Managing Activity-Based Funding Using Costing Data and Activity-Based Budgets

This chapter will show how detailed information from an activity-based costing (ABC) system can be used to support activity-based funding (ABF) by providing management with a detailed perspective of the activity and how it can be used to internally model the allocation of target activity to build an activity-based budget (ABB). By building a set of internal cost weights based on ABC data, this chapter will show how activity forecast in a funding agreement can be broken up and applied to the individual cost centers that contributed to the activity in the current year. Building an ABB provides an evidence base for the overarching hospital budget and encourages the adoption of a focus on efficiency by hospital departments.

Statistical Inference to Develop Budgets From Activity-Based Funding Costing Data

Activity-based funding (ABF) is a way of funding hospitals whereby they get paid for the number and mix of patients they treat. In order for governments to fund hospitals using ABF, hospitals use costing to inform the development of classification systems which provide valuable information for pricing purposes. Hospital patient costing is essential for understanding the total costs involved in treating a patient including the services or products used. This chapter outlines a methodology using simple statistics to prepare a budget for an inpatient ward using costing data. This method can be extended to other clinical areas (e.g., residential aged care or non-admitted).

Electronic Health Records

The physician often spends far more time gazing at the screen than at the person who has made the appointment. The patient has booked with the expectation their illness or accident will receive undivided attention. Immediately there is a problem, both for the doctor and the patient. Careful medical record-keeping is one of the most important duties of a clinician. How else can a patient's history be documented, the clinical findings recorded, the provisional diagnosis entered, and the chosen treatment pathway defined? But how does the doctor maintain confidence-giving eye contact whilst doing all this? The 19th century physician, as exemplified by the famous painting of “The Doctor” by Luke Fildes in 1891, typifies the devotion to care exhibited by the committed physician. The actuality is that today's physicians display equal amounts of dedication to their work; the difference in 1891 was that there was very little available to treat the great majority of illnesses. EHR, if used to its potential, is the means of pulling all this data together and getting it right every time!

Applying Business Intelligence and Analytics to Clinical Costing Data

Most healthcare organizations would like to provide actionable information to the managers of their various service lines. Bringing administrative, clinical, and financial data together is critical to operating the service lines efficiently. It also presents a strategic advantage, as the applications of funding are more closely monitored, and regulatory reporting requirements increase. With a clearer picture of their financial and clinical performance together, organizations are better prepared to put efficient strategies in place to meet their goals and demonstrate value. However, that requires thorough planning and forward-thinking leadership. This chapter discusses approaches to how organizations can empower their stakeholders by providing them with integrated clinical and costing data. It addresses how business intelligence supports the management and reporting of clinical costing data, the utilization of data visualization and advanced analytics, the importance of data governance, and the role of a BI strategy, illustrated throughout with a case study.

Revenue Allocation

Until now, the revenue allocation of a hospital service has not received sufficient attention. Previous research done on this subject overlooked the details of revenue streams in the activity-based funding environment and has not introduced any technical dimension faced by new clinical costers. On the other hand, clinical costers (who manage clinical costing database) have a strong aversion to talking about revenue, because of the exclusion of revenue data collection and submission for most funding authorities. Clinical costing also tries to prevent revenue information from influencing on cost allocation methods. That makes research on this subject extremely difficult. However, the chapter uses a language called “revenue is an integral part of clinical costing” as an alternative way to explore this subject, including fine technical details. The benefits of investing in the revenue allocation process seem to exceed its cost, since the cost, revenue, and clinical outcomes could be analyzed in toto for delivering information on safety and quality of care.

The Integration of an Extra-Corporal Life Support (ECLS) Service at Austin Health

Extra-corporal membrane oxygenation (ECMO), also known as extracorporeal life support (ECLS), is a globally established treatment option in modern intensive care medicine for patients suffering from severe but reversible respiratory and/or cardiac failure. If refractory to other advanced treatment options, early instatement of ECLS therapy is closely associated with reduced mortality and improved long-term patient outcome. ECLS, in many ways, has replaced other, less effective treatments and future modelling predicts increased demand. ECLS has routinely and successfully been applied to neonates and pediatrics for many years. This field study however will exhibit focus only on the viability of the introduction of ECLS therapy in the Victorian adult population at Austin Health.

Health Economic Implications of Complications Associated With Pancreaticoduodenectomy

Clinical costing is a powerful tool to bridge the disconnect between financial and clinical information, and is an ideal platform to conduct research aimed at informing value-based clinical decision making. This chapter will provide an example of the utility of activity-based costing to elucidate the costs of complications following pancreaticoduodenectomy, a high acuity procedure with high costs. It will show the significance of clear clinical costing in targeting cost containment in a tertiary hospital environment.

Clinical Costing Standards

Standards are part of our lives. Clinical costing is no exception in this regard. Clinical costing standards are published documents comprising specifications and procedures to build consistent datasets for statutory purposes. The Independent Hospital Pricing Authority publishes and updates Australian Hospital Patient Costing Standards. The standards ensure compatibility and credibility. The standards formulate a consistent and transparent way to process costing. Compliance represents the production of reliable information which could be compared locally, nationally, and internationally. Health professionals could utilize these standards-compliant datasets for testing clinical guidelines for patient safety, developing patient classification systems for counting clinical services, and setting national efficient price for public hospital funding. The ultimate goal is to improve healthcare delivery in an equitable way and reduce human suffering.