CG 3 Operating room and special procedure suites

CG 3.1 Scope

CG 3.1.1 This Costing guideline outlines an approach to cost activity within an operating room (OR) and special procedure suites (SPS).

CG 3.1.2 The business provides a guide to cost each separately.

CG 3.1.3 This Costing guideline also provides practical steps and examples to guide staff on the patient costing process for this activity.

OR and SPS scope

CG 3.1.4 For the purposes of patient level costing, operating room expenses are those that relate to areas of the hospital that would typically be found in the theatre suite. SPS may have their own cost centres to account for SPS expense, but may have related expenses in other cost centres, such as the OR, as the OR theatre manager may order goods and services on behalf of the SPS.

CG 3.1.5 There are a number of other areas in hospitals where procedures are performed, which should not be included as operating rooms but classified as specialist procedure suites for patient level costing purposes including:

  • angiography,
  • cardiac catheter suites,
  • ECT suites,
  • endoscopic suites,
  • general procedure suites,
  • hyperbaric chamber,
  • lithotripsy suites,
  • lung function laboratories; non–invasive cardiac laboratories (e.g. echo labs),
  • physiology laboratories,
  • radiotherapy suites,
  • respiratory laboratories,
  • sleep laboratories.

CG 3.1.6 Operating rooms should be separated from Specialised Procedure Suites for the purposes of patient level costing.

CG 3.1.7 Expenses and activity should be identified for each and costed in their own right. The steps below should be applied for both the operating room and special procedure suite. There is no change in the application of the steps required to separately cost each.

CG 3.2 Objective

CG 3.2.1 The objective of this Costing guideline is to guide costing practitioners of the end to end steps required to ensure that all OR and SPS activity and expenses which contribute to the day to day production of final OR and SPS products are included in the patient costing process to determine the full cost of production.

CG 3.3 Costing guideline

Step 1: Stakeholder Identification and Service Scale and Scope

CG 3.3.1 Costing practitioners should meet with the appropriate stakeholders within the OR, relevant SPSs and Finance Department to identify both the expense and activity related to OR and SPS. OR Stakeholders may include the Director of Surgical Services (or local equivalent), the OR Nursing Manager and the OR Cost Centre Manager. SPS stakeholders may include the Clinical Directors that relate to the relevant SPS within the hospital.

CG 3.3.2 For example, the Medical Director of Gastroenterology may have responsibility for the Endoscopy Suite, while the Medical Director of Cardiology may have responsibility for the Cardiac Catheter Suite. The relevant SPS Cost Centre Managers should also be met with. The Finance Department should be able to assist with providing the contact details for these staff.

CG 3.3.3 In some hospitals, expenses associated with an SPS may not be discrete and may fall within an OR cost centre (e.g., Endoscopy). In this case, costing practitioners should seek to meet with the appropriate stakeholders within the OR, as described above.

CG 3.3.4 The agenda of these meetings should include an overview to the operation of the OR or SPS. This information is required to understand the configuration of these areas. This insight should enable further detail to be gathered such as the expense that is reported within and across the OR or SPS, and the associated activity within its configuration. The meeting should also discuss the available feeder systems and the data within (for example, some hospitals may have feeder systems used in the OR or SPS that capture prosthesis and/or other consumable utilisation per procedure); the most appropriate way to allocate expenses and the RVUs that should apply to different intermediate products (see Steps 4 and 5 below).

Step 2: Align expense to the OR or SPS service and define overhead and direct expenses, including overhead allocation methods

CG 3.3.5 Costing practitioners should work with OR and SPS stakeholders to define the expenses within the OR and SPS that relate to final products. This includes obtaining agreement on the cost centres to map to OR and SPS for costing purposes in the costing software.

CG 3.3.6 Where the general ledger has consolidated expenses for both OR and SPS within the one cost centre, costing practitioners should also work with the OR and SPS stakeholders to define and agree on the methods and assumptions to be used (for example, staff rosters, timesheets and/or other relevant data) to transfer expenses to other intermediate products.

CG 3.3.7 Costing practitioners should then (within the patient costing system) use stakeholder insights to move expenses appropriately between the OR and SPS.

CG 3.3.8 Costing practitioners should utilise the costing system or another medium to record:

  • the classification of OR and SPS expenses into the OR and SPS final cost centres;
  • the stakeholders met with;
  • the date of the meeting; and
  • a date for future review of OR and SPS expense alignment.

Step 3: Identify patient level activity and OR and SPS feeder data and perform quality assurance checks

CG 3.3.9 Ideally, the OR and SPS feeder system will include some or all of the following fields:

  • the patient’s unique identifier;
  • the patient unique episode identifier;
  • unit code (for example, Theatre 1, Theatre 2, Endoscopy, Cardiac Catheter Suite);
  • the date of service;
  • the time into and out of the unit (including pre operation, skin to skin and recovery times, anaesthesia start and finish time, anaesthesia type); and
  • Surgeon code;
  • Prosthesis or consumable code

CG 3.3.10 Where hospitals have feeder systems that measure prosthesis or consumable consumption at the patient level, these feeder systems will ideally include the following fields:

  • the patient’s unique identifier;
  • the patient’s unique episode identifier;
  • the prosthesis or consumable code and description;
  • the prosthesis or consumable price; and
  • the date of service.

CG 3.3.11 Costing practitioners should perform quality assurance checks on the OR and SPS files prior to the costing process. For example, checks should be made on:

  • the date of service (check error dates, relevancy to costing period);
  • time into and out of the OR or SPS (check for negative values – i.e., where start time is after finish time)
  • Surgeon codes.

Step 4: Creating and mapping OR and SPS costing products or intermediate products

CG 3.3.12 With the exception of prosthesis (which generally uses the traceable cost i.e. the actual charge), the most widely used method for allocating OR and SPS expenses to patients includes the use of the procedure duration, which may also be combined with a Relative Value Unit (RVU). Where hospitals have feeder systems that capture consumable utilisation by procedure, this information can be used to allocate consumable costs within the OR or SPS.

CG 3.3.13 Depending on the fields available in the OR or SPS feeder systems, a number of products can be created and used within an OR, including products for medical and nursing Anaesthesia (where these expenses are located with the OR cost centre); surgical procedure products; recovery products and consumable products. Usually, the product will include the procedure code and the unit code.

CG 3.3.14 If feeder systems are available that measure prosthesis and/or consumable utilisation, products will need to be created in the costing system and mapped to the relevant final cost centre (i.e., OR or SPS). Where such data is available, products may resemble the code of the prosthesis or consumables.

CG 3.3.15 Where prosthesis feeder systems are unavailable, the costing practitioner should consider constructing products, which utilise known prosthesis procedure codes.

CG 3.3.16 Where OR and SPS products are created in the costing system, they will also need to be mapped to the relevant final cost centre (i.e., OR or SPS). An example of such a product is: ‘OR1_ProcX’, where ‘OR1’ denotes Operating Theatre 1, and is derived from the unit code field, and ‘ProcX’ is derived from the procedure category field of the OR or SPS feeder file. Once this product code is created, costing practitioners will be required to map this code in the costing system to the OR or SPS final cost centre.

CG 3.3.17 Where SPS activity is captured within the OR feeder system, this may also include unit codes, (for example, ‘CCS’ for Cardiac Catheter Suite), that need to be mapped to the SPS final cost centre. In this case, costing practitioners should create a product for example ‘SPS_ProcX’ and map this product to the relevant SPS cost department in the costing system.

Step 5: Apply Relative Value Units by OR and SPS product

CG 3.3.18 Procedure duration is usually the primary cost driver used to allocate the labour related expenses within an OR or SPS. This includes medical, nursing, and consumable (where consumable feeder systems are unavailable). Where the OR or SPS product uses duration to allocate cost, costing practitioners may also wish to assign RVUs to adjust the cost allocation to account for resource intensity.

CG 3.3.19 For example, some procedures in the OR or SPS may require more medical and nursing staff than others. The RVU for these products then becomes the average number of nursing and medical staff per procedure. Similarly, some procedures may require more consumables than others.

CG 3.3.20 These relative values should be determined in consultation with the OR and SPS stakeholders (see Step 1 above). It may be useful for RVU development for costing practitioners to provide a template which includes the list of OR and SPS procedures (sorted in order of volume) to stakeholders.

CG 3.3.21 Where prosthesis feeder systems are available, the costing practitioner may consider using the prosthesis price (the traceable cost or actual charge) as the RVU. Where prosthesis feeder systems are unavailable, the costing practitioner may need to construct products based on known prosthesis procedure codes and may use RVUs based on the known average cost per unit (as sourced from the material management department) or bands costing based on MBS codes for like prosthetic against the nominated procedure codes.

Step 6: Create intermediate product costs in final cost centres

CG 3.3.22 Two allocation processes are performed:

  • When overhead costs are allocated to the Production Cost Centre (using an appropriate allocation statistic)
  • When the Production Cost Centre costs (overhead and direct) are allocated to the intermediate products.

Step 7: Match intermediate products and their costs to patient activity

CG 3.3.23 Intermediate products from the OR and/SPS will be matched to patient activity according to defined matching criteria in accordance with Standard 2.2. For example, for inpatients, the dates between the admission and discharge date will be used to find OR and or SPS intermediate products for matching for patient activity as the relevant sessions will fall between these dates.

Step 8: Report costs

CG 3.3.24 Costing practitioners should then perform the required steps to consolidate and report costs at encounter level

Step 9: Cost data review with OR and SPS Stakeholders

CG 3.3.25 Costing practitioners should meet with their relevant OR and SPS stakeholders to report on costs calculated.

CG 3.3.26 Cost data should be reviewed for, amongst other checks, cost relativity per product and resource completeness per episode to determine if the cost data captures resources that have been provided at encounter level.


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