How to Calculate CIHI s Cost of a Standard Hospital Stay Indicator

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1 Job Aid December 2016 How to Calculate CIHI s Cost of a Standard Hospital Stay Indicator This handout is intended as a quick reference. For more detailed information on the Cost of a Standard Hospital Stay (CSHS) methodology, consult the official methodology found in CIHI s Indicator Library: For ease of use, the step numbers in the CSHS calculation section below refer to sections of the methodological notes. Preparing the data In order to ensure consistency and comparability, CIHI needs to make certain adjustments to the data before calculating the CSHS. Clear the clearing accounts A clearing account is an account used as a temporary repository for recurring transactions of a similar nature that are eventually transferred to other accounts. CIHI bases the allocation of clearing accounts on the total expenses (secondary financial accounts 3* to 9*) of each absorbing functional centre as a percentage of the total expenses (secondary financial accounts 3* to 9*) of all relevant absorbing functional centres for that clearing account. If there are no absorbing functional centres available, the amounts remain in the clearing account. The following MIS Standards functional centre accounts are clearing accounts. CIHI clears these accounts before calculating the CSHS: Account number Functional centre Administrative and Support Services Administration Plant Administration Nursing Inpatient Administration Ambulatory Care Administration Ambulatory Care Medical Resources Diagnostic and Therapeutic Services Administration Rehabilitation Services Administration 2016 Canadian Institute for Health Information

2 1. For each absorbing functional centre, determine the absorbing functional centre expense as a percentage of the total relevant absorbing functional centres expenses. Do not include recoveries (secondary financial accounts 12*) in this process. 2. Apply the percentages to the clearing account expenses (net of recoveries) and add this amount to the absorbing functional centre expenses. 3. After calculating the amounts to be distributed, set the original clearing account to 0. Allocate regional expenses For provinces and territories with regionalized health care, CIHI allocates undistributed shared expenses (for example, certain administration and support expenses) to the health service organizations within that region. It s important to identify the regional entity data and transactions at the facility level that are deemed to be regional transactions (i.e., those with sector code 001). Expenses at the regional level associated with a direct patient care functional centre are not allocated to facilities and remain at the regional level. 1. Move all facility expenses identified with sector code 001 (regional transactions) to the regional entity data. 2. Allocate the regional entity s data that is not a regional transaction (i.e., not sector code 001) to each of the region s facilities with the same sector code, based on each facility s share of the total expenses within the region that contains the same sectors. If this amount is less than 0, the organization will not receive an allocation. 3. Allocate all the regional entity s data reported under sector code 001 to each of the region s facilities, based on each facility s share of the total expenses in that region. Expenses at the regional level associated with a direct patient care functional centre (e.g., 71 2, 71 3, 71 4 and 71 5) are not allocated to facilities and remain at the regional level. These expenses remain in the regional entity and get a share of the undistributed expenses that are allocated. Net recoveries Calculate the total expenses net of recoveries (1 2*), including the clearing account amounts and regional expenses (if applicable) for all functional centres. Calculating the numerator 1a. Exclude certain expenses Exclude the following expenses from the subtotal: , Other termination benefits 3 90 Compensation Medical Personnel Amortization Undistributed Land Improvements Amortization Undistributed Buildings Amortization Undistributed Building Service Equipment 9 55 Interest on Long-Term Liabilities 2

3 At CIHI, we clear clearing accounts at the transaction level (secondary account level). When we remove our exclusion amounts from our indicator, we can see those clearing amounts that are deemed exclusions in the consuming functional centres. Hence these amounts are excluded at this step. 1b. Net expenses Calculate the subtotal for all functional centres once exclusions are removed; if any net amounts are negative, set these amounts to zero dollars. There are different reasons why CIHI sets net negative expenses to zero dollars. For example, having a net negative expense is a data quality issue for the majority of functional centres. Where it is reasonable to have a net negative expense (e.g., Net Gain or Loss on Disposal), including this amount will misrepresent the actual cost of providing services. 2. Create 3 cost pools (inpatient, other patient and non-patient) and allocate the expenses to them How do you determine inpatient expenses in the MIS functional centres? 1. Identify functional centres that are likely to have inpatient expenses. 2. Use secondary statistical accounts to allocate proportions of expenses that are deemed inpatient and those deemed other patient. - These are broken out by service recipient category (inpatient, client, resident, etc.) Remember, the goal is to extract inpatient expenses wherever they occur in the hospital. Legend *All national rates are labour-adjusted for each province/territory OP = Other patient FF = Face-to-face OR = Operating room IP = Inpatient PARR = Post-anesthetic recovery room Surg = Surgical NP = Non-patient 2a. Cost pool assignment 71 2 nursing inpatient units (except OR and PARR) 2. If there is no reliable workload but there are reliable service activity (SA) statistics: Use a labour-adjusted national cost per visit reported visits to determine the other patient expenses. 3. If there is no reliable workload and no reliable SA statistics: Deem all expenses as inpatient expenses. 3

4 2b. Cost pool assignment , , , , , , operating rooms, post-anesthetic recovery rooms (PARRs) and day surgery 2. If there is no reliable workload but there are reliable service activity (SA) statistics: Use the labour-adjusted national cost per visit and reported surgical visits. a) If only surgical visits are reported, use this formula b) If PARR visits or visits face-to-face are reported, use this formula: 3. If there is no reliable workload and no reliable SA statistics: Use a national average inpatient to total workload % to allocate expenses to the inpatient cost pool. 2c. Cost pool assignment emergency 2. If there is no reliable workload but there are reliable service activity (SA) statistics: Use the labour-adjusted national cost per day and/or cost per visit SA. Use the labour-adjusted national rates based on facility type and size (teaching, large and small). Teaching hospital: Provincially/territorially defined teaching status Large hospital: 50 or more beds (based on rated bed capacity) Small hospital: Less than 50 beds (based on rated bed capacity) 4

5 a) For teaching hospitals: b) For large hospitals: c) For small hospitals: 3. If there is no reliable workload and no reliable service activity statistics: All expenses are deemed to be other patient expenses. 2d. Cost pool assignment , , , specialty day/night care, specialty clinics, private clinics 2. If there is no reliable workload but reliable service activity (SA) statistics: Use the labour-adjusted national cost per day and/or cost per visit SA. a) For functional centre : 5

6 d) For functional centres , and : 3. If there is no reliable workload and no reliable SA statistics: All expenses are deemed other patient expenses. 2e. Cost pool assignment 71 4* Diagnostic and Therapeutic Services 2. If there is no reliable workload but reliable service activity (SA) statistics: Use % of SA by category of service recipient. 3. If there is no reliable workload and no reliable SA statistics: Use a national average inpatient to total workload % to allocate. 2f. Cost pool assignment other patient care Assign all expenses in the following functional centres to the other patient cost pool: Mental Health Long-Term Care Nursing Unit Long-Term Care Nursing Unit Contracted-Out Surgical Services Telephone Health Services Poison and Drug Information Services Contracted-Out Day Surgery Services 71 5 ** Community Health Services 6

7 2g. Cost pool assignment non-patient expenses Assign all expenses in the following functional centres to the non-patient cost pool. 71 7* Research 71 8* Education (with the exception of * In-Service Education) 71 9* Undistributed 3. Remove some mental health and addiction services nursing unit expenses If the hospital submits data to the Ontario Mental Health Reporting System (OMHRS) or submits mental health data to the Discharge Abstract Database (DAD) using an institution number specific to mental health: Move Mental Health and Addiction Services Nursing Unit expenses from the inpatient cost pool to the other patient cost pool. These expenses are excluded from the inpatient cost pool, as their weighted cases are not appropriately captured in the denominator of the CSHS indicator. 4. Remove some physical rehabilitation services nursing unit expenses If the hospital submits data to the National Rehabilitation Reporting System (NRS) or submits inpatient rehabilitation data to the DAD using an institution number specific to inpatient rehabilitation: Move Physical Rehabilitation Nursing Unit expenses from the inpatient cost pool to the other patient cost pool. These expenses are excluded from the inpatient cost pool, as their weighted cases are not appropriately captured in the denominator of the CSHS indicator. 4b. Remove the long-term care, mental health and physical rehabilitation portions from Diagnostic and Therapeutic Services inpatient expenses For all hospitals: Remove the portion of inpatient expenses attributed to long-term care from the inpatient cost pool of the Diagnostic and Therapeutic Services (71 4 **) functional centres and add it to the other patient cost pool. For hospitals that report data to OMHRS or submit mental health data to the DAD using an institution number specific to mental health: Remove the portion of inpatient expenses attributed to mental health and addiction services from the inpatient cost pool for 71 4** functional centres and add that to the other patient cost pool. 7

8 For hospitals that report data to the NRS or submit inpatient rehabilitation data to the DAD using an institution number specific to inpatient rehabilitation: Remove the portion of inpatient expenses attributed to mental health and addiction services from the inpatient cost pool for 71 4** functional centres and add that to the other patient cost pool. To determine the proportions of diagnostic and therapeutic expenses that you need to move from the inpatient cost pool and add to the other patient cost pool, define 4 costs groups as follows: 1. Acute care group: All 71 2 ** and 71 3 ** inpatient expenses 2. Mental health group: Mental Health and Addiction Services Nursing Unit expenses moved from the inpatient cost pool to the other patient cost pool in step 3 of the methodology (if applicable) 3. Rehabilitation group: Physical Rehabilitation Nursing Unit expenses moved from the inpatient cost pool to the other patient cost pool in step 4 of the methodology (if applicable) 4. Long-term care group: Other patient expenses of Long-Term Care Nursing Unit Total the expenses in the 4 cost groups acute, mental health (if applicable), rehabilitation (if applicable) and long-term care group and determine the percentage of the total for each cost group. Multiply the long-term care proportion (and the mental health and/or rehabilitation proportions, if applicable) by the original amount in the inpatient cost pool for all 71 4 ** functional centres. Remove this amount from the inpatient cost pool and add it to the other patient cost pool. Most provinces/territories do not submit their data by type of service recipient. For example, if workload is collected in the Diagnostic and Therapeutic Services functional centres, the workload usually specifies the category of service recipient (e.g., inpatient) but not the type (e.g., inpatient mental health). Since the expenses for long-term care and possibly the expenses of mental health and physical rehabilitation are moved to the other patient care functional centres, a portion of the inpatient expenses from the Diagnostic and Therapeutic Services functional centres must also be moved to the other patient cost pool to account for services rendered to these patients. 5. and 6. Distribute indirect expenses Administration and Support Services and Accounting Centre For each facility, sum the inpatient, other patient and non-patient expenses from the steps above and distribute the following expenses to the 3 cost pools based on the ratio of inpatient, other patient and non-patient expenses to their total: 1. Administration and Support Services (7 11*) 2. Accounting Centre (8 19*) 7. Distribute indirect expenses In-Service Education ( *) For each facility, using the totals calculated in steps 5 and 6 for the inpatient and other patient cost pool, distribute the In-Service Education indirect expenses to both the inpatient and other patient cost pools based on the ratio of their inpatient and other patient expenses to their sum. 8

9 Indirect expenses for in-service education are shared only between inpatients and other patients because inservice training is practical training that s provided in the course of delivering patient care. 8. Sum the expenses Sum the expenses in the inpatient cost pool. This is the CSHS numerator. Calculating the denominator Determine total acute inpatient weighted cases 1. Obtain the hospital s acute, rehabilitation and mental health inpatient weighted cases from the DAD. 2. Remove weighted cases for mental health inpatients for those hospitals in which expenses were removed from the numerator (if step 3 in the numerator methodology applies). 3. Remove weighted cases for rehabilitation inpatients for those hospitals in which expenses were removed from the numerator (if step 4 in the numerator methodology applies). 4. Sum the remaining weighted cases. This is the CSHS denominator. Calculating the CSHS Calculate the CSHS result by dividing the numerator by the denominator. This is the final CSHS. fsi@cihi.ca 9

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