Minor Assignment 2 – Health and Aged Care Funding Models and Financial Statement Analysis

Minor Assignment 2 – Health and Aged Care Funding Models and Financial Statement Analysis

Presentation         Professional report to the CEO (with academic references)

These are short answer questions and not essay questions. While dot points can be used where appropriate (e.g., for lists), formal sentence structure and grammar are expected. Refer to Workshop 1 for more detail about expected quality of submissions.

Part 1 – Health Care Funding Models

1. Describe activity based funding as it is applied in the Australian health sector.
2. What is the role of the Independent Hospital Pricing Authority in activity base funding?
3. Casemix funding relies upon the average length of stay. Describe the problems of using the average length of stay for funding purposes?
4. Briefly compare the key features of activity based and population based funding methods. If you were the Federal Health Minister which funding model would you advocate and why?
5. The Federal Government provides funds to enable services to be purchased to help keep people in their own homes. The Living Longer Living Better reforms have seen the commencement of a transition to consumer directed care packages. Consumer directed care has altered the way in which funds can be used to support people in their own homes. If you were a service provider what would be the two key financial management issues you might be concerned with in relation to this change and why?

(Hints: include definitions of key terms, especially if they are abbreviated, and feel free to include simple examples in your answers.)

Part 2 – Financial Statements and Analysis

To access the Annual Reports, I will send you a annual reporting of  Alfred health resources.

Use the annual reports to answer the following questions:

1. Compare the financial summary (page 38) to the financial statements (start at page 59) reported in the Alfred Health 2016-17 annual report. Which set of information did you find most useful and why?
2. Using the 2016-17 annual report compare the 2017 and 2016 comprehensive results for the parent entity reported in the operating statement for the financial year ended 30 June 2017 (page 62). What other information would be useful in providing context for the outcomes? Is this information available in the annual report?
3. Construct a graph to show the following trends from 2007-08 to 2016-17:
   1. Revenue from operating activities
   2. Expenses (employee expenses + non salary labour costs + supplies and consumables + other expenses)
   3. Total admitted patient separations

(Hint: You need only a single graph, not three graphs – put $ on one of the y axes and separations on the opposite axis.) Interpret the graph.

4. Using the information gained in Question 3, discount the combined expenses (employee expenses + non salary labour costs + supplies and consumables + other expenses) using one of the following indexes (source ABS (2017). Catalogue 6401.0 Consumer Price Index, Australia, TABLE 5. CPI: Groups, Index Numbers by Capital City, http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/6401.0Dec%202017?OpenDocument – Melbourne only data)

Create a new graph of discounted expenses and total admitted patient separations. (Hint: a single graph, use both the primary and secondary y axes.)

• Why discount the expenses?
• Which index did you choose and why?
• Does discounting the expenditure alter your interpretation of the past expenditure and activity (compared to question 3)?

5. What other performance indicators may be useful to measure? Why?

In relation to Assignment 2 please note the following:

• There is a typo error in Assignment 2:  Part 2 – Question 2 should read page 62 not 45 (I apologise for any confusion).  Be careful if you are printing a specific page of the report as it may not align with your printer’s view of the page numbering.

• The ‘patient activity statistics can be found in the Section entitled “Activity” in the 2016-17 Report on page 29.  There will be a similar location for ‘Activity’ in each of the other reports. Check that the format of the activity data looks similar in each report for consistency. Contact me if you have a problem.

• As discussed on Friday 4th May – you are required to use either the CPI or Health Index data provided in the table on page 2 of the assignment to discount the information gained in question 3.  (You do not have to search any sites for the CPI and HI index data)

•  Refer to the Module “Trend Analysis’ (located on FLO) for an example relating to the application of the CPI or Health Index using the historic year as a base to discount nominal values of expenditure.

• A useful additional reference to assist your understanding of Population Based Funding (compared to activity Based Funding) is also attached for your information:

https://books.google.com.au/books?id=hGoYPE7OTu4C&pg=PA76&dq=population+based+fundingI

Assignment 2 : Trend Analysis

As previously discussed, Module 6 : Trend Analysis (page 5) provides the formula for discounting money over time using an inflation rate index (e.g. CPI or HI index),  using the first year as the ‘base year’ (historic  method).

In the example, the year 2000 is identified as the base year.  The expenditure for the year 2000 is divided by the inflation index for that year (50) and multiplied by the same index to convert the base year into discounted dollars.  Note that the nominal $ and the discounted $ are the same for the base year only.

In the following years, each year ‘s expenditure is divided by its corresponding inflation index factor and multiplied by the base year index factor to calculate the respective ‘discounted’  expenditure for each year. The formula column in the table on page 5 shows how this is achieved.

Your final discounted expenditure for each year is now relative to the base year.

For assignment 2, you can align your index data (provided) with your expenditure for the relevant years, and apply the discount formula, using 2007-08 as your base year . Note the 2007-08 financial year ends on 30th June 2008 . You could align the expenditure for 2007-08 with the index for 2008, the expenditure for 2008-09 with the index for 2009, and so on. (Based on the assumption that the Index for each year is reflective of the previous financial year).

Do not forget to state your assumptions.