HfMA

This Q&A session accompanies an article in the June issue of Healthcare Finance which focused on the introduction of patient-level costing at Chelsea and Westminster Hospital NHS Foundation Trust. click here for published article

What are the main costs of introducing PLC?

There are a range of patient level costing systems now on the market. However, the upfront cost of the system itself is not the only cost that trusts will face. 

• Patient level costing system software, implementation and training and potential computer hardware. Highly variable depending on chosen system but likely to be in range of approximately £30k to £80k one off investment plus annual maintenance, licence fee and on-going support.
  
• ‘Front-end’ reporting software, implementation, licence fee and training etc. Costing systems are often not good at providing management information, so there may be a need for a separate reporting tool to combine cost and income data. In the short-term this may be done on spreadsheets but where costs and income are driven down to patient level this will probably require a separate reporting system. Again, as with patient level costing systems, there are a number of reporting systems on the market now. Our experience indicates that costs are highly variable. More than £50k is likely to be required for implementation plus maintenance, licence fee and on-going support.
  
• Automation of existing activity feeder systems. Having reviewed all their feeder systems, organisations may decide that they need to automate particular systems to support patient level costing.
  
• Dedicated on-going full-time senior costing expert (minimum band 7). Working exclusively on implementing, embedding and moving forward patient level costing as well as supporting the communication and adoption of best practice. Reference costs should be produced as a bi-product of this work although there will be some additional work for instance to produce costs in HRG4.
  
• Dedicated senior data analyst working on an ongoing basis to ensure timely provision of validated patient level activity data in line with a pre-determined timetable (monthly/quarterly). This will involve working with colleagues in the organisation to ensure completeness of data and improve data quality.
  
• Organisation-wide resources to be made available for instance time for clinicians to be involved. Two days per week during the implementation, one to two days per month thereafter. Clearly any apportionment of costs needs to be agreed and signed off by clinicians, including a process for updating and reviewing as appropriate. Costs attributed directly to service lines need to be communicated to and understood by clinicians. In order to embed the benefits of SLR/PLC in our organisation we have implemented a number of pilot projects to ascertain possible areas for efficiencies within certain specialties. In these cases the time required has been significantly higher than the days noted above but this investment has proved successful in improving the EBITDA of each service and created greater awareness of the benefits of SLR. Additionally, this has been a useful learning tool for other service areas.
  
• Training for finance managers – the SLR process will need to become an integral part of the finance department’s monthly workload.
  
• Ongoing system support (costs vary widely but, on average, £500 to £700 per day as and when required) and maintenance charges.
  
• ‘Champions’ within the organisation who can set aside dedicated time. SLR is now an integral part of business planning and specialties wishing to develop services need to demonstrate that they understand the impact on their EBITDA of any developments. There are a number of regular (monthly) directorate meetings where champions can update their SLR results, and highlight the reasons for any significant variances from trend.

What are the main data challenges?

• At Chelsea and Westminster we had a particular issue with our pathology data as our pathology service is outsourced. This means we are reliant on another trust to provide us with patient level pathology data. Currently we receive patient-level pathology data on a quarterly basis, although we will shortly be moving to monthly data flows. As we move towards real time analysis, we may need to explore the potential to link up systems.
  
• Assigning nurse time to individual patients is a key challenge. The costs of ward-based nurses are allocated to patients based on time spent on wards. At the outset of the project this was based on days on the ward. However an amendment to the PAS system has enabled admission and discharge/transfer times to be captured enabling ward time to be measured in minutes. This is a significant improvement in overall accuracy of breaking down costs but is particularly important for day case activity. Under the previous recording system, all day case patients would have been assigned the same nursing costs irrespective of whether they stayed on ward for two hours or a full day. However, there are still some concerns with data quality. For instance there are a number of cases where the ward stay is recorded as starting at midnight, which might indicate incomplete data input by nursing staff.
  
• We are currently working with clinicians (for instance in paediatrics) to introduce a more refined approach to allocating nursing and medical costs to patients that recognises variations in acuity for different types of patients. This is a difficult issue. Initially any system of grading for acuity is likely to be based on clinicians’ views of the nursing intensity required for a particular group of patients, perhaps at sub-specialty or even at specialty level, within a particular ward rather being patient specific. 
  
• We have implemented a new theatre system and there are still some data quality problems for instance some cases have no time recorded or negative minutes.
  
• We currently have a limited amount of patient level activity data (contacts) available for therapy services. This is often collected manually. The collection of therapy services activity has traditionally been a difficult area for data collection for both in-patient and out-patient activity. For example, out-patient therapy services are often delivered as part of a multi-disciplinary team, so making it more difficult to identify the therapist time spent with each patient.
  
• Prosthesis costs have proved to be difficult to allocate to individual patients. We currently allocate about two-thirds of our prosthesis costs to individual patients, with the rest being apportioned over all patients who have undergone procedures involving prostheses. However, we are working with theatre staff to improve the recording of the use of prostheses.
  
• Allocating drug costs to individual patients is also a difficult area. Although very high cost drugs are allocated accurately, in total only about half of our drug costs can be allocated to patients with the remainder being allocated in the same way as the appropriate consultant. 

What are the reporting challenges? (including how we currently present SLR information to service lines)

• Currently quarterly SLR information is presented to the board and to directorates in spreadsheet format and includes a portfolio matrix, EBITDA table and detailed I&E information for each service line.
  
• Directorates have access to detailed information on costs (again in spreadsheet format). This allows them to look at costs by specialty, point of delivery or HRG and ultimately drill-down to look at the costs of individual patients. Costs are broken down into cost ‘buckets’ such as medical staff, nursing staff and drugs.
  
• Clearly spreadsheets are not the best way of presenting this information. We are in the early stages of implementing a ‘front-end’ reporting tool that combines cost and income data from our existing costing system and allows desk-top access (for up to 100 users) to service line reporting information.
  
• We are intending to implement this reporting software from the first quarter of 2008/09. This will allow service leads to be able to drill-down into their own data to inform decision making.
  
• Some basic training will be required for all users of the ‘front-end’ reporting tool but this should not be too onerous. The biggest challenge is in ensuring that service leads and clinicians understand the SLR information that is available to them. 
  
• The trust is intending to move to monthly service line reporting in 2008/09. This will present challenges in terms of the timely coding of activity and reducing the time spent in validating, processing and running all the cost and activity data.
  
• The allocation of clinical income to service lines presents some challenges as the relationship between activity and income is often not as straightforward as simply applying a national tariff to all activity undertaken. For instance the non-elective threshold would mean that any activity above the threshold would only attract 50% tariff income. However to apply this reduced rate only to the activity undertaken after the threshold is passed could be unfair on some service lines. Mechanisms need to be in place to deal with this and similar arrangements need to be made for outpatient ratios and local prices. There is also an issue around allocating income from multi-episode spells to service lines. For instance an elderly patient may receive a hip replacement and then be transferred to a care of the elderly consultant once the acute episode is complete. This will attract one tariff rate for the spell of care, but rules are needed for how that income is divided internally. At Chelsea and Westminster, income is allocated in proportion to relative costs for each episode.

Any other main challenges/top tips for implementing?

• Prepare thoroughly and engage clinicians as early as possible in the process.
  
• Service line reporting and patient level costing is not all about systems (although this is an important aspect). The cultural change required for the successful implementation of SLR is crucial.
  
• Be clear about which specialties and services are service lines for example general surgery may contain a number of sub-specialties which are not shown as separate service lines. 
  
• Assess all activity feeder systems and address any areas where detailed activity data is unavailable.
  
• Ensure that all costs can be linked back to the general ledger and that explanations are available as to why changes may have occurred to contribution and EBITDA.
  
• Review all options for patient level costing systems. There are several patient level costing systems available but careful thought needs to be given as to which one is best for the organisation. Speak to software suppliers, arrange demonstrations and visit sites that are already implementing systems.
  
• Be prepared for and encourage challenges to the data. Some data issues may take up to a year to resolve, but it is only by getting information out to the organisation that these issues will be resolved properly.
  
• Assess whether resources in finance and information services are adequate to support the implementation of patient level costing. For example, it may be necessary to have a costing accountant working full-time on the finance aspects and likewise it may be best to have a dedicated data analyst, particularly in the early stages of implementation.
  
• Set contribution and/or EBITDA targets for all service lines. 

Contributed by staff at Chelsea and Westminster Hospital NHS Foundation Trust

To contact the trust directly contact jonathan.allsopp@chelwest.nhs.uk

 

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