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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 centremanagement? 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
objectives remain NSW Health priorities:
- Improve patient access
- Ensure sustainability of funding
- Improve transparency of health organisation funding
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FINANCIAL MANAGEMENT IN HEALTHPRINCIPLES
Ownership Accountability Transparency
Integrity ConsistencyFinancial
Stewardships
Accounting Standards
Value for Money
FINANCIAL MANAGEMENT IN HEALTHRESPONSIBILITIES
Plan and prioritiseDevelop a realistic
budgetUnderstand and
control your costsReduce 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 formRegister
• the involvement of the individualRestrict
• the individual from the conflict matterRemove
• the private interestRelinquish
• a disinterested third party to overseeRecruit
• the decision making processReview / Renew
• from the public sector agencyResign
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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
OrderRequisition
Goods
Receipt
Note
Invoice Payment
Operations Procurement Finance FinanceOperations
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: [email protected]
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
PlanningPlanning starts from State
Government and is
cascaded throughout the
organisation
NSW State Reporting
NSW Health Reporting
Health Org Reporting
Health Unit Reporting
PerformancePerformance
monitors and
manages resources
to meet service
demands and
achieve desired
outcomes
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
FundingResource 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 RESOURCESThe 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 MurrabaHospital?
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 organisation?
2. Is your organisation funded on an activity or block basis?
ACTIVITY BASED FUNDING (ABF)
• Funds are allocated based on the specific activities
or 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&SInfrastructure Staff
$
ABF FUNDING/PURCHASING PRINCIPLES
• Funding is now linked to
outputs or activity
• The NSW Health
Organisation determines
the inputsG&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:
• optimising 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 organisation?
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
FYActual
$
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-
• 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 COLLABORATIONEffective 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 opinion
c. Summing up
OPTIONS ANALYSISOptions
Ability to
reduce costs
Improved
budget value
More
efficient
options
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:
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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.