Nhcdc round 19 Independent Financial Review

Application of AHPCS Version 3.1

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

1. SCP 1.004 – Hospital Products in Scope

NSW Health representatives and LHD costing staff demonstrated through the templates and interview process that costs are reported against all products.

It was noted that costs are reported for non-patient products (such as commercial entities) which are not submitted to the NHCDC. Teaching, Training and Research products are assigned costs by the LHD and submitted to NSW Health, but are attached to non–patient encounters. NSW Health excludes non-patient products and non-patient level encounters from the NHCDC submission.

2. SCP 2.003 – Product Costs in Scope

LHD costing staff and NSW Health representatives discussed the NSW reconciliation process for financial data used for costing purposes and fully populated templates to demonstrate products costed.

At the LHD level, it was demonstrated that all products are costed. This includes all products in scope for the NHCDC both at a patient level and non-patient level and where appropriate, non-patient products.

For private patient costs, both LHD costing staff and NSW Health staff indicated that all LHDs in NSW cost according to the NSW costing guidelines. It was noted in the templates completed for each LHD reviewed that no VMO costs were assigned to private patients, as VMO costs related solely to public patients.

3. SCP 2B.002 - Research Costs

At the LHD level, if direct research expenditure can be identified it is mapped to a research area. Embedded research is fractioned out and reclassed to the research area. All research expenditure is then mapped to a non-patient encounter. These encounters were submitted to NSW Health who then excluded them from the Round 19 NHCDC submission.

4. SCP 3.001 - Matching Production and Cost

All three LHD’s 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

All three LHD’s demonstrated that overhead costs were fully allocated to direct patient care areas via the pre allocation and post allocation data included in the templates.

LHD Costing staff also demonstrated the order of preference for overhead allocation listed in the CAG. NSW Health staff indicated that these preferences are based on the AHPCS Version 3.1.

6. SCP 3B.001 - Matching Production and Cost – Costing all Products

The application of this standard was demonstrated in the templates for each of the three LHD’s. NSW Health provided an overview of their internal reconciliation process that demonstrated the allocation of costs to products.

It should be noted that NSW LHDs cost to the CAG. Whist LHDs noted they assigned teaching, training and research costs to non-patient encounters, these were not reported to the NHCDC.

7. SCP 3C.001 - Matching Production and Cost – Commercial Business Entities

LHD costing staff indicated that where commercial entities existed, the expenditure was allocated to a non-patient product. 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

No offsets were presented in the final templates. All three LHDs indicated that revenue is not offset against costs in accordance with the CAG and the applicable standard.

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

NSW Health representatives demonstrated the NSW reconciliation process for financial and activity data used for costing purposes. The process appears robust. This was further verified in the completion of the templates used in this review.

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.

NSW Health demonstrated reconciled costs by line item as indicated in this standard.

11. GL 4A.002 – Critical Care Definition

Two of the three LHDs participating in this review indicated that they had critical care areas comprising dedicated ICU’s and HDU’s. The expenditure is reported in a critical care cost centre (HDU/ICU).

The PAS ward transfer activity data extracted from the HIE separately identifies ICU and HDU hours based on the reported bed type.

Service codes are then built incorporating the bed type and enables the allocation on critical care costs using the ICU/HDU RVUs. All areas are mapped to critical care as specified in this standard.

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

All three LHDs indicated that costing of private patients follows the guidelines specified in the CAG.

The costing methodology incorporates relative value units for private patients ensuring no VMO payments are allocated to private patients. Salaried Medical Officer and Junior Medical Officer staff salary and wages are allocated to both public and private patients with no adjustments for private patients.

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

Patients are allocated costs based on their consumption of resources for that reporting period. Costs are incurred in prior years they are included in the NHCDC submission. In Round 19, this included costs from both 2012-13 and from 2013-14. NSW Health includes these WIP costs. These costs were not escalated in the Round 19 NHCDC submission to ensure consistency with other jurisdictions.

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