Clinical Costing Clinical Costing processes and business application in the hospital setting Health Finance Fundamentals Program 2018
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1 Clinical Costing Clinical Costing processes and business application in the hospital setting Health Finance Fundamentals Program 2018 Glenn Prentice Management Accounting Kelly Morrison Principal Cost Analyst Gold Coast Hospital and Health Service
2 Clinical Costing processes and business application in the hospital setting Gold Coast Hospital and Health Service Is one of the fastest growing health services in Australia Employs more than 8,900 staff Operates almost 20 facilities and delivers a broad range of secondary and tertiary health services Comprises over 1,150 beds across the two main hospital sites: Gold Coast University and Robina Services delivered include surgery, trauma, paediatric, general and specialist medicine, maternity and intensive neonatal care, aged and dementia care, emergency medicine, intensive care, cardiology, mental health, outpatients, environmental health, public health services and more. Had an annual operating budget of $1.359 billion in 16/17
3 Clinical Costing processes and business application in the hospital setting Glossary Episodes: An episode of care (episode) is the set of services provided to treat a clinical condition or procedure, during a set time period Departments/Areas: Interchangeable terms used in Costing systems Diagnosis Related Group DRG: is classification system for admitted patients (inpatients) that provides a clinically meaningful way of relating the number and type of patients treated in a hospital to the resources required by the hospital. Each DRG represents a class of patients with similar clinical conditions requiring similar hospital services. DRGs roll up to Service Related Groups - SRGs Direct cost areas: relate to patient costs, aka final costs Indirect cost areas: relate to overhead costs (ultimately allocated to direct/patient/final cost areas) WAU: weighted activity unit. The WAU provides a common unit of comparison, a 'common currency' to measure the value of the care and resources used to provide services to patients.
4 Clinical costing - business application in the hospital setting Gold Coast HHS Activity 2012/ /17 Moved to new Hospital Sept 2013 Growth from 2012/13 to 2016/17 30% growth in ED presentations 59% growth in Inpatient Separations 69% growth in Outpatient Occasions of Service * Oral Health & Breastscreen have been excluded from 16/17 Outpatient activity for trending purposes
5 Clinical costing - business application in the hospital setting Gold Coast HHS FTE & Expenditure Budget 2012/ /17 Growth from 2012/13 to 2016/17 46% growth in MOHRI Occupied FTE 57% growth in Expenditure Budget FTE Full Time Equivalent employee MOHRI Occupied FTE A measurement of FTE used by Department of Health for reporting
6 Clinical Costing processes
7 Clinical Costing processes Patients consume services (blood tests, surgery, rehabilitation, pharmacy) which consume resources (lab testing, staffing hours, pharmaceuticals, cleaning, food) which generate costs Clinical Costing traces this consumption of costs through from the general ledger/financial system to the individual patient episodes.
8 Clinical Costing processes 1. General Ledger Cost Centres: All expenses allocated to Direct (Patient) or Indirect (O/head) Areas 2. Costing System All Indirect Areas allocated to a Direct Patient Area 3. Areas allocated to Product Categories 4. Products allocated to individual patients episodes In 2016/2017 at GCHHS, expenses in 1,016 CC >> 287 Costing Areas >> 223 Direct/Patient Areas
9 Costing in Health Clinical Costing processes
10 Clinical Costing processes 1. General Ledger Cost Centres: All expenses allocated to Direct (Patient) or Indirect (O/head) Areas 2. Costing System All Indirect Areas allocated to a Direct Patient Area 3. Areas allocated to Product Categories 4. Products allocated to individual patients episodes In 2016/2017 at GCHHS, expenses in 1,016 CC >> 287 Costing Areas >> 223 Direct/Patient Areas
11 Relationship between the $ and the Activity Clinical Costing processes
12 Clinical Costing processes Patient Activity Source Systems in use at Gold Coast HHS
13 Clinical Costing processes GCHHS Costed Activity in 2016/17 (extract) 908,109 Inpatient, Outpatient & Emergency episodes were costed $1,084 million allocated to these episodes Source: GCHHS PPM costing dataset, 2016/17
14 Example of Product costs incurred on a patient journey Clinical Costing processes ED Emergency Department Labour Supplies Imaging Pharmacy Pathology Other services Theatre Labour Supplies Blood Other services Rehabilitation Labour Supplies Pathology & Pharmacy Other services Discharge Labour Pharmacy Other services
15 Clinical Costing processes and business application in the hospital setting Challenges encountered during the Costing Process Cost centre (activity centre) purpose not properly identified at the start Cost centres mapped to wrong patient care areas Poor identification of X all the service lines, or, some service lines are not mapped to a patient care area - missing activity could overstate the cost of the existing mapping Staff being paid from wrong cost centre activity has moved but staff still being paid from their original cost centre Good News! As finance professionals, these may be areas of your responsibility or influence to improve the quality of ledger and costing data
16 Clinical Costing processes and business application in the hospital setting Application of Costing data How and where it is used internally Understanding costs drives process improvement This in turn assists with cost containment resources become available for patient care Costing data assists Business Managers/Service Directors to understand their costs The Costing System serves as a proxy data warehouse of all the individual source/feeder systems
17 Clinical Costing processes and business application in the hospital setting Application of Costing data How and where it is used externally Monthly/annual reporting to Qld Department of Health who in turn report at the national level National Hospital Cost Data Collection (NHCDC) submission to Independent Hospital Pricing Authority (IHPA) IHPA use the data to form the basis of the price weights and national efficient price (NEP) Health Round Table (HRT) organisation in Australia and New Zealand collect, analyse and publish costing data for peer-to-peer comparisons, benchmarking and identifying ways to improve operational practices Financial and Residential Activity Collection (FRAC) is an annual collection that collects public hospital data including expenditure, revenue, staffing levels and other related data.
18 Clinical Costing - business application in the hospital setting
19 Clinical costing - business application in the hospital setting Case Study: Vascular Service Line, Prosthetics Expenditure 1. It was identified that the Vascular service line was over budget in Prosthetics
20 Clinical costing - business application in the hospital setting 2. The Vascular Service Line was under YTD WAU Target, and YTD WAU had decreased compared to the same period on prior year 3. However YTD Separations (Seps) had increased compared to prior YTD Seps by 6% A Separation (Sep) is defined as the time between a physical admission and discharge multiple episodes of care can occur during a separation e.g. a patients care type might change
21 Clinical costing - business application in the hospital setting 4. Comparison of Cost Buckets against HRT benchmark Operating Theatre Costs = $1.01M HRT Operating Theatre Costs = $712K 43% ($307K) higher Uncontrollable Costs ICU Costs = $525K HRT ICU Costs = $418K 26% ($107K) higher Controllable Costs Prosthetics Costs = $537K HRT Prosthetics Costs = $467K 15% ($70K) higher Controllable Costs
22 Clinical costing - business application in the hospital setting 5. When comparing Vascular ICU Hrs per Sep to other Hospitals, GCUH has more ICU Hrs per Sep than other Hospitals. Hospital A Hospital B Hospital C
23 Thank you! Any Questions?
24 References IHPA Hospital Patient Costing Standards v Queensland Clinical Costing Guidelines And with thanks to: Bairnsdale Regional Health Service/HFMA for images used in presentation
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