Information Services Division NHS National Services Scotland

1. Integrated Resource Framework Valuing Hospital Activity Costing PilotDirectors of Finance and TAGRA Meeting 18 August 2011 Information Services Division NHS National Services Scotland

2. Costing Landscape 1 – ScottishGovernment • 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

3. Costing Landscape 2 – ScottishGovernment • 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

4. Costing Landscape 3 – ScottishGovernment • 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

5. Costing Landscape 4 – ScottishGovernment • 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

6. 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

7. Sample Unit Tariffs

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

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

10. 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

11. 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

12. 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

13. Sample Outputs - 1 Price List / Tariffs

14. Sample Outputs - 2 Aggregate costed summary

15. Sample Outputs - 3 Costs Book Reconciliation

16. Sample Outputs - 4 High Cost Items Summary

17. Sample Outputs - 5 Activity / Costs Mismatches

18. 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

19. 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