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Accounting Notes Accounting in the New Public Sector Notes

Topic 4 Reading Costs And Prices For Inpatient Care In England Notes

Updated Topic 4 Reading Costs And Prices For Inpatient Care In England Notes

Accounting in the New Public Sector Notes

Accounting in the New Public Sector

Approximately 80 pages

AC310: Management Accounting, Financial Management and Organizational Control - Module 4 (Accounting in the New Public Sector).

These notes cover the final module of the AC310 Management Accounting course at LSE which covers the following topics: Management accounting and financial management in the 'New Public Sector', including performance measurement, cost accounting, cost management and pricing; the roles of accounting controls in the health system reforms in the UK and elsewhere.

These not...

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Introduction

  • Unlike most other countries with similar payment mechanisms, hospitals in England will have few alternative sources of income once the tariff system is fully implemented

  • Cost-per-case tariff system for the reimbursement of hospital services aims to promote

    • Productivity

    • Patient choice

    • Competition

  • Powerful incentives for change

  • Exposes purchases and providers to considerable financial risks, a state that has been termed “constructive discomfort”

  • Budget for the NHS of which 18% is used by the DoH for central services, research and training

  • Within the resource limit, PCTs are responsible for purchasing nearly all healthcare services on behalf of their local population

  • PCTs have traditionally purchased inpatient healthcare from publicly owned hospitals, but now also purchase from independent not-for-profit hospitals (foundation trusts) and private providers

  • In April 2005, there were 259 NHS hospitals, 25 foundation trusts and 6 independent providers offering services to NHS patients

The reimbursement system for inpatient services in England

  • Until April 2004, nearly all hospital healthcare for NHS patients was purchased from NHS rpvoiders by PCTs through locally negotiated block contracts

    • Providers were paid a fixed amount often irrespective of activity

    • Prices were typically based on historic costs of the providers

  • New reimbursement system – ‘Payment by Results’ (PbR)

    • PbR is a national prospective tariff system that aims to promote:

      • 1) efficiency and value for money

      • 2) patient choice, more flexible market entry and competition amongst providers

      • 3) service innovation and improved quality

      • 4) reduced waiting times

      • 5) fairness and transparency

    • The same tariff is paid for an elective inpatient as a daycase

    • Gives a clear financial incentive for hospitals to transfer services to daycase where possible

    • Tariff for each spell in order to promote a strong incentive for change, based on average (not marginal) costs of all NHS hospitals in England

    • Where a provider lacks data on a particular episode and cannot identify the procedure or diagnosis

    • The full PbR has a target date of April 2008, when 90% of hospital activity is expected to be covered by the tariff

The Healthcare Resource Group (HRG)

  • A panel of advisors was set up in 1990 to modify US DRGs to reflect clinical practice in England

  • Following the introduction of the tariff, the DoH has refined the system by alost doubling the number of HRGs in the new version 5 from 550 in 2005/2006 to about 1000

Additional reimbursement components for PbR

  • Unintended consequences, such as perverse behavioural responses, have to some extent been anticipated and certain technical solutions have been employed to offset them

  • There are several additional components to the simple cost-per-case tariff

  • As a long length of stay may sometimes be clinically appropriate, the tariff structure includes long stay outlier payments to enable risk-sharing between purchasers...

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