted, emergency and non-admitted patients is sourced directly from the Data Management and System Reporting Branch. Feeder data is sourced from the hospital. The ABF team source some feeders directly, whilst for others they will make contact with Departmental staff within the hospital and request a feeder extract. Once loaded, a series of internal quality checks are undertaken for both format and data quality. The data is formatted to the requirements of PPM2 and linking occurs within this costing system.

NT Health improved linking rules upon implementation of the new costing system and continues to refine them. During the interview process, staff from the ABF team noted that, where possible, linking rules were deployed to link records using hours, then days to enable greater linking percentages. Where possible, all feeder linking rules are reviewed on an individual feeder basis. Once linking has occurred, the proportions linked are reviewed with prior linking results to check for any major variations. Where variations occur, these are reviewed for data quality issues or to inform linking rule updates.

A product fraction review is undertaken to inform the various reclassification rules applied in PPM2. Work has commenced in high cost areas such as patient transport and accommodation. Work also continues in ensuring greater specificity in mapping expenditure to specialities. The assumptions of these linking rules are further reviewed upon completion of the draft costing results. Where there are significant cost differences compared to the prior year, the assumptions underlying the reclassification rules are further examined.

Prior to submitting NHCDC data to IHPA, NT Health undertakes a number of quality assurance procedures prior to sign-off of the final file by the Chief Operating Officer, Corporate Services Bureau. The Quality Reports provided by IHPA are also used to assess results.

Key initiatives since Round 18 NHCDC

Round 18 was the first year the NT submitted data using PPM2. The primary focus for Round 19 was improving the costing methodology to be in line with the Australian Hospital Patient Costing Standards (AHPCS) Version 3.1. Some of the key initiatives since Round 18 include:

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  Improvements to allocation statistics for overhead costs. For example, in Round 18, total expenditure was applied as an allocation statistic for a number of overhead areas, whereas in Round 19, there was an adoption of the order of preference as per the AHPCS Version 3.1.
  
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  Increased education for hospitals in relation to potential feeders that inform the costing process. As a result, the following changes for Round 19 occurred:
  
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  Blood products had a separate feeder and costs were allocated directly; and
  
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  Ambulance costs were directly allocated in Round 19, compared to allocation as an overhead in Round 18.
  

The jurisdiction reported that the costs across product categories had changed between Round 18 to Round 19, following a change in the overhead allocation methodology to better reflect overhead usage. Focus for Round 19 and beyond will be to continue overhead refinements, but to also commence work on reviewing direct care costs.

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