Nhcdc round 19 Independent Financial Review

Application of AHPCS Version 3.1

The following section summarises VIC Health’s application of selected standards from Version 3.1 of the AHPCS (outlined in Appendix I) to the Round 19 NHCDC submission of Ballarat Health Service, Eastern Health and Latrobe Regional Hospital.

1. SCP 1.004 – Hospital Products in Scope

The three Victorian health services reviewed report against all products, with the exception of Teaching, Training and Research which is costed but not identified by product. This was demonstrated through the templates submitted and interview process. It was noted that health services cost according to the VCDC Business Rules.

System-generated records are created from unlinked feeder data and are allocated costs. The generation of system-generated records is specific to the feeder. These system-generated records with costs are not submitted to the NHCDC.

2. SCP 2.003 – Product Costs in Scope

The health services and VIC Health representatives demonstrated the reconciliation process for financial data used for costing purposes. Discussions indicated that all products are costed, including costs assigned to products in scope for the NHCDC, unlinked activity and costs assigned to system-generated patients where there is no activity. Unlinked activity and system-generated patients are not submitted to the NHCDC.

Teaching, Training and Research costs that can be identified as direct costs and identifiable in dedicated costs centres are spread across all costed activity. Health service representatives in all interviews stated they are guided by the VCDC Business Rules. These costs are submitted to the NHCDC, but are not identified by product.

Blood products are costed by the hospitals, however, are removed by VIC Health prior to NHCDC submission.

Depreciation and other capital related expenditure is not costed in accordance with the VCDC Business Rules.

3. SCP 2B.002 - Research Costs

Victorian health services cannot explicitly identify patients relating to research activity therefore do not comply with this standard. VIC Health representatives stated during the interview process that the Victorian Chart of Accounts have dedicated research cost centres, and are waiting on further advice from IHPA on how these expenditures should be allocated.

Currently embedded research costs are spread to patients and submitted to the NHCDC, but are not identifiable by product.

4. SCP 3.001 - Matching Production and Cost

All three health services 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 health services were 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 each of the three health services. VIC Health also provided an overview of their internal reconciliation process, which demonstrated the allocation of costs to products.

Again, it should be noted that Victorian health services cost to the VCDC Business Rules and whilst costs for teaching, training and research were not reported by product, these costs are spread across other products.

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

Commercial entities exist at Ballarat Health and Eastern Health. These costs were excluded from the costing system or costed as a system-generated patient. Ballarat Health and Latrobe Regional Hospital have shared entities or services. Each health service’s share of the costs were appropriately reflected in the GL and costed to activity. 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

VIC Health indicated that Victorian health services are advised not to offset revenue against costs as per the applicable standard. All three health services indicated that they did not offset revenue.

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

VIC Health representatives outlined the reconciliation process for financial and activity data used for costing purposes. All three health services were able to produce statements that reconcile the activity and cost data outputs used in their patient level costing processes. These statements are submitted to Vic Health as part of the VCDC in a form of reconciliation templates. The process appears robust.

VIC Health will provide health services with the internal reconciliation process from VCDC submission to IHPA submission from Round 20 onwards.

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.

All three Victorian health services indicated that they costed according to the VCDC Business Rules and specifications, including associated cost centre mappings and account codes. VIC Health representatives indicated that these cost centres and account codes enabled mapping to both the VCDC and NHCDC requirements.

VIC Health undertook the mapping of the cost data submitted by participating health services. This mapping demonstrated that total costs were mapped to the standard specified line items and reconciled.

11. GL 4A.002 – Critical Care Definition

The three hospitals reviewed had dedicated ICU’s in their facilities as well as a range of observation units including High Dependency Units, Special Care Nurseries and Coronary Care Units.

VIC Health indicated that all expenditure for these areas are reported in cost centres as per the Victorian Chart of Accounts and mapped to the VCDC cost areas. Where there are both dedicated intensive care units and observation units (whether collocated or not), this mapping enables the identification of all relevant expenditures. However, the activity for each area (in some Victorian health services) cannot be isolated given the information captured in some health service systems. Costs are derived using the total expenditure for all areas with total activity.

Upon review, these areas are mapped as critical care in accordance with the applicable standard.

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

The three health services indicated that medical costs are allocated to public and private patients in the same manner.

Where possible medical expenditure is handled in a similar way for both public and private patients. VIC Health indicated that it is difficult to determine and may differ within the health service. The payments relating to the treatment of private patients paid directly from Private Practice Funds are excluded from the costing process. Clinician billing direct to the patient is not included in the total patient cost.

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. 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 not escalated in the Round 19 NHCDC submission.

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