Phuong Nguyen, Department of Health VIC - Victorian Perspective - Using Patient Level Costing for...

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).


•  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


•  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

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


• 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).


• 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?


• 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.


• 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.


• 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


• 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


• 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.


• 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.


• 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.


• 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

Phuong Nguyen, Department of Health VIC - Victorian Perspective - Using Patient Level Costing for...

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