Integrated Resource Framework Valuing Hospital Activity Costing Pilot

Directors of Finance and TAGRA Meeting 18 August 2011

Information Services Division

NHS National Services Scotland

Costing Landscape 1

– Scottish Government

• Several costing related projects – Scottish National Tariff Project (SNT)– Local Costing Systems (East and West)– Integrated Resource Framework (IRF)– Programme Budgeting– Other methodologies e.g. NRAC

• Costs Book single source for all

• Costing environment– Define future strategy– Aim for common costing system– Improve quality of underlying Costs Book data– External interest/pressure to improve costing data from

Ministers, Parliamentary Committees, Audit Scotland, press, etc

– Key to success of Shifting the Balance of Care and integrated adult and social care

Costing Landscape 2

– Scottish Government

• Scottish National Tariffs– Aims

• Price list to simplify SLA process• Transparent, fair and takes into account volume

and case mix complexity• Incentive for efficiency by encouraging

benchmarking • Improve accuracy of costing data

– Issues• Difficult to apply HRG price list to activity• Specific purpose and methodology

• Aim to phase out SNT– Replace with new costing methodology

Costing Landscape 3

– Scottish Government

• Requirements of new costing system– Improved understanding of costs, variation and causes within

service (including financial flows)– Productivity and efficiency opportunities through

benchmarking– Improved clinical ownership of costs and resource decisions

• PLICS (Patient Level Information Costing System)– Represents a change in the predominantly “top down”

allocation approach, based on averages and apportionments, to a more direct and sophisticated approach based on the actual interactions and events related to individual patients and the associated costs

– Data can be analysed by patients, specialty, HRGs, consultant, etc

Costing Landscape 4

– Scottish Government

• Benefits of PLICS– Ability to truly understand financial drivers– Understanding of variation and their causes within services– Improved clinical ownership of resource use– Driver for improved efficiency– Service level/business unit reporting– Improved data for planning and performance management – Sensitive to length of stay, theatre time, value of drugs, etc

• Conclusion– Focus to shift from tariffs towards patient level type costing

• Widen focus of TRG• Raise benefits of good costing data

– ISD to lead development but boards need to focus on continued improvement of data quality and commitment to use outputs

– Need to consider appropriate software solutions for outputs

Background – NHS Highland Methodology

• Costing model developed by NHS Highland – Aim for responsive tariff to underpin IRF work– Issues applying Scottish National Tariffs locally

• “Soft-PLIC” detailed costing methodology– Site and specialty/line number specific– Calculation of unit costs/tariffs by costs pool

• Identify activity (units vary by pool)• Remove any high cost item costs • Divide costs by activity

– Application of unit costs/tariffs to records• On admission• Per day• For Theatre time• For any High Cost Items (HCI) • Overhead allocation

– Covers range of hospital activity

Sample Unit Tariffs

Table 1 - Sample Inpatient unit tariffs for Board X **Draft - Test data for EPID presentation - 14/07/2011**

Hospital Costs Book Line Number

Medical cost per

adm

Medical cost per

day

Nursing cost per

day

Theatre cost per

minOverheads

% etcHospital X 121 - General surgery (exc vascular surgery) 30.00 30.00 160.00 12.00 35%Hospital X 500 - Intensive care unit 300.00 300.00 1300.00 - 20%etc

Table 1b - Sample HCI list for Board X **Draft - Test data for EPID presentation - 14/07/2011**

HCI description OPCS4 code Unit CostHIP W37.1 1200HIP W37.8 1200etc

Sample application of tariffs - 1 (from NHS Highland IRF presentation)

Sample application of tariffs - 2(from NHS Highland IRF presentation)

Costing pilot - 1

• Methodology presented at IRF meeting November 2010– Explore possibility of replicating nationally– More efficient for work to be undertaken centrally

• ISD currently testing costing methodology– Eight test boards– Financial year 2009/10

• Acute; Mental Health; Geriatric Long Stay SMRs• Costs book SFRs 5.3 and 5.5• Board specific reference information

– High cost items– Average theatre times for procedures

– Simplest form of methodology– Activity calculated from SMR

Costing pilot - 2

• Scottish National Tariffs– Same acute datasets

• SMR01 / SFRs 5.3 and 5.5

– Methodological differences• Cost pools e.g. nursing, medical, etc• HRGs• Length of stay• Exclusions e.g. NSD• Reference information

– Sourced from boards

Reference Information

• High Cost Items– Tariff list by OPCS4 (or ICD10)

• Costs removed from relevant cost pools• High value single items e.g. ICDs• Volumes result in significant % of spend

• Theatre information– Average theatre times at OPCS4 level

• NHS Lothian default• National Theatres Project

Sample Outputs - 1

Price List / Tariffs

Table 1 - Sample Inpatient unit tariffs for Board X **Draft - Test data for EPID presentation - 14/07/2011**

Hospital Costs Book Line Number

Medical cost per

adm

Medical cost per

day

Nursing cost per

day

Theatre cost per

minOverheads

% etcHospital X 121 - General surgery (exc vascular surgery) 30.00 30.00 160.00 12.00 35%Hospital X 500 - Intensive care unit 300.00 300.00 1300.00 - 20%etc

Sample Outputs - 2

Aggregate costed summary

Table 2 - Sample costed Inpatient summary for Board X **Draft - Test data for EPID presentation - 14/07/2011**

Dimensions: Measures:

Hospital Costs Book Line NumberSMR

casesSMR OBD

Medical costs £

Nursing costs £

Theatre ex HCI costs £ etc

Hospital X 121 - General surgery (exc vascular surgery) 5,700 23,000 £1,689,000 £3,680,000 £3,360,000Hospital X 181 - Cardiac surgeryHospital X 505 - Coronary care unitetc

Repeated for all types of cost / activity

Table 3 - Sample reconciliation Inpatient summary for Board X **Draft - Test data for EPID presentation - 14/07/2011**

Hospital Line NumberCB

casesCB

OBDSMR

casesSMR OBD

SMR - Medical

costs

CB - Medical

costs

SMR - Theatre inc HCI

CB - Theatre

costs etcHospital X 121 - General surgery (exc vascular surgery)Hospital X 500 - Intensive care unitetc

SMR totals from costed summary in Table 2; Costs Book from SFR5.3

Sample Outputs - 3

Costs Book Reconciliation

Sample Outputs - 4High Cost Items Summary

Table 4 - Sample HCI Inpatient summary for Board X **Draft - Test data for EPID presentation - 14/07/2011**

Hospital Line NumberCosts Book Total Theatre Costs £

High Cost Items - Theatre £

Proportion of Theatre costs

that are HCI etcHospital X 121 - General surgery (exc vascular surgery) £3,440,000 £80,000 2%Hospital X 130 - Orthopaedics £3,600,000 £900,000 25%Hospital X 500 - Intensive care unit £0 £0 -etc

HCI amounts calculated from SMR using HCI list

Sample Outputs - 5Activity / Costs Mismatches

Table 5 - Sample Inpatient activity/costs mismatches for Board X **Draft - Test data for EPID presentation - 14/07/2011**

Hospital Costs Book Line NumberSMR

casesCB

cases CB Costs £ Flag NotesHospital X 530 - Acute other 100 0 £0 1 = No CB costs Uncosted activityHospital Y 510 - General practice 0 500 £1,500,000 2 = No SMR activity Reconciliation at hospital leveletc

Next steps – Review of pilot once complete

• IRF project• Outputs

– Support mapping work– Improve data quality

• Local application• Inclusion of other boards

• National costing• Impact assessment

– Feasibility– Future developments

• Parallel run - SNTs, Atkinson, NRAC, etc • Benchmarking

– Unit of activity

Next steps – Future Strategy

• TRG to expand role to wider review of costing methodology in NHSScotland

• Need DOF to “champion” costing agenda• Need to raise awareness of benefits of

good costing data particularly at clinician level

• Need EPSOG and Ministerial approval but CE/Director buy in