FINANCIAL MANAGEMENT IN A HEALTH CONTEXT WELCOME - - PDF document

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FINANCIAL MANAGEMENT IN A HEALTH CONTEXT

FINANCIAL MANAGEMENT ESSENTIALS FOR NSW HEALTH MANAGERS

WELCOME

• Acknowledgement of Country and

Elders

• Acknowledgement of Carers

HOUSEKEEPING

• Phones/iPads/Laptops
• Water
• Restrooms
• Emergency evacuation
• Break times
• “Parking” list
• Questions

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PROGRAM OVERVIEW

Financial Management in a Health Context

DAY ONE FACE-TO-FACE EDUCATION SESSION

Tasks: Pre-program survey Discussion, activities, reflections Workplace Report guidance assistance Post Day One Survey

Interpreting and Responding to Financial Information

DAY TWO FACE-TO-FACE EDUCATION SESSION

Tasks: Workplace Report discussion Full Time Equivalent overview Cooinda case study Post program Survey

Four to Six Weeks

INTRODUCTIONS

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YOUR EXPECTATIONS

• 1. What outcomes would you like to achieve as a result of

attending this program?

• 2. What do you consider is effective cost centre

management? Provide three examples

NSW HEALTH VALUES

• Collaboration
• Openness
• Respect
• Empowerment

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FOCUS OF DAY ONE

Financial Management Context: principles, responsibilities and policies

• 1. Planning

and Prioritisation 2.Budgeting: costs, activity and funding sources 3.Budgetary Control: Variance analysis

• 4. Decision

making / corrective action

HEALTH FUNDING

• The cost of providing health care has been steadily rising over the

past few decades

• A focus on efficiency and accountability is essential and will remain

central to provision in the future

• Although the National Health Reform Agreement has now ended, it’s
• bjectives remain NSW Health priorities:
• Improve patient access
• Ensure sustainability of funding
• Improve transparency of health organisation funding

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FINANCIAL MANAGEMENT IN HEALTH PRINCIPLES

Ownership Accountability Transparency Integrity Consistency Financial Stewardships Accounting Standards Value for Money

FINANCIAL MANAGEMENT IN HEALTH RESPONSIBILITIES

Plan and prioritise Develop a realistic budget Understand and control your costs Reduce waste and increase utilisation Risk monitoring and awareness Monitor results and take corrective action when necessary Information, integrity and reliability Operate within the financial delegations and comply with regulations Evaluate new activities Safeguard assets

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PRINCIPLES AND RESPONSIBILITIES

Considering the principles and responsibilities of financial management:

• 1. Identify three areas that you feel are the most

important for the success of your organisation.

• 2. Explain why.

ACCOUNTABILITY

“Accountability is something you choose to exhibit – it is not assigned to you. In short, you can be given responsibility, but you have to take accountability."

The Oz Principle: Getting Results Through Individual and Organisational Accountability

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CONFLICT OF INTEREST

Public Duty Private Interest

Potential Perceived Actual

Conflict of Interest

DEALING WITH CONFLICTS OF INTEREST

• via a conflict of interest declaration form

Register

• the involvement of the individual

Restrict

• the individual from the conflict matter

Remove

• the private interest

Relinquish

• a disinterested third party to oversee

Recruit

• the decision making process

Review / Renew

• from the public sector agency

Resign

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CONFLICTS OF INTEREST

For the allocated scenario discuss:

• 1. What type of conflict of interest exists and
• 2. what could be done to manage it.

DELEGATIONS

Level 5 Level 4 Level 3 Level 2 Level 1

Secretary Deputy Secretary Level 3 Level 4 Level 5 Level 3 Deputy Secretary Level 3

Risk Efficiency

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DELEGATIONS REFLECTION

• a. Why do delegations of authority exist?
• b. What delegations do you have and how do they

compare with others in your group today?

PROCUREMENT

Purchase Order Requisition Goods Receipt Note Invoice Payment Operations Procurement Finance Finance Operations Segregation of Duties

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PROCUREMENT CARDS (Pcards)

The NSW Health policy on Procurement Cards (PCards), published February 2016, states that all NSW Health entities are required to use PCards where practicable for purchase of all goods and services valued at or below $5,000 (and in line with user Delegation). This limit may be increased at the Chief Executive’s discretion. PCards are a type of credit card with features that provide expenditure

• control. They are a cost effective way of purchasing high volume, low

value goods and services. PCards replace the need to create purchase orders for these types of transactions. They also intend to reduce the number of invoices received and the delay in delivery of goods.

PROCUREMENT CARDS (Pcards)

If you are not currently using a PCard, you might discuss the suitability of having a PCard with your direct line manager and/or the finance department of your health organisation. If you have an existing PCard and are having issues, you can contact the PCard Support team: Email: HSNSWPCardSupportTeam@health.nsw.gov.au Phone: 1300 883 965. Further information regarding Procurement can be accessed via the NSW Health Goods and Services Procurement Policy Manual.

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PROCUREMENT

• 1. What are the separation of duties and why do they

exist?

• 2. What is the purpose of a PCard and how is it

consistent with effective controls and segregation of duties?

PLANNING

NSW Health Plan: Towards 2021

Health Org Plan Health Unit Plan

Planning

Planning starts from State Government and is cascaded throughout the

• rganisation

NSW State Reporting NSW Health Reporting Health Org Reporting Health Unit Reporting

Performance

Performance monitors and manages resources to meet service demands and achieve desired

• utcomes

NSW Government Premier’s Priorities

NSW Health Budget NSW State Budget Health Org Budgets Health Unit Budgets

Budget

Budgeting allocates resources to meet service demands and achieve desired outcomes

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PLANNING - VALUE FOR MONEY

Community Needs and Expectations Program and Service Delivery Design Fiscal Strategy Review Alloc. Best Program and Service Mix Funding Resource Mix (Inputs) Activities Goods and Services (Outputs) Impacts on Community (Outcomes) Community Needs and Expectations

Resource Management Maximising delivery effort over time

Efficiency Effectiveness Appropriateness Value for Money

ALLOCATING SCARCE RESOURCES

The Apex Local Health District

Using the project proposal summary table and background information provided,

• 1. identify which projects you

will fund and

• 2. document your rationale

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The Apex Local Health District

• 2. What other information would you need for each

proposed project to make a properly informed decision?

• 3. Explain how you balanced short and long-term return on

investment decisions

• 4. How will the ongoing cost for these initiatives be funded

ALLOCATING SCARCE RESOURCES

• 1. How were CORE values demonstrated as you tried to

reach a decision on funding priorities?

• 2. What are some actions you can take to involve staff in

the financial management process in your workplace? Link each of your ideas to one or more of the CORE values.

APEX LHD CORE VALUES

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BUDGETING

• What is a budget?
• Put simply, it’s your operational plan in dollars and cents
• Budget components:
• Revenue
• Expense
• Cost centres

TYPES OF BUDGET

Capital

Buildings Machinery Equipment

Recurrent / Operating

Salaries and Wages Good and Services Maintenance

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SERVICE AGREEMENTS

• The NSW Government establishes an annual Service

Agreement with each NSW Health Organisation

• The Service Agreement exists between the NSW Health

Organisation and the Ministry of Health

• It is aimed at promoting budget integrity

BUDGETS

• 1. What is the relationship between the budget and Key

Performance Indicators?

• 2. What is the link between activity and a budget?
• 3. What are the benefits of budgeting?

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NET COST OF SERVICE

Expenses Less: Revenue Less: Gain/(Loss) on disposal Less: Other gains/(losses)

• Salaries and wages
• Goods and Services
• Maintenance
• Private patients
• Department of Veteran Affairs
• Grants
• Disposal of assets
• Bad debts

Eg:

INTRODUCTION TO MURRABA HOSPITAL

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MURRABA HOSPITAL BUDGET

• 1. What is the Net Cost of Service for Murraba Hospital?
• 2. What is the total expense budget for Murraba

Hospital?

• 3. What is the difference between Net Cost of Service

and Capital?

MURRABA HOSPITAL BUDGET

$ Administration 2,852,922 Allied Health 315,953 Murraba Hospital (150 Bed) Full Year Budget - Year Ending 30 June 2017 Meals & Entertainment (47,576) 30,223,003 3,796,354 Food 17,754 EMPLOYEE RELATED VISITING MEDICAL OFFICERS Administration 1,044,210 20,054,425 782,260 TOTAL EXPENSES 54,856,042 Accommodation (4,071,009) REPAIRS & MAINTENANCE GOODS & SERVICES Other Revenue (226,585) TOTAL REVENUE (6,938,440) 47,917,602 CAPITAL 200,000 TOTAL NET COST OF SERVICE (NCOS)

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POTENTIAL REVENUE SOURCES

Facility Fee Prosthetics Room rates PRIVATE PATIENTS Motor Accident Patients Ineligible patients Workers Compensation Dept Veterans Affairs COMPENSABL E PATIENTS Interstate patients Patient transport Transitional Aged Care High Cost Drugs PUBLIC PATIENTS Donations / Gifts / Bequests Grants – CW, State, Private Fundraising Lease / Rent / Car Parking GENERAL

RESTRICTED FINANCIAL ASSETS AND CUSTODIAL TRUST FUNDS

Restricted Financial Assets

Grants Donations Bequest

Custodial Trust Funds

Funds held on behalf of third parties Private Practice Trust Funds Funds that have conditions or restrictions as to their use, for example:

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THE FLOW OF FUNDS

TOTAL HEALTH EXPENDITURE

“In Scope” i.e. Commonwealth and State funded “Out of Scope” i.e. State responsibility ABF funded Block funded Block funded

• Acute admitted
• Emergency department
• Non-admitted
• Sub and non-acute admitted
• Mental health admitted
• Small hospitals
• Residential aged care service

(RACS)

• Teaching, Training, Research
• TTR
• Population health
• Ambulance services
• Pillars*
• Ministry of health

* Pillars - Agency for Clinical Innovation (ACI); Bureau of Health Information (BHI); Cancer Institute NSW; Clinical Excellence Commission (CEC); Health Education and Training Institute (HETI).

PUTTING THE FUN IN FUNDING

Can you think of any other ways to generate own source funding in your health organisation?

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FUNDING SOURCES

• 1. What are the main funding sources for your
• rganisation?
• 2. Is your organisation funded on an activity or block

basis?

ACTIVITY BASED FUNDING (ABF)

• Funds are allocated based on the specific activities
• r services provided
• Has increased transparency in funding allocation
• Identifies relative resource use from which to consider:
• Are we using the right model of care?
• Are we allocating resources correctly?
• Are we providing the highest quality of service to our patients,

with the resources we have available?

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TRADITIONAL FUNDING/PURCHASING PRINCIPLES

Traditional approaches to funding health care involve providing $ for inputs for example:

• positions
• infrastructure
• goods and services

G&S Infrastructure Staff

$

ABF FUNDING/PURCHASING PRINCIPLES

• Funding is now linked to
• utputs or activity
• The NSW Health

Organisation determines the inputs

G&S Infrastructure Staff

Emergency Care Non Adm Services MH Services Acute Care

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BLOCK FUNDING

• There are small number of services and activities provided by NSW

Health where it has been difficult to determine a consistent agreed price

• Such services continue to receive funding via alternative models

such as Block Funding

• Regardless of the funding model applied to your service or unit, it is

important to continually seek efficiencies and cost savings

ACTIVITY BASED MANAGEMENT (ABM)

ABM in the health care environment: A management approach that focuses on strategic decision-making and aims to improve patient care through:

• ptimising resource allocation
• meeting performance targets
• identifying areas for improvement
• evidence-based decision-making.

Activity Based Funding (ABF)

to

Activity Based Management (ABM)

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ACTIVITY BASED MANAGEMENT EXPLAINED

• http://www.heti.nsw.gov.

au/programs/activity- based-management- for-better-care/

ACTIVITY BASED MANAGEMENT CYCLE

Document care delivered Extract and verify patient activity and financial information Assign costs to patient-level data Analyse and report on performance Make informed service improvement decisions Implement service improvements Allocate and manage resources

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ABM AND YOU

• 1. How does ABM relate to your NSW Health
• rganisation?
• 2. Does having and understanding of ‘Activity’ help you

make better decisions regarding financial and resource management? If so, how?

THE IMPORTANCE OF BUDGETARY CONTROL

• The key role of monitoring and reviewing data
• Ensuring activities are undertaken within the available resources
• Communicating decisions and impacts

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USING A BUDGET

• Reviewing actual performance

against budget

• Variance
• Favourable
• Unfavourable

MURRABA HOSPITAL

FY Actual $ Budget $ Variance $ Variance % YTD_Actual $ YTD_Budget $ Variance $ Variance % Budget Medical 687,908 693,766 5,858 0.84% 3,806,711 4,072,595 265,884 6.53% 8,145,190 Nursing 1,712,047 1,503,453 (208,594)

• 13.87%

9,338,440 9,020,720 (317,720)

• 3.52% 18,041,439

Employee Related 2,399,955 2,197,219 (202,736)

• 9.23%

13,145,151 13,093,315 (51,836)

• 0.40% 26,186,629

394,045 316,363 (77,682)

• 24.55%

2,149,334 1,898,177 (251,157)

• 13.23%

3,796,354 Drugs 163,958 147,745 (16,213)

• 10.97%

894,318 886,470 (7,848)

• 0.89%

1,772,940 Blood Products 9,042 9,321 279 2.99% 49,319 55,925 6,606 11.81% 111,849 Linen 74,760 63,564 (11,196)

• 17.61%

407,782 381,385 (26,397)

• 6.92%

762,770 Goods & Service 247,760 220,630 (27,130)

• 12.30%

1,351,419 1,323,780 (27,639)

• 2.09%

2,647,559 TOTAL EXPENSES 3,041,760 2,734,212 (307,548)

• 11.25%

16,645,904 16,315,272 (330,632)

• 2.03% 32,630,542

Dept Veteran Affairs (35,240) (34,950) 290 0.83% (210,240) (209,700) 540 0.26% (419,400) TOTAL REVENUE (35,240) (34,950) 290 0.83% (210,240) (209,700) 540 0.26% (419,400) NET COST OF SERVICE 3,006,520 2,699,262 (307,258)

• 11.38%

16,435,664 16,105,572 (330,092)

• 2.05% 32,211,142

Visiting Medical Officers FY 20XX/20YY December FY 20XX/20YY December Murraba Hospital

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STATE-WIDE MANAGEMENT REPORTING SERVICE

• A centralised, web-based system that provides financial data to cost

centre managers

• Compares actual to budget performance
• Variance
• Potential impacts on budget
• Training
• Individual
• Group

SMR SERVICE TRAINING

SMR Service Training Team HSNSW- SMRServiceSupport@health.nsw.gov.au

• Individual
• Group

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MURRABA HOSPITAL VARIANCE ANALYSIS

Calculate the Variance and Variance % for the blank cells in the month and YTD columns.

COST CONCEPTS

Variable costs Fixed costs Mixed costs Cost drivers

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COMMON COSTS

• 1. What are the costs you have influence over in the

department / unit where you work and are able to manage?

• 2. What circumstances or factors influence your ability to

manage your costs?

THINKING ABOUT COSTS

• 1. Identify the three largest costs in your area and

indicate:

• Is the cost mainly fixed or variable?
• What is the most likely cost driver for each

identified cost?

• 2. What is the benefit of understanding this information

regarding major costs?

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BRAINSTORM: FINANCIAL RISK MANAGEMENT

• 1. In your groups identify as many financial risk

management activities that have been discussed today as you can.

ENGAGING STAFF

It is important to consider:

• Management style
• Communication

and collaboration

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ENGAGEMENT AND COLLABORATION

Effective financial management requires:

• An appreciation of and support for the resources allocated to the unit,

by the people working within the unit

• A commitment by managers to communicate transparently with

people in their unit about the resources required and used to efficiently achieve the operating goals of their unit. 1. Reflecting on the first two bullet points above, who are the key people you need to engage with to gain a better understanding of you health organisations financial management goals, tools and resources?

PERSONAL REFLECTION

To what extent do you involve your staff in the financial management process?

1 2 3 4 5

I need to improve I do this sometimes I do this consistently

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QUALITY OF DATA

Consider the collection of activity data

• Counting
• Coding
• Costing

Everyone plays an important role in ensuring both patient activity data and financial information is correct

DATA INTEGRITY

• 1. What is the impact of inaccurate recording of data?
• 2. What are some ideas you can take back to your

workplace to improve data inaccuracy?

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MURRABA HOSPITAL – BUDGET CONTROL

Part 1

• a. Review the budget

report

• b. Provide advice and
• pinion
• c. Summing up

OPTIONS ANALYSIS

Options Ability to reduce costs Improved budget value More efficient

• ptions

Do nothing Seek more resources x Re-organize existing resources

• a. Review large expenditure items

x x x

• b. Review discretionary expenditure

x x

• c. Stop some activities

x

• d. Do things differently

x x x

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MURRABA HOSPITAL – BUDGET CONTROL

Part 2 Options matrix tool analysis

END OF DAY 1 - WHAT’S NEXT?

• Workplace Report
• Overview of Full Time

Equivalent (FTE)

• Cooinda Local Health

District case study

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WORKPLACE REPORT

Instructions and Tips:

• Identify a resource management issue and outline a strategy to address

the issue

• Proposed strategy to be in line with your NSW Health Organisation

Strategic plan / Service Agreement

• Engage with your Business Manager / Business Partner to assist
• Upload report to My Health Learning one week prior to attending day two
• At day two lead informal discussion, 10 minutes to share
• If working as a group:
• all members actively participate in workplace report creation and leading

discussion

WORKPLACE REPORT – continued

• Focus on strategies that can be implemented in future, not ones that

have already been implemented

• Strategies should focus on at least one of the below:
• the ability to reduce cost
• the ability to improve budget value, ie generate revenue
• the ability to implement a more efficient operation
• Strategies should not:
• shift costs to other areas
• justify future expenditure already decided on
• identify/correct errors in finance process or allocation of FTE.

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WORKPLACE REPORT TEMPLATE

Five parts to complete: 1. Background: Brief background to resource management issue 2. Do Nothing: What are current cost drivers & risks of doing nothing 3. Identify two strategies: Use the modified options matrix tool to identify two

strategies that may resolve your issue

4. Expected improvement and risks: Identify the expected improvements and

potential risks of each strategy. Quantify the benefit

5. Recommendation: Make a recommendation of your preferred option and

explain why

PROGRAM SUPPORT

• Collaborate with your colleagues
• Share your learning with your team / colleagues
• Connect with your Business Manager / Business Partner

about your project

• Contact the HETI Leadership, Management Development and

Educational Design (LMDED) Portfolio if you require assistance.

HETI Management Development Programs 02 9844 6136 Email: HETI-Management@health.nsw.gov.au

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CHECK OUT AND CLOSE

• Expectations
• Parked questions
• Any immediate feedback or requests for

support?

• Share one key ‘take away’ message from

today

• Please complete the Post day 1 survey via

My Health Learning Pathway

• Look forward to seeing you at day 2.