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Phuong Nguyen, A/Manager, Funding Systems Development, Department of Health Victoria delivered the presentation at the 2014 Hospital Patient Costing Conference. The Hospital Patient Costing Conference 2014 examines the development and implementation of patient costing methodologies to reflect Activity Based Funding allocations. For more information about the event, please visit: http://www.healthcareconferences.com.au/patientcostingconference
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4th Annual Hospital Patient Costing Conference 2014 The Victorian Experience 19 March 2014
Phuong Nguyen A/Manager Funding System Development
Background
Department of Health (DH)
ALLOCATES
Funds are allocated across broad areas of health care:
• Acute admitted patients
• Non-acute admitted patients
• Emergency
• Non-admitted patients
• Subacute patients
• Mental Health patients
• Incentive schemes / Specified grants
NEGOTIATE with each hospital
Nominal budgets for:
• Variable funding
• An agreed volume of activity at agreed prices
• Allocated using Casemix
• Fixed/Block grant funding
Key elements of casemix
Casemix funding model
(TARGETS)
Australian Refined Diagnosis Related Groups (AR-DRGs) A method of classifying patients with similar conditions and level of resources
The Victorian Admitted Episodes Dataset (VAED) Contains information on all public hospital episodes of care (activity)
Victorian Cost Data Collection (VCDC)
Cost data obtained from public health services in Victoria
Good IT infrastructure to collect patient information
Victorian Cost Data Collection
• Requirements
• Clinical costing is a key building block of activity based funding. • Victorian public hospitals are required to report costs for all
operational funded activity, and are expected to maintain activity and costing systems as part of good hospital management practice (see Victorian Health Policy & Funding Guidelines).
• The department conducts an annual collection of cost data from all metropolitan, major rural and some small rural public hospitals via the Victorian Cost Data Collection (VCDC).
Victorian Cost Data Collection
• Costing data is used to:
– inform Victorian cost weights – inform development of funding models and budget proposals – analyse the cost of health care – benchmark costs for comparable activity across hospitals – inform best practice and quality improvement initiative – inform planning of clinical services within a hospital setting – inform resource utilisation and effect clinical practice
improvement in a hospital setting
Victorian Cost Data Collection
• The 2012-2013 collection must be able to:
• comply with the VCDC File Specifications, • comply with the Australian Hospital Patient Costing Standards
(AHPCS) V2.0 - excluding standards relating to Depreciation (DEP 1.001, 1A.001,1B.001,1C.001 1D.001 and 1E.001), Teaching (SCP 2A.002) and Research (SCP 2B.001); and
• be used for benchmarking and best practice improvement initiatives.
• To support the submission, health services are provided with:
• VCDC Business Rules for Reporting 2012-13 Cost Data • VCDC File Specification for Reporting of 2012-13 Cost Data
Victorian Cost Data Collection
Costing Standards & Practices
• Clinical Costing Standards Association of Australia
• Australian Hospital Patient Costing Standards
• Victorian Cost Data Collection (VCDC) File Specifications
• VCDC Business Rules
The Beginning of Costing in Victoria
• 1992 -1994 • Cost modelled data from six metro hospitals for six months of 1992
used to develop cost weights for DRGs • Cost modelled data from 15 hospitals for six months of 1993 used
to develop cost weights • Patient level costing implemented in metro health services
• 1 July 1995 • Implemented to allocate funding for Acute Inpatient care in
Victorian Metro and Major Rural Health Services • 16 health services contributing patient level cost data on acute
admitted services to annual collection.
The Beginning of Costing in Victoria
Costing Period Months of cost data Campuses 1992 6 5
1993 5 15
1994 6 11
1994-95 12 16
1995-96 12 13
1996-97 12 15
1997-98 12 17
1998-99 12 18
1999-00 12 19
2000-01 12 28
2001-02 12 53
2002-03 12 56
2003-04 12 45
2004-05 12 45
2005-06 12 45
2006-07 12 45
2007-08 12 46
2008-09 12 51
2009-10 12 59
Current Victorian Status
Cost modelling
Cost modelling with some
patient level costing
Patient level costing with some
cost modelling
Full patient level costing
Most Victorian Patient Costing Sites sit here
Most Victorian Rural
Sites sit here
What funding models does the cost data support?
• Victorian Cost Weight Formulation • Acute Admitted (WIES) • Admitted Rehabilitation (CRAFT) – Pre NHRA • Subacute care (iSNAC) – Post NHRA • Non Admitted Specialist Consultations (VACS) – Pre NHRA • Mental Health - Weighted Occupancy Targets (WOTs)
• National Cost Weight Formulation
What do we also do with the cost data?
• Other Uses • Budget Allocation Reviews • Specified Grants (Exceptional Products) • New Technology • DRG Classification Development • Funding Model Development • Research
Victoria’s approach - Using patient level costing
• Cost Model • Cost models are about predicting costs where paramount
criteria are achieving a cost ratio of 1.000, maximising R2 and minimising MAPE (SMAPE)
• i.e. effectively a cost-recovery model
VS • Funding Model (Victorian Model)
• Funding models are about allocating funding that generally aligns with cost but more importantly supports and aligns with sound pricing guidelines
• e.g. supporting a particular pricing guideline will at times necessarily come at the expense of compromising on cost ratios, R2 and MAPE values
Victoria’s funding approach - % total costs
• How much cost does the WIES price cover? • About 70-80% of the average cost of treating a patient • WIES price not set to cover 100% of cost • Other sources of funding (e.g. grants) • Change in WIES price should match change in overall
average cost of treating a patient
• Cost does not equal price !
Flow of Cost Data - Victoria
• Health Services (LHNs)
• Victorian Cost Data Collection (VCDC)
• Price Weight Development
• Funding model
Flow of Cost Data - Timing
• Typical cycle (e.g. 2012-13)
• VCDC Specifications - June 2013 • Preliminary Submissions – October 2013 • Final Submissions – December 2013 • Review of preliminary dataset - February 2014 • Finalisation of Dataset (Stage 1 Edits) – February 2014 • Preparation of of Data for funding model (Stage 2) – March 2014 • Preliminary cost weights – April 2014 • Refinement of cost weights – May 2014 • Sign off of price weights (Ministerial) – June 2014 • Implementation of 2014-15 price weights – July 2014
Flow of Cost Data - National
• Health Services (LHNs)
• Victorian Cost Data Collection (VCDC)
• National Hospital Cost Data Collection (NHCDC)
• Independent Hospital Pricing Authority(IHPA)
• National Efficient Price (NEP)
Processing of Cost Data
Processing of Cost Data
Processing of Cost Data
Victorian Cost Data Collection
• Program ‘episodeProgram’ Definitions • The program field (episodeProgram) identifies the type of cost
episode reported. • Appropriate linking keys have also been defined to assist in
linking costing data to other activity data reported to the Department such as the:
- Victorian Admitted Episodes Dataset (VAED), - Victorian Emergency Minimum Dataset (VEMD), - Victorian Non-admitted Health Minimum Dataset (VINAH) - Victorian Radiotherapy Minimum Dataset (VRMDS).
Victorian Cost Data Collection
• Program ‘episodeProgram’ Definitions
Victorian Cost Data Collection – Output groups
TOTCOST Total cost INURSING Nursing cost (indirect)
ALLIED Allied health cost (total) PATH Pathology cost (total)
IALLIED Allied health cost (indirect) IPATH Pathology cost (indirect)
CCU CCU cost (total) PHARM Pharmacy cost (total)
ICCU CCU cost (indirect) IPHARM Pharmacy cost (indirect)
EMERG Emergency cost (total) THEATOR Theatre cost (total)
IEMERG Emergency cost (indirect) ITHEATOR Theatre cost (indirect)
ICU ICU cost (total) THEATNOR Theatre cost (non operating) (total)
IICU ICU cost (indirect) ITHEANOR Theatre cost (non operating) (indirect)
IMAGING Imaging cost (total) OTHER Other cost (total)
IIMAGING Imaging cost (indirect) IOTHER Other cost (indirect)
MEDSURG Surgical practitioner cost (total) PROSTHESIS Prosthesis costs
IMEDSURG Surgical practitioner cost (indirect) S100* S100 drug costs
MEDNON Non surgical practitioner cost (total) PBS* PBS drug costs
IMEDNON Non surgical practitioner cost (indirect) HITH * Hospital in the home costs
NURSING Nursing cost (total) PNDC* Post-natal domiciliary care costs
Cost Outputs - National
Cost Groups (Cost Centres) • Allied
• Clinical
• Critical
• ED
• Imag
• OR
• Path
• Pharm
• Other Serv
• Special Procedure Suites (SPS)
• Overhead
Line Items (Account Types) • SWNurs – S&W Nursing • SWMed – S&W Medical (non VMO) • SWVMO – S&W VMOs • SWAH – S&W Allied Health • SWOther – Other S&W • OnCost – Labour on-costs, all staff types • Path – Pathology • Imag – Imaging • Pros – Prosthesis • MS – Medical Supplies • GS – Goods and Services • PharmPBS – Drug PBS and S100 • PharmNPBS – Drug Non PBS/S100 • Blood – Blood products • DeprecB – Building Depreciation • DeprecE – Equipment Depreciation • Hotel – Hotel Goods & Services • Corp – Corporate Costs • Lease – Lease costs
X
Cost Outputs – National Buckets
• Buckets • Ward Medical • Ward Nursing • Non-clinical Salaries • Pathology • Imaging • Allied Health • Pharmacy • Critical Care • Operating Rooms • Emergency Department • Ward Supplies
• Specialised Procedure Suites • Prostheses • On-costs • Hotel • Depreciation
Data validation process – Admitted acute
• Stage 1 • Data validation begins by assessing the quality of the source data,
with documentation of costing system precision in each hospital, reconciliation of reported costs to hospital financial records
- have all inpatient-related expenditures been counted? - are any non-inpatient costs inappropriately assigned to inpatient
cases? - reconciliation of patient volume to the statewide patient reporting
system - have costs been allocated across the hospital's total volume of
inpatient cases?
Data validation process – Admitted acute
• Stage 1 • Face validity of case costs is assessed by screening each
hospital's data for high and low cost cases. • Anomalous cases are reviewed against length of stay information
and the profile of costs at the patient level, including, for example, - whether expected cost centres have been omitted from low cost
cases, and - whether very high cost activities such as intensive care have
contributed to the high cost cases. • Hospitals are asked to review any cases proposed for removal
from the data set. • Hospitals may also resubmit records at any stage.
Data validation process – Admitted acute
• Stage 1 • Over the period of these studies, mechanisms for individual case
review of anomalous cases have been developed which return some cases to the data file as ‘real’ costs.
• Even when cases are excluded, they are used to identify the sources of specific costing system problems for remediation.
• In some instances this process has led to identification of more systematic errors in the data which require correction and re-extraction from one or more hospitals.
Data validation process – Admitted acute
• Stage 1 edits (in addition to VCDC business rule edits) • Edit 1 - Negative category costs • Edit 2 - Unable to link with VAED Invalid or null DRG • Edit 3 - Negative total cost • Edit 4 - Zero total cost • Edit 5 - Total cost of sameday episode < $50 • Edit 6 - Total cost of multiday episode < $300 and < $100 per day • Edit 7 - Total cost > $200,000 • Edit 8 - Daily average cost > 5 x DRG daily average total cost • Edit 9 - Non acute care episode total cost > $3,000 per day • Edit 10 - Total cost does not balance with sum of category costs
Data validation process – Admitted acute
• Stage 1 edits (in addition to business rule edits) • Edit 11 - ICU hours but no ICU costs • Edit 12 - ICU costs but no ICU hours • Edit 13 - CCU hours but no CCU costs • Edit 14 - CCU costs but no CCU hours • Edit 15 - Procedures with < $50 (sum (THEATOR, THEATNOR,
MEDSURG,MEDNON) costs) • Edit 16 - PROSTHESIS cost < $10 for reported ACHI procedure
codes • Edit 17 - HITH cost > NURSING cost • Edit 18 - DOMICILIARY cost > NURSING cost • Edit 19 - Sum(PBS,S100) cost > PHARMACY cost • Edit 20 - VAED records where cost data not submitted
Data validation process – Admitted acute
• Stage 2 • Reliability of the data for extrapolation of the DRG mean costs from
the study sample to cases treated outside the study hospitals is also assessed.
• Tests which are undertaken to identify any consistent patterns which might call a DRG weight into question as a basis for hospital funding, including DRGs not treated in the sample (zero-case DRGs), those with small case or hospital samples, and those cost estimates with large standard errors.
Data validation process – Admitted acute
• Stage 2 • While reporting a mean cost is problematic in the context of the
typically skewed costs of hospital care, the mean remains the most appropriate measure for payment policy .
• The relative standard error of the mean (RSEM) gives a measure of the robustness of the estimate of mean cost, given variability around the mean and the number of cases in the DRG-specific sample.
• Repeated testing of the distribution of the RSEM for DRG-level costs in these data has identified a threshold of 0.2 as defining DRGs with either adequate samples but very high variability, or moderate variability with a small sample size.
• These DRGs are also flagged for policy review and investigation of the sources of variation to inform possible modification of the classification system.
Data validation process – Admitted acute
• Stage 2 • In many instances, DRGs which are problematic on one of the
reliability criteria are problematic on others as well. • DRGs with small cell sizes will inevitably be represented in a
smaller sample of hospitals, and if one or two inlier cases are high cost, the DRG may have a very high RSEM as well.
• Cumulative DRG counts show that approximately 6% of DRG cost estimates in any year require careful evaluation to gauge the effect of these data problems.
• As an example of policy responses to this information, the Victorian Department assigns cost weights for DRGs with small samples and large changes in average cost (compared with the previous year) using pooled cost data from the 2 years.
Data validation process – Admitted acute
• Stage 2 • Finally, assessment of the reliability of the costs is undertaken
using clinical criteria. • The ‘with and without complications’ hierarchies are evaluated to
determine whether cost relativities are consonant. • Large changes in average cost from 1 year to the next are
assessed to determine whether such changes are related to changes in the sample, normal variation in low volume DRGs, or identifiable clinical factors.
• Changes in average length of stay show up as a stable ‘cost per day’ for those DRGs in which ALOS is the major driver of cost differences from the previous year.
• New therapies, such as increased use of more costly drugs, were identified as cost drivers for inpatient HIV treatments with similar ALOS, but higher costs in the subsequent year.
Price weight development - Admitted acute
• Admitted acute • Model latest coding edition implications • Regroup data updated AR-DRG version (if applicable) • VIC-DRG modifications review • WIES rebasing • Review boundary policy • Identify & adjust for additional factors i.e. New technology • Reassess co-payments • Reassess same day and one day weights • Identify & implement changes to WIES funding pool • Iterative cost weight formulation
Data validation – Emergency Departments
• Emergency Departments • Presentations less than $10 will be excluded from the emergency
cost dataset unless otherwise advised by Health Services. • Presentations greater than $10,000 are sent to Health Services for
scrutiny. • Spilt between ED/Admitted acute reviewed for patients who are
admitted through the ED – not relevant under the WIES model as ED is funded through
WIES payments (bundled) – reviewed for purpose of national model (ED and Admitted acute
separate) to ensure ED component is not under/over allocated – e.g. treatment of radiology/pathology order in ED, but for
admitted treatment
Data validation – Other work streams
• Non-admitted • All ‘unlinked’/’unallocated’ (dummy) records removed • All service events that are less than or equal to $5 excluded • All service events greater than $3,000 (excluding s100 and PBS
costs) were excluded • Included if advised by Health Services.
Data validation – Other work streams
• Admitted subacute & Admitted mental health • In infancy stages • Episodes with an average bed day cost of less than $400 were be
excluded unless otherwise advised by Health Services
• Work is continuing to improve the costing methodology for mental health (MH VCCUG subgroup led by Chris Jackson) and subacute (funded studies)
Product Development - Benchmarking Tool
Recent changes in Victoria
• Increase in granularity of reporting Historically (prior to 2010-‐11) Current – (2010-‐11 +)
• One row of informa,on for each episode consis,ng of cost buckets, direct and indirect costs for:
• Nursing • Medical Non Surgical • Medical Surgical • Allied Health • Pathology • Imaging • Pharmacy • Theatre • Procedure Suite • ICU • CCU • Other (Outreach)
• One row of demographic/linking informa,on per episode • Mul,ple cost records per episode repor,ng:
• Cost Area • Account Type • Loca,on • Service Date • Direct Cost • Indirect Cost
• Average for acute admiKed = 60 rows of cost records per episode
Recent changes in Victoria
• Increase in file size
• Consistent file format
Historically (prior to 2010-‐11) Current – (2010-‐11 +)
• Total file size for 2009-‐10 = < 1Gb • Total file size for 2010-‐11 = 100 Gb (expected to increase in future)
Historically (prior to 2010-‐11) Current – (2010-‐11 +)
• Various formats (e.g. Text, Access, Excel, etc)
• .XML formal
Changes in Victoria
• At all levels increased resources needed which Victoria has funded
Stakeholders Descrip>on
Health Services • Metro and major rural • 29 LHNs/59 campuses par,cipated in 2010-‐11 submission
Cos,ng Vendors • 3 in Victoria • Mix of service provision – i.e. provide so`ware to full outsourced service
Department of Health (Victoria) • Development of File Specifica,ons and Business Rules • Processing changes to handle size and scope of data
Current Status
• Challenges • Some work streams are still in infancy stages • Labour related costing needs improvement – largest component of
hospital budgets • Full potential not realised yet • The costing workforce is shrinking and at risk • The impression some health service senior manager’s have of it is
that costing is for compliance purposes only, hence no real investment in workforce
Current Status
• Strengths • Financial and Non Financial benefits • Cost benchmarking & alternative approach to looking at the
business • Links data from in house systems – potential to be the electronic
record of a pathway with costs attached to this • Significant investment has reaped rewards – we have cost time
series data
Why Invest in Patient Costing?
Operational effectiveness
•Access•Procurement•System planning•Performance frameworks
F inancial performance
•Efficiency / Productivity
•Cost reduction•Funding model
evolution•Price setting
C linical Quality & L eadership
•Pathway des ign•Outcomes
•Patient safety•Innovation
Patient-‐level costing
information
Where to Next
• Mental Health • Costing mental health services – community and admitted • Challenges in allocating costs between general ledgers
• Subacute Care • Costing subacute programs in Victoria – community and admitted • Understanding cost drivers
• Block Funded Services • Understanding the fixed costs of single site, multi site, MPS
services
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