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FPH exam > 5F Finance > Flashcards

5F Finance Flashcards

1
Q

Cost of healthcare service: name 5 uses if healthcare cost information

A

1 MONTORING
the first stage in the process of monitoring and controlling spending is to establish accurate cost information

  1. REVIEW
    -cost information provides an indication of the intensity if resource utilisation on different health services. This information can be used to regulate the level of activity
  2. BENCHMARKING
    - It may be possible to identify and address areas of abnormal spending by comparing local costs to regional/national benchmarks
  3. QUALITY ASSURANCE
    - cost information can identify services that are relatively underfunded and therefore may be delivering services of inferior quality
  4. EARLY WARNING
    - cost information can sometimes serve as an early warning of a nascent public health problem ie increasing cost of paeds services may be reflecting the rise in childhood obesity
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2
Q

Cost of healthcare services: types of costs- direct

A

-direct costs are costs incurred exclusively for the outcome eg disposable surgical equipment

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3
Q

Cost of healthcare services: types of costs- indirect

A
  • indirect costs are costs shared across several outputs ie the cost of an autoclave for sterilising equipment for several operations
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4
Q

Cost of healthcare services: types of costs- overhead

A

overheads are costs incurred by the entire organization ie the cost of the organization press officer

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5
Q

Cost of healthcare services: name 3 factors that complicate the process of assigning costs to healthcare

A
  1. DEFINING THE SERVICE OR EPISODE OF CARE
    - eg dose hip replacement surgery consist only of the operation and inpatient stay or also the pre-op assessment and outpatient post op physio
  2. APPORTIONING INDIRECT AND OVERHEAD COSTS
    - in healthcare labour accounts for >2/3rds fo the budget
    - staff costs are counted as an indirect cost since they are spread over many patients and typically care requires input of more than one healthcare professional
    - what portion of the indirect costs is attributed to each patient?
  3. CASE MIX
    - the same procedure can vary widely depending on characteristics and comorbidities of the patient
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6
Q

Cost of healthcare services: What are aggregate costs

A
  • total costs of a procedure over a time period within one clinical speciality

ie
- Inpatient, outpatient or A+E activity levels
- Readmission rates
- Acute bed occupancy
- referral rate per 1000 population

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7
Q

Cost of healthcare services: What are individual level costs?

A
  • resources sued by each individual patient, potentially spanning several departments

eg
- procedures performed
- length of stay
- drugs administered

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8
Q

Cost of healthcare services: What have aggregate costs historically been used for?

A
  • historically, NHS trusts have reported costs of care at an aggregate level by considering the total costs for conducting a large number of procedures
  • the department of health collects these REFERENCE COSTS and produces AVERAGE UNIT COSTS for each procedure
  • the AVERAGE UNIT COSTS are then grouped into similar types of activity to give HEALTHCARE RESOURCE GROUPS
  • HRGs are then used to inform the NHS payment scheme (which has replaced the national tariff)
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9
Q

Cost of healthcare services: What are the limitations of aggregate costs?

A
  1. Difficult to verify the accuracy of the underlying reference costs
  2. Not possible to break the costs down into constituent parts (ie staff, drugs etc) which would be useful for identifying potential saving opportunities
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10
Q

Cost of healthcare services: What are the advantages of patient level costs?

A
  • patient level costs offer several advantages over aggregate costs so systems have been introduced to collect these
  • they are being used to informed he NHS payment scheme (replaced the National tariff)
  • advantages
    1. can be linked to outcome data so can see relationship between costs and quality
    2. Identifies clinical variation in resource use and the cost of this variation
    3. Identifies inefficiency such as duplication and unnecessary investigations
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11
Q

Cost of healthcare services: What is a service line in the business sense?

A
  • the service line is the natural ‘business unit’ of an organization
  • a distinct unit with identifiable customers, products, revenues and costs that is run as an independent business with its own income and expenditure
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12
Q

Cost of healthcare services: how is service line reporting used in foundation trusts?

A
  • introduced in Foundation Trusts to better develop an understanding of their operational and financial performance and in turn improve their strategic and clinical decision making
  • service line reporting measures a trusts profitability by each of its service lines rather than just aggregated as a whole trust (ie paeds, maternity, medicine)
  • it is seen as a way to enable clinicians to become more autonomous and accountable for delivering quality and productivity
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13
Q

Cost of healthcare services-service line reporting: what are Spend and Outcome Tools (SPOT)

A
  • SPOT compares expenditures with outcomes in each healthcare speciality between similar healthcare organisations
  • alternatively it can be used by public health teams in local authorities to compare spend and outcome measures against other local authorities including CIPFA neighbours
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14
Q

Cost of healthcare services-service line reporting: Describe a SPOT chart

A

For example if an organization wanted to compare spend for multiple specialities with another foundation trust

Spend and outcome relative to the other foundation trust would be plotted on a chart

Health outcomes on Y axis with 0 in middle
Health spend on X axis with 0 in middle

bottom left quadrant would contain services with poorer outcomes and lower spend

Top left quadrant would contain services with better health outcomes and lower spend

Top right quadrant would contain services higher spend and better outcomes

bottom right would contain services with higher spend and poorer outcomes

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15
Q

Budgetary preparation: what is a budget?

A
  • a specific sum of money allocated for implementing a specific plan over a particular rime period
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16
Q

Budgetary preparation: What 2 types of accounting method may be used?

A
  • Financial accounting
  • managerial accounting
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17
Q

Budgetary preparation: What is financial accounting?

A
  • a specialised field
  • aims to provide financial statements and assess a companies financial health
  • uses accounting information for reporting to external bodies (eg auditing purposes or for stakeholders)
  • Financial reports are:
    1 created for a set period
    2 historically factorial
    3 productive of the organisations future financial situation
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18
Q

Budgetary preparation: What is managerial accounting?

A
  • less technically complex than managerial accounting
  • managerial accounting aims to provide financial information so managers can make decisions aligned with their business strategy
  • primarily for use by people inside the organization, including public health specialists
  • by using a combination of historical and estimated data managerial accounting can be used to guide decision making related to:
    1 day to day operations
    2 Future operations
    3 organisational strategies
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19
Q

Budgetary preparation: when does the financial year run in England and Ireland?

A

England April 1- march 31
Ireland 1Jan- 31 Dec

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20
Q

Budgetary preparation: Who should be involved?

A

In order to ensure budgetary decisions both reflect economic realities and remain sensitive to the strategic mission of the organization, the preparation of a budget should involve both financial and managerial staff

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21
Q

Budgetary preparation: name the 3 main approaches to budget setting

A

1 Historical or incremental
2. zero based
3. Activity based

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22
Q

Budgetary preparation: what is the historical/ incremental approach to budget setting and what are the advantages and disadvantages

A
  • based on previous years budget adjusted for inflation and changes to services

Advantages:
1 easy to apply
2 useful for services that do not change year on year

Disadvantages:
1. Does not encourage innovation

23
Q

Budgetary preparation: what is the zero-based approach to budget setting and what are the advantages and disadvantages

A
  • Fresh financial plan each year, requires re-evaluating all services and contracts

ADVANTAGES
- useful for new services

DISADVANTAGES:
- requires significant resources to prepare

24
Q

Budgetary preparation: what is the activity based approach to budget setting and what are the advantages and disadvantages

A
  • budget based on defined activity levell and includes information on how the budget will vary if levels of activity change

ADVANTAGES
- enables providers to be paid based on number of treatments they deliver

DISADVANTAGES
- Requires detailed data and understanding of activity and costing

25
Q

Budgetary preparation: Budget setting process- what are the 7 steps?

A
  1. Collate service performance data from previous year and compare against objectives set that year
    2 Collate fiscal performance data from the previous year and compare against the budget
  2. Use patient level costs or calculate the cost per unit of service
  3. Determine service objectives for the forthcoming year based on the organisations strategic plan
  4. Estimate the cost required to achieve these objectives
  5. Compare revenue and expense projections
  6. Prepare monthly budget breakdowns that reflect anticipated cash flow (not simply the budget divided into 12 equal parts)
26
Q

Financial balance: what different positions might organisations choose to be in?

A
  1. may elect to incur a DEFICIT in part of an organisations while attempting to break even overall (eg when investing in new developments)
    - May elect to realise a SURPLUS (eg when establishing an operation reserve to guard against future cash flow shortfalls)
    - BREAK EVEN
27
Q

Financial balance: what different financial positions can NHS organisations and NHS foundation trusts be in?

A
  • government financial orders require NHS organisations to remain in a continuous financial balance on every day of the year
  • In contrast NHS Foundation trusts have no statutory duty to break even, they can:
    1 generate and retain a surplus
    2. Incur a deficit
  • however, the regulatory framework requires Foundation Trusts to demonstrate financial viability in the medium term
28
Q
A
29
Q

Financial allocation: what might be used to decide how to allocate financial resources withing healthcare?

A
  • programme budgeting marginal analysis
30
Q

Financial allocation: What are Brambleby and Fordhams 8 steps for programme budgeting marginal analysis?

A
  1. Choose a set of meaningful programmes
  2. identify current activity and expenditure in those programmes
  3. Think of improvements
  4. Weight up incremental benefits and incremental costs and prioritise a list
  5. consult widely
  6. decide on changes
  7. effect changes
  8. evaluate changes
31
Q

Financial allocation: what is programme budgeting marginal analysis?

A
  • PROGRAMME BUDGETING is a way of analysing how money has been spent across medical specialities
  • MARGINAL ANALYSIS refers to the explicit consideration of the benefits and costs of increasing or decreasing resources for a programme. It can be used to make decisions about how funding is allocated at a macro level (between programmes) or micro level (within a programme)
32
Q

Contracts: what is a contract?

A

-contracts are agreements between 2 or more parties that set out what one party will do in return for specified resources

33
Q

Contracts: name the 4 principle contract payments methods in healthcare

A
  1. block contract
  2. capitation
  3. Resource groups
  4. fee for service (aka payment by results)
34
Q

Contracts: what is the block contract payment method in healthcare and what are the advantages and disadvantages

A
  • payment to a provider to deliver a specific, normally broadly defined service
    eg a hospital could be given a contract to provide acute medical care
  • a salary may also be considered a type of block contract

ADVANTAGES
- more investment in preventative care
- limits healthcare activity
- risk sharing between organisations
- low transaction costs

DISADVANTAGES
- less responsive to public expectations and demand
- can result in some perverse incentives ( does not incentivise improved clinical care)

35
Q

Contracts: what is the capitation payment method in healthcare and what are the advantages and disadvantages

A
  • lump sum payments are made to care providers based on the number of patients in a target population, to provide all or sum of their care needs
  • payments are adjusted (Depending on the population)

ADVANTAGES
- more investment in preventative care
- limits healthcare activity
- have been shown to be more cost effective

DISADVANTAGES
- less responsive to public expectation and demand

36
Q

Contracts: what is the resource groups payment method in healthcare and what are the advantages and disadvantages

A
  • payment for services which are grouped by similar resource levels required (eg diagnostic services resource group or HRGs)
  • HRGS inform the NHS payment scheme (replaced the national tariff)

ADVANTAGES
- more response to public expectation and demand
- as providers are paid according to activity levels i encourages them to treat more patients which can lead to reduced waiting times
- increased efficiency: HRGs are calculated based on average costs so this encourages hospitals with above average costs to become more efficient

DISADVANATGES
- less investment in non-reimbursed preventative care
- increases healthcare activity
- promotes cream skimming when providers seek out healthier or lower risk patients

37
Q

Contracts: what is the fee for services (payment by results) payment method in healthcare and what are the advantages and disadvantages

A
  • payment for each item of service and patient contact

ADVANTAGES
- more responsive to public expectations and demand

DISADVANTAGES
- less investment in non-reimbursed preventative care
- increases healthcare activity

38
Q

Contracts: what should be considered about selecting the provider when agreeing contracts?

A
  • In England providers can be NHS organisations, private companies or third sector organisations including charities
  • the health and social care act 2012 places a duty on commissioners to select the provider on the basis that ‘competition and choice of hospital provider leads to better health outcomes’
  • NHS Monitor regulates the selection of providers
38
Q

Contracts: list 4 points for consideration when agreeing contracts?

A
  1. selecting the provider
  2. Agreeing the price
  3. Payment arrangement and schedules
  4. Monitoring and improving quality
39
Q

Contracts: what should be considered about agreeing the price when agreeing contracts?

A
  • prices are fixed for many procedures at a national level
40
Q

Contracts: what should be considered about payment arrangements and schedules when agreeing contracts?

A
  • payments in advance or arrears
  • block contract, capitation, resource group or fee per service (payment by results)
41
Q

Contracts: what should be considered about monitoring and improving quality when agreeing contracts?

A
  • measures to monitor and improve quality should be agreed
  • QoF payments are examples of payment for performance whereby a proportion of a providers income is dependent on achieving quality goals
42
Q

Commissioning: what is commissioning?

A
  • the term commissioning is used to describe the process by which a purchaser of healthcare (eg ICS, NHS England) identifies local NEED for a service, sets out the REQUIRMENTS for that service, PROCURES such a service and MONITORS its delivery
43
Q

Commissioning: what 6 things does commissioning achieve when it works well?

A
  1. Identifies local healthcare need
    2 exposes any deficiencies in the current provision
    3 determines the level of investment required to address any unmet needs
    4 Favours healthcare services that are efficient
    5 ensures unambiguous agreements are made between purchasers and providers
    6 guides workforce development
44
Q

Commissioning: Name the 6 department of health principles that should guide commissioners and what public health tool can be used for each one (there’s a mnemonic)

A

VEG PEN

  1. VALUE FOR MONEY (economic evaluation)
    2 EQUITY (health equity audit and equality impact assessments
  2. local service GAPS (healthcare evaluation)
  3. PARTNERSHIPS (change management analysis)
  4. EVIDENCE BASED (literature review and critical appraisal)
    6 population NEEDS (Health needs assessment)
45
Q

Commissioning: what is volatility?

A
  • random fluctuations in healthcare activity presents a relatively larger risk to small commissioners than large commissioners
  • this is a phenomenon known as volatility ie in a GP practice a single haemophiliac needing surgery may use as many HRGs in a year as all the other patients on the list combined
  • in order to cope with this volatility in over/under spending from year to year commissioners can make a risk pool
  • this is a form of insurance for commissioners in which overspending commissioners may access additional resources, subject to explicit criteria
  • specialist commissioning enables this risk pooling
46
Q

Commissioning: who is responsible for specialised commissioning in England?

A
  • In England specialised commissioning is the responsibility of NHS England
  • risk sharing arrangements are put in place for rare or expensive conditions
47
Q

Commissioning: Specialist commissioning and risk pooling has advantages for all interested parties- what are they for each party?

A

1 PATIENTS
benefit: Improved access to rare services

  1. HEALTHCARE PLANNERS
    Benefit: restricting the number of specialised services so as to maintain a high level of expertise
  2. COMMISSIONERS
    Benefit: smooths out risk volatility
  3. PROVIDERS
    Benefits: cash flow to support rare and expensive treatments
  4. SPECIALISTS
    Benefits: Focus point for discussion about service development
48
Q

Financial audit: What is the purpose of financial audit?

A
  • To provide an independent, objective opinion on the performance of an organization with regards to:
    1. Financial control
    2. Risk management
    3. Governance
49
Q

Financial audit: What is internal audit?

A
  • In order to maintain credibility, auditors must strive for integrity, objectivity and confidentiality
  • A healthcare organization may be audited by:
    1 in house audit teams
    2 in house audit teams with support from external contractors
    3 external ‘whole internal audit’ service
50
Q

Financial audit: What is external audit?

A
  • the National Audit Office is an independent body that reports directly to parliament
  • one of its roles is to assess the efficiency and effectiveness with which the public bodies use their resources
  • the National Audit Office audits:
    1. The Department of Health resource account
    2. Accounts of Department of Health arms length bodies
    3. Summarised accounts of NHS trusts
    4. Consolidated accounts of Foundation Trusts
51
Q

Fraud detection: who is responsible?

A
  • generally fraud detection is a line management issue rather than the responsibility of auditors
  • In England the NHS Counter Fraud Authority is charged with tackling fraud and corruption in the NHS
52
Q
A

FPH exam (29 decks)

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