Nhcdc round 19 Independent Financial Review

Application of AHPCS Version 3.1

The following section summarises TAS-DHHS’s application of selected standards from Version 3.1 of the AHPCS (outlined in Appendix I) to the North West Regional Hospital and Mersey Community Hospital Round 19 NHCDC submissions.

1. SCP 1.004 – Hospital Products in Scope

For the two Tasmanian hospitals reviewed, costs are allocated to all products and reported by TAS-DHHS, with the exception of research. This was demonstrated through the templates submitted and interview process. TAS-DHHS staff noted that the AHPCS Version 3.1 is used as the basis for costing. Teaching and Training costs are allocated at patient level but are not submitted to the NHCDC.

2. SCP 2.003 – Product Costs in Scope

The IFR templates were completed by TAS-DHHS staff to demonstrate the reconciliation of financial data, which was demonstrated through the interview process. Discussions also indicated that all products other than research are costed, which includes costs assigned to products in scope for the NHCDC, with minimal unlinked activity.

3. SCP 2B.002 - Research Costs

Research costs are not assigned to a product as they are unable to be separately identified within cost centres. These costs are then allocated and contribute to the total patient cost and are submitted to the NHCDC.

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. TAS-DHHS staff also indicated in the interview that the AHPCS Version 3.1 order of preference is applied to allocate overhead costs.

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

The application of this standard was demonstrated in the templates for each hospital. TAS-DHHS 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

No commercial entities were reported. TAS-DHHS Finance staff make adjustments to the GL for some shared service arrangements by hospital. TAS-DHHS costing staff make further adjustments for shared service arrangements through the use of inpatient fractions. Based on discussions during the review, adherence with the standard was demonstrated.

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

Cost recoveries for salaries and wages and work cover expenses were noted in the template for North West Regional Hospital. During the interview, TAS-DHHS staff confirmed that no revenue offsetting was undertaken.

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

TAS-DHHS staff demonstrated during the interview that the Tasmanian reconciliation for financial and activity is 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. TAS-DHHS staff demonstrated (in the templates) that costs reconciled by NHCDC line item

11. GL 4A.002 – Critical Care Definition

This standard is not applicable as both hospitals reviewed did not have dedicated critical care units.

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

TAS-DHHS staff indicated that costs are allocated to public and private patients in the same manner at all hospitals within Tasmania. 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. 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.
TAS-DHHS 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, due to a change in costing system in that year. These costs were not escalated in the Round 19 NHCDC submission.

5. Conclusion

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

• 
  Since Round 18, TAS-DHHS improved the allocation of nursing costs to patients by utilising a weighted minute based on the number of nurses and their respective levels that are rostered on the ward in which each patient is located.
  
• 
  The financial reconciliations demonstrated the transformation of cost data for the sampled hospitals based on the GL of the respective hospital. The GL for each hospital reconciled to the expenditure in the audited financial statements. Major exclusions from North West Regional Hospital data included costs that related to Mersey Community Hospital, which were recorded as inclusions in the Mersey Community Hospital data. Minor variances were noted for the sampled hospitals between the hospital expenditure and the costs allocated to patients.
  
• 
  Non-admitted patient costs relating to externally referred and bulk-billed patients were excluded. Costs were also excluded for WIP, system-generated patients and for Teaching and Training costs (these teaching and training costs are reported at product level, just not submitted as part of the NHCDC).
  
• 
  The basis of the adjustments made by TAS-DHHS appears reasonable. However, the exclusion of Teaching and Training may impact on the completeness of the NHCDC.
  
• 
  Total NHCDC activity data for the hospitals was adjusted by TAS-DHHS for the removal of records associated with excluded costs.
  
• 
  In Tasmania, a variance of ($759) was noted for Mersey Community Hospital and $763 was noted for North West Regional Hospital. Tasmania costed these hospitals together in one costing study and the IFR process requested that a reconciliation be undertaken for each hospital separately. As such, when the costing data of both hospitals is combined, the variances offset each other resulting in a minor $4 variance between the costs submitted to IHPA and the costs received by IHPA.
  
• 
  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. It is noted that no escalation factor was applied to prior year costs. WIP costs are included for 2013-14 onwards due to a change in costing system in that year.
  
• 
  The five sample patients selected for review for North West Regional Hospital and Mersey Community Hospital reconciled to IHPA records.
  

Based on discussions held during the site visit, and a review of the financial reconciliation provided, TAS-DHHS has robust reconciliation processes in place. As such, nothing has come to our attention to suggest that the financial data for North West Regional Hospital and Mersey Community Hospital is not fit for NHCDC submission. Furthermore, the data flow from the jurisdiction to IHPA demonstrated no unexplained variances.

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