Nhcdc round 19 Independent Financial Review

Application of AHPCS Version 3.1

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

1. SCP 1.004 – Hospital Products in Scope

All products are reported by NT Health. This was demonstrated through the templates submitted and interview process. NT Health staff noted that the AHPCS Version 3.1 are used as the basis for costing in the NT. Research undertaken at Alice Springs Hospital is not separately costed. Teaching and Training costs are allocated to the system-generated patient and these records are not submitted to the NHCDC.

2. SCP 2.003 – Product Costs in Scope

The NT reconciliation process for financial data used for costing purposes was demonstrated through the interview process. It was also stated that all products are costed, which includes costs assigned to products in scope for the NHCDC, unlinked activity, and costs assigned to system-generated patients where there is no activity.

3. SCP 2B.002 - Research Costs

There are no research costs assigned to the research product. Where research is undertaken, these expenditures are embedded within cost centres and spread across patients but are not assigned to the Research product.

4. SCP 3.001 - Matching Production and Cost

NT Health staff provided reclass and transfer detail in the templates. The application of this standard was demonstrated during the interview process including discussion of examples.

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

The application of this standard was demonstrated in the templates for Alice Springs Hospital. NT Health also 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

NT Health staff indicated that where commercial entities existed, the expenditure was allocated to a non-patient product. Shared services in the NT were charged to various facilities. Costs in relation to commercial and shared entities were treated in accordance with the standard.

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

NT Health staff nominated offsets for rent, salary recoveries and other departmental costs (such as offsite pathology, stock reserves for community based services). At the interview, NT Health staff indicated that these offsets do not relate to production costs at Alice Springs Hospital.

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

During the consultation process, NT Health representatives demonstrated that the NT reconciliation for financial and activity appears robust through the use of the templates.

10. 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.

NT Health staff demonstrated reconciled costs by line item as indicated in the standard.

11. GL 4A.002 – Critical Care Definition

NT Health staff indicated that all direct costs associated with the ICU and HDU/CCU at Alice Springs Hospital are recorded in one cost centre. The activity associated with patients in both ICU and the HDU/CCU can be extracted and identified. Costs for each are then allocated using weightings, where patients in ICU have minutes weighted twice that of HDU/CCU to demonstrate greater staffing intensity and hence greater costs. Critical care costs are captured in accordance with the applicable standard.

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

NT Health staff indicated that costs are allocated to public and private patients in the same manner at Alice Springs Hospital. This includes costs associated with nursing salaries and wages, pathology, medical imaging and prosthesis.

Medical expenditure is handled in a similar way for both public and private patients as there is currently no feeder identifying patient resource consumption of VMOs or consultants.

Private patient revenue is not offset against the expenditure.

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

Patients are allocated costs based on their consumption of resources for that reporting period. NT Health submitted WIP costs for admitted and discharged patients in 2014-15 and WIP costs for 2013-14 for those patients admitted prior to, but discharged, in 2014-15.

Where costs are incurred in prior years, only the costs for 2013-14 are included in the final costed data and NHCDC submission. These costs were escalated in the Round 19 NHCDC submission.

4. Conclusion

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

• 
  NT Health’s primary focus in Round 19 was to make improvements to the costing methodology. Focused efforts included refining the allocation of overhead costs, improving feeder data and strengthening linking rules.
  

• 
  The financial reconciliation demonstrated the transformation of cost data for the entire group of LHNs in the NT. The costs submitted to the jurisdiction for Alice Springs Hospital accounted for 19.85 percent of the GL for the NT LHNs. Adjustments to the GL included offsetting expenditure with rental revenue received from Departmental staff, external salary recoveries, other cost recoveries, and medical, dental and pharmaceutical supplies. There were no exclusions of costs. NT Health adjusted the cost data for WIP escalation and the removal of Teaching and Training.
  
• 
  The basis of the adjustments made by NT Health were reasonable. However, the exclusion of Teaching and Training costs may impact on the completeness of the NHCDC.
  
• 
  WIP was treated in accordance with the COST 5.002 of the AHPCS Version 3.1. NT Health applied the escalation factors to the costs associated with WIP for prior years as part of the Round 19 submission to the NHCDC. IHPA advised jurisdictions that escalation factors should not be applied to prior year costs in February 2016.
  
• 
  There were no unexplained variances in the financial reconciliation of the Alice Springs Hospital’s NHCDC submission.
  
• 
  Total activity data for Alice Springs Hospital was adjusted for the removal of system-generated patients and the exclusion of WIP by NT Health.
  
• 
  The number of records linked to admitted patients, emergency, non-admitted or other patients had a greater than 96 percent link or match. This suggests that there is robustness in the level of feeder activity reported back to episodes and is representative of increased data quality checks at both the jurisdiction and hospital level.
  
• 
  The five sample patients selected for review for Alice Springs Hospital reconciled to IHPA records.
  

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

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