A number of key observations were made during the Round 19 IFR. Specifically:
A number of key initiatives were implemented by jurisdictions that contributed to a more robust costing process for Round 19 submissions to the NHCDC, including: improved governance over the costing output in Victoria, South Australia (SA) and New South Wales (NSW) (NSW also improved linking of activity and feeder data and the costing of organ transplant and retrieval); improved reconciliation processes in Victoria and Queensland; SA submitted non-admitted cost data; Tasmania improved the costing methodology for ward segments; and Queensland and Northern Territory (NT) both improved costing methodologies for overheads
The review of the reconciliation between the expenditure reported in the audited financial statements and the general ledger (GL) extracted for costing identified minor variances for seven of the 18 hospitals/LHNs sampled. All variances were considered insignificant to the NHCDC submission.
The review of the data flow from the hospital/LHN to jurisdiction identified variances for 12 of the 18 hospitals/LHNs sampled. All identified variances were considered insignificant to the NHCDC submission.
The review of the data flow from the jurisdiction to IHPA, identified variances for ten of the 18 hospitals/LHNs sampled. All identified variances were considered insignificant to the NHCDC submission. Of particular note were the variances identified in SA’s sampled hospitals which related to SA’s new submission method containing more decimal places than permitted by IHPA’s automated collection portal. IHPA reviewed the impact of this on the jurisdiction-level collection and considered it immaterial.
Hospitals/LHNs and jurisdictions made a number of adjustments to the financial data both pre and post allocation of costs to patients. KPMG relied upon the assertions made by hospital/LHN staff and jurisdictional representatives (and the information presented in the templates) in forming a view as to the reasonableness of the basis of the adjustments. The basis of most adjustments appears reasonable, with common exceptions noted for Teaching, Training and Research, depreciation, amortisation and other capital related expenditure, and blood products.
Despite the variances and adjustments, nothing was identified to suggest that the financial data was not fit for NHCDC submission.
Feeder system information provided for all sampled hospitals/LHNs highlighted that the number of records linked from source to product was significant. The majority of feeder systems in all hospitals had at least a 90 percent link or match. The average linking ratio across all sampled hospitals/LHNs and their feeders was 99.04 percent.
Common variances were noted in pharmacy systems, for reasons such as repeat prescriptions being filled up to 12 months from the original encounter and where the activity related to services provided to external clients. Other feeder systems such as radiology and allied health experienced variances due to the client not being in attendance or the provision of services to external clients. Other issues for other feeder systems related to data quality at source.
Findings and recommendations
The following findings and associated recommendations have been identified during the Round 19 IFR:
The review found that financial reconciliation processes are robust for all jurisdictions and occur at the hospital/LHN level and also at the jurisdictional level. Hospitals/LHNs and jurisdictions made a number of adjustments to the financial data, including for unlinked/unmatched and out-of-scope activity. While the basis of these exclusions appears reasonable, it is important that the reasons for this unlinked/unmatched and out-of-scope activity are continually investigated and addressed if necessary.
Recommendation
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Hospitals and jurisdictions should continue to investigate reasons for unlinked/unmatched and out-of-scope activity to ensure appropriate treatment in future rounds.
As jurisdictions and hospitals are continuously improving their reconciliation processes, linking of feeders and the utilisation of cost data for decision-making purposes, it is important the Independent Financial Review also continues to evolve.
Recommendation
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IHPA may wish to consider revisiting the scope of the IFR to include focus areas for each round. Examples of focus areas are summarised below:
Specific testing of expenditure and exclusion items.
Further testing of source activity used for costing purposes.
Analysis of improvements between NHCDC rounds.
Understanding costing methodologies for specific expenditure items.
Reviewing the use of cost data as a management/decision-making tool.
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It is important that the IFR still includes a review of the reconciliation of financial data and compliance with the AHPCS, however, to streamline the review process the following recommendations are made for incorporation into each hospital/LHN’s submission to the NHCDC. The following recommendations are carried over from the Round 18 IFR.
Recommendation
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Reconciliation templates should be included as part of the NHCDC submission from jurisdictions. The templates, covering both financial and activity data, should present the end-to-end reconciliation. That is, data should flow from the hospital to the jurisdiction and to IHPA for transformation and storage in the NHCDC national dataset. Detail should be provided for all adjustments at each step of the process.
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Recommendation
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A signed jurisdiction declaration in relation to the application of the AHPCS should be included in the NHCDC submission (similar to the directors’ declaration required for financial statements1). The consistency of application of the AHPCS is important for ensuring the NHCDC is comparable across a range of factors such as jurisdictions, DRGs, and hospital settings etc. A signed declaration should require jurisdictions to confirm that they have applied the AHPCS, or identify where the standards were not applied and reasons therefore.
