Understanding the general ledger for costing

February 2016

guidance

Understanding the general ledger for costing

shaping healthcare finance …

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ContentsForeword 3

Executive summary 4

Introduction 5

Section 1: The role of the general ledger in the costing process 6

Section 2: Understanding the detail in the general ledger 7

Section 3: Extracting accurate financial data from the general ledger 8

Section 4: Mapping the general ledger to the costing system at a sufficiently granular level 16

Section 5: Ensuring cost classifications are appropriate for the costing process 17

Section 6: Reconciling the cost quantum 18

Section 7: Engaging with financial management and financial accounting in the overall costing process 19

Appendix 1 Case study: Robust change control with an integrated service directory 21

Appendix 2 Case study: Service-line reporting securing improvements in cost data 22

Appendix 3 Case study: Identifying education and training costs 23

Appendix 4 Case study: Restructuring the general ledger 24

Appendix 5 Case study: Use of confidence scores to drive improvements in costing 25

Appendix 6 Glossary of terms 27

Appendix 7 HFMA Acute and Community Costing Practitioner Groups 28


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ForewordThe starting point for the costing process is the general ledger, with financial data needing to be mapped into the costing system. However, with general ledger structures differing from organisation to organisation, getting the data into the correct place is not always straightforward and requires a good understanding of the overarching core finance system.

If organisations start with the wrong quantum of costs or the wrong costs in the wrong cost centres, then no amount of sophisticated allocation methodologies will produce accurate cost data.

This guidance aims to support costing practitioners, financial managers and financial accounting in getting this mapping right. All have roles in creating a solid foundation for the whole costing process.

It identifies common problems facing costing practitioners in getting accurate data into the costing system. These include changes to cost centres, the use of dump codes and internal recharges, and suggestions are provided on how to address them.

A close working relationship between costing practitioners and other financial colleagues is the common strand to most of these solutions.

The HFMA has championed improvements in costing for several years. It continues to do this through the work of its costing practitioner groups and the Healthcare Costing for Value Institute, promoting both the production of accurate cost information and its use in value-based decision-making.

The publication of this guidance forms part of this ‘championing’ role – a role that has seen the association develop clinical costing standards since 2010, in conjunction with, and with support from, both the Department of Health and Monitor. These standards continue to have an important role in supporting costing practitioners to improve their costing processes during the transition to the revised patient-level costing process that is described in Monitor’s Costing Transformation Programme.

The Acute clinical costing standards and the Mental health clinical costing standards, together with the two guidance papers Understanding the general ledger for costing and Improving the quality of source data for costing form part of Monitor’s Approved costing guidance for 2016/17.

Both the standards and this guidance have been developed with the full involvement of costing practitioners. Their contribution massively enhances the guidance, ensuring it is based on how processes and systems work in the reality of busy healthcare organisations. The commitment and support of these practitioners– and that of their organisations – is greatly appreciated by the HFMA.

This practitioner network also offers access to good practice examples from around the service, many of which are included here. Monitor has recognised that an engaged costing community is vital to the success of its Costing Transformation Programme and the HFMA will continue to work with these practitioners as the service continues to improve costing and deliver the programme.


Mike McEnaney

Chair, HFMA Community Costing Practitioner Group

John Graham

Chair, HFMA Acute Costing Practitioner Group

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Executive summaryRobust cost information requires costing practitioners to map accurate financial data from the general ledger to the costing system so that all the costs are in the correct starting position for the costing process.

Costing practitioners, financial management and financial accounting all have a role to play in ensuring that patient-level costs are derived from accurate financial data. This guidance paper describes how costing practitioners and other financial colleagues need to work closely together to ensure that this happens.

Mapping the financial data in the general ledger to the costing system requires a good understanding of the detail in the general ledger at account/subjective code and cost centre level. Costing practitioners cannot do this on their own, but need to rely on financial managers to have this knowledge, and engage with them to support accurate mapping.

Costing practitioners may encounter a number of problems in extracting accurate financial data from the general ledger – for example, the merging of cost centres, incorrectly coded costs or incomplete accruals and prepayments. They need to engage with financial management and financial accounting so that all parties understand the impact these items can have on the costing process and come up with joint solutions to address the problems.

The costing system may require more granular financial data than the general ledger provides. Costing practitioners may need to break down some expense lines further, especially once the resource structure in Monitor’s Costing Transformation Programme has been defined.

It is vital that the total expenditure used for costing can be reconciled to board papers and the annual accounts, so that costing teams can demonstrate the integrity of the financial data used in the costing process.


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IntroductionUnderstanding the cost of NHS patient care is vitally important, both locally and nationally, in making decisions about how to plan, manage and deliver sustainable high-quality services. Robust cost information should ensure that local decisions are informed not only by a clear understanding of current costs, but also the likely costs of any new ways of working.

Improving value is a high priority in the NHS. Linking patient-level costs with health outcome data allows the NHS to promote value for patients – that is, improve the quality of care using scarce resources sustainably. Reliable cost data will also provide the basis for the new payment systems required to deliver the new care models outlined in the Five-Year Forward View.

The HFMA has been actively involved in driving better standards in NHS costing for a number of years, working closely with its costing practitioner groups. The HFMA was commissioned first by the Department of Health, and subsequently by Monitor, to develop the clinical costing standards and supporting guidance, which reflect best practice and are intended to drive improvement.

It is a time of change for NHS costing, with the launch of Monitor’s Costing Transformation Programme, which aims to transform costing over the next six years. The HFMA programme of work this year has focused on supporting costing practitioners to build on the excellent progress made in costing and to lay a solid foundation in preparing and supporting costing practitioners for the changes to come.

Extracting accurate costs from the general ledger and accurate activity data from feeder systems is key to deriving robust patient-level costs.

The HFMA has worked with the HFMA Acute and Community Costing Practitioner Groups to develop two guidance papers:

• Understanding the general ledger• Improving the quality of source information.

Although the guidance papers have been produced by the Acute and Community Costing Practitioner Groups, much of the good practice described is just as relevant to mental health services. It is strongly recommended that mental health costing practitioners read both guidance papers and share them with colleagues in their trust.

Extracting financial data from the general ledger is the first stage of the costing process. Both costing practitioners and financial management accountants have a role to play in ensuring that patient-level costs are derived from accurate financial data.

This guidance paper is aimed at costing practitioners, financial management and financial accounting. As well as describing good practice, it highlights some of the main issues that costing practitioners may encounter and it provides some examples of how trusts are mitigating these issues.

There are a number of technical terms in this guidance paper. The glossary in Appendix 6 provides a list of definitions.


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Section 1The role of the general ledger in the costing process

The general ledger is the core source of financial information for costing. The total expenditure used for costing is known as the quantum of cost and is a key reconciling figure to ensure that, throughout the costing process, there are no omissions or duplications of cost.

General ledger data is captured in the costing system. As there is no standard set of NHS accounts, each general ledger is bespoke to the organisation. The costing practitioner needs to map the general ledger appropriately to the costing system so that all the costs are in the correct ‘starting position’ for commencing the costing process.

To map the general ledger appropriately to the costing system, the costing practitioner needs to:

• Understand the detail in the general ledger

• Extract accurate financial data from the general ledger

• Map the general ledger to the costing system at a sufficiently granular level

• Ensure cost classifications are appropriate for the costing process

• Reconcile the cost quantum to the annual accounts and board papers

• Engage with financial management and financial accounting in the overall costing process.

The following sections of this guidance discuss each of these topics in turn, highlighting some of the challenges that costing practitioners may face and providing solutions to the issues raised.


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Section 2Understanding the detail in the general ledger

A good understanding of the detail in the general ledger is needed to accurately map the financial data to the costing system. The costing practitioner needs to know what activities incur what costs, and where these costs sit in the general ledger. This involves understanding how each cost centre maps to a specific cost pool or resource type and how to classify the cost centre for internal reporting by directorate or division.

The costs in these cost centres need to be matched to resource categories. This requires using data derived from information systems (for example, medical staff in a specific cost centre may spend their time with admitted patients, non-admitted patients and on teaching, training and research) or using, where available, direct consumption data (for example, minutes spent with admitted patients, and non-admitted patients, and proportion of job plan allocated for teaching, training and research).

A large acute trust may typically have about 15,000 account code/subjective code combinations, perhaps 10 clinical directorates with around 36 financial management staff, and a costing team of three costing practitioners.

These numbers demonstrate that it is not possible for the costing team to have a good understanding of all the detail in the general ledger. Instead they must rely on the financial managers responsible for individual directorates to have this knowledge, and engage with them to support the accurate mapping of financial data to the costing system.

Although the actual costing output may not necessarily be a monthly process, it is important that costing teams engage with financial management on a regular and frequent basis so that issues can be ironed out. This will ensure high-quality data is produced which is essential for clinical engagement and board approval.


“The costing team works closely with the business advisers and accountants within financial management to understand the detail in the general ledger and how this needs to be allocated in the costing system. Financial management work with their service-line teams to help the costing team improve cost allocations, particularly where the costs of services are different to that expected. The costing team has spent time educating financial management so that we are kept informed when new items appear or costs are moved in the ledger. As part of the budget-setting process, the accountants are keeping a list of changes so that we can action them in the costing system when the new year is set up. We also do a full annual review of each area to identify any issues that haven’t been identified through these other processes.”

Plymouth Hospitals NHS Trust

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Section 3 Extracting accurate financial data from the general ledgerCosting practitioners need to extract accurate financial data from the general ledger for the costing process. They therefore need a good understanding of the impact that financial management and financial accounting adjustments to the general ledger can have on costing. Financial management and financial accounting in turn need to understand the impact their adjustments to the ledger can have on the costing process.

Some of the common problems costing practitioners face in extracting accurate financial data are described below, together with suggestions on how to address the problems.

Changes to cost centres The setting up of new cost centres, and the merger or change in use of cost centres, can all have a significant impact on the costing process. Where this is done without the costing practitioner’s knowledge, this can severely affect the costing process, causing delays and inaccurate costing data.

The setting up of new cost centres without the costing practitioner’s knowledge means that when the costing system is run, it will fail. New cost centres require allocation methods to be determined before an output can be produced. If a number of new cost centres are set up during one quarter without the costing practitioner’s knowledge, this can lead to less accurate costing outputs or delays in the production of cost data, as the costing practitioner needs time to agree new cost allocation methodologies with the relevant trust staff.

If cost centres change use, this can result in incorrect costs being charged to patients or services – for example, if a cost centre which was used to hold ward costs changed to holding community team costs, the costs would continue to be allocated to patients on the ward unless the costing practitioner knew about the change in use of the cost centre.

Financial management often merge cost centres to enable a budget holder to look after one cost centre rather than a number of budget reports. This may mean the budget holder has to complete fewer HR or payroll returns as these tend to be cost centre-based, but this can impact heavily on the granularity of costing. At one trust all hospital and community midwifery services were merged into one cost centre and the costing practitioner now has to keep a spreadsheet of which costs are allocated to specific teams.

• Changes to cost centres

• Costs not in the right place

• Dump codes

• Internal recharges

• Negative costs

• Accruals and prepayments

• Zero-balance cost centres

• Non- patient care activities

Common problems


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Problems with changes to cost centres – suggested solutions from the costing practitioner groups• The hierarchy of the general ledger should be able to support summary reporting for budget

holders without requiring cost centres to be merged. It is important that the costing practitioner is involved in the design and maintenance of the hierarchy so that the granularity needed for PLICS is maintained.

• Financial management should produce a regular report on changes to cost centres for costing practitioners. This allows costing practitioners to adjust the costing system before the model is run.

• The trust should include the costing team in the approval of new cost centres and any amendments to existing cost centres. This means that any changes can be set up in the costing system before the model is run. It also allows the costing team to discuss with the relevant financial management team an appropriate allocation method for the new cost centre.

• Some trusts have moved towards embedding costing within their financial management teams and even gone as far as the financial management teams owning the cost centre allocations. This means that it is the responsibility of the financial management teams to agree the allocation methods of each cost centre and review them on a regular basis.

• Reports showing trend data on ward unit costs can help identify changes in the use of a cost centre or highlight costs that have been inappropriately allocated to a cost centre. Evidence of outlying costs or changes in unit cost can allow costing practitioners and financial management to investigate potential inaccuracies in the underlying financial data. Similar reports for medical staffing teams and other services are useful checks to send to financial management or pin up on the wall for people to see.

“Our trust’s clinical directorates now have ownership of the cost drivers. Senior members of the clinical directorates’ finance teams are required to sign off the allocation methodologies for the areas for which they are responsible. When new cost centres are created on the general ledger, it is the responsibility of the finance teams to notify the costing team and provide them with an allocation methodology for incorporation within the financial model.”

Guy’s and St Thomas’ NHS Foundation Trust

• See Appendix 2 for case study

“The trust’s integrated service directory includes robust change control procedures, which means that any changes to cost centres are approved and communicated to all relevant staff.”

Oxford Health NHS Foundation Trust



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Costs not in the right placeThe incorrect coding of costs to cost centres or account/subjective codes can lead to inaccurate patient-level costs, as costs may be incorrectly allocated to patients and/or incorrectly classified as direct, indirect or overhead costs.

For example, an account/subjective code for a high-cost device may have a driver to allocate to patients that have a specific procedure code. If the cost of this device is incorrectly coded in the general ledger, the cost allocated to patients will be too low and costs elsewhere will be too high.

The solution to this is to ensure that financial management and financial accounting understand the importance of correct coding for costing purposes and routinely check coding for accuracy. This should include checking ledger feeds from payroll and procurement, and support service feeds such as pharmacy and theatres.

Publishing unit costs at cost driver level for financial management to review is a good way of identifying large items of expenditure that have been incorrectly coded as the unit price will suddenly increase or decrease because of the error.

Dump codes The use of dump codes that are only sorted out in month 12 can have a significant impact on the stability and accuracy of patient-level costs over the year. Quite often these costs, which can be materially significant, are held on central or corporate cost centres and end up being allocated across all services as an overhead. This can compromise the accuracy of patient-level costs, as some of the costs in dump codes should be allocated to a specific service or group of services. This practice will also lead to poor budgetary control.

The adjustment in the treatment of such costs at month 12 can cause a significant change to costs for specific services or patients, and may give managers and clinicians cause for concern over the accuracy of the costing information.

Such costs have to be investigated by the costing practitioner to determine the correct allocation method for the expenditure, and this will take time and delay the costing reporting process.

The solution to this is to encourage financial management and financial accounting to use the correct cost centres and account/subjective codes for all items of expenditure, therefore removing the use of dump codes for year-end spend. There needs to be an understanding and awareness of the importance of correct coding for costing.

“We have created separate cost centres for the theatre consumables of each surgical specialty. This enables us to ensure that we can allocate costs to the theatre patients of the correct specialty, even where we cannot allocate costs to the exact patient. It also means that financial management can speak to the specialty where there is an overspend.”

Alder Hey Children’s NHS Foundation Trust

“The finance team has taken a zero tolerance approach to this issue. It is now flagged as a governance issue for financial management if such issues arise.”

North Tees and Hartlepool NHS Foundation Trust


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Internal rechargesInternal trading may be carried out by financial management as part of the normal budget reporting process – for example, pathology will charge clinical services for tests. While the charges may be built up from patient level, they will be based on a standard cost for a test rather than representing the actual resources consumed.

Costing practitioners need to reverse internal trading to allocate costs at patient level. Some trusts use specific journal types for internal trading, which means that they can easily be identified and reversed. Other trusts have specific account/subjective codes for internal trading, which again makes identifying and reversing the costs on these codes very easy.

If the internal trading is not reversed, the actual costs of the traded service will not be allocated at patient level. It is also likely that the allocation used by financial management could be different to the patient-level feed, so costs could be allocated to the wrong service line.

“We removed virtually all recharging from the ledger about five years ago and use PLICS to produce service-line reports. The idea was to streamline general ledger processes and use the costing system to generate the output instead.”

Plymouth Hospitals NHS Trust

“Our trust recharges all the blood products’ costs to the individual services who use blood products, as the budget for blood products is devolved to the individual services rather than kept centrally in the pharmacy department budget. A patient-level feed is available from pharmacy so that it is possible to allocate these costs at patient level. The costing system has a rule to collect the costs sitting on the blood products expense code and bring them together in a blood products cost centre, and then allocate the costs based on the patient-level feed.”

Alder Hey Children’s NHS Foundation Trust

“Producing a monthly or quarterly report showing the total costs of all internally traded services (for example, radiology) with a breakdown of costs and activity by service line will reassure the receiving specialties that the costs are allocated appropriately. One good tip is to show total costs £ and total costs % of the service. That way a service can see they are using – for example, 10% of radiology – and can compare their usage and allocation % with other similar services to check they are appropriate.”

Nottingham University Hospitals NHS Trust


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Negative costsIn an ideal world, negative costs should not happen, but in reality they do occur, and therefore need to be investigated to see if they have arisen as a result of an error or a miscode so that they can be dealt with appropriately.

There are a number of scenarios where negative costs can occur in the costing process. Most of these scenarios arise as a result of recharging between cost centres or in accounting for cost recoveries.

Negative costs can appear on expenditure subjective codes for two main reasons.

Income allocated to an expenditure code

Income is sometimes incorrectly allocated to an expenditure-subjective code rather than an income-subjective code. If a trust invoices another trust for staff costs, for example, the income should be allocated to an income-subjective code. If the income is allocated to an expenditure-subjective code, this may result in a negative cost. In such instances, the income should be moved to an income-subjective code rather than left on an expenditure code.

Expenditure transferred from one subjective code to another subjective code

A journal moving costs from one expenditure-subjective code to another subjective code can cause negative costs. If £6,000 is transferred from an expenditure code with a balance of £5,000, for example, this will cause a £1,000 negative value. This might arise where the full value of the invoice is transferred but the VAT has already been reclaimed.

Where there are negative costs at account/subjective code level in the general ledger, they need to be offset in the costing system against positive costs that have the same allocation methodology.

First, negative costs should be matched against positive costs in a different expenditure line in the same cost centre with the same allocation methodology. Remaining negative costs should be matched against positive costs in another direct cost centre with the same allocation methodology.

If, after matching, there are still negative costs in direct cost centres, then a similar process should be adopted at cost centre level.

It is expected that this process would normally happen within a costing system rather than a manual exercise. The outcome should mean that there are no negative costs at cost centre level.

“At our trust, we have five cost centres for different microbiology labs – one of these cost centres may have a negative value and the other four cost centres may have positive values. The negative value can be netted off against the positive value cost centres if – and only if – the cost centre has the same allocation method.”


“The total value of cost centres with negative amounts is not material for our trust. An element of the negative value is netted off true overheads. Other negative values are netted off other cost centres that are allocated to the same cost pool and therefore use the same allocation methods.”

Northamptonshire Healthcare NHS Foundation Trust


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Accruals and prepaymentsIf monthly accruals and prepayments are not made, this can lead to incorrect costs being allocated against resources consumed. This is likely to lead to poor engagement from clinicians as they will not be confident in the figures.

Financial management should provide monthly accruals and prepayments rather than move budgets to match expenditure. This is quite a common issue as some financial management teams do not realise this is a problem for costing purposes.

Common accruals and prepayments include:

• Creditors – where invoices are received near the end of the period but are not paid until the next period

• Inventory levels – where the acquisition of stock has resulted in a significant change in inventory levels from one period to the next, rather than reflecting resources consumed in the period

• Prepaid expenses – where expenses are paid near the end of one period that relate wholly or in part to goods or services consumed in the next period (for example, insurance payments and maintenance contracts that can relate to more than one year)

• Accrued expenses – where expenses are recognised in the period in which the organisation incurs liability for them, even though the actual payment is made in the next or some future period

• Work in progress – where costs and income are incurred against patients that have not been discharged. This can be significant for long-stay patients who under payment rules are not billed until discharge.

There are times when the costs of services legitimately change significantly from one period to the next due to one off items of expenditure – for example, additional costs might be incurred to reduce waiting lists or address winter pressures. Such costs need to be matched appropriately against the relevant activity in the right time period.

It is important that financial management and the costing teams understand the difference between one-off costs and ‘business as usual’ costs and keep the general ledger maintained to reflect the correct position.

“Our costing and financial systems team has worked closely with financial management to review and amend budget profiles to accurately reflect resource consumption, rather than aligning budgets to reflect payment dates. This has been an iterative process over two to three years, focusing on the most material items first.”

Maidstone and Tunbridge Wells NHS Trust


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Zero-balance cost centresPart of the understanding of the general ledger is to know what costs need to be included in the costing model and which costs can be ignored.

There may be many cost centre-account/subjective combinations that have zero balances or very small values. Often these are old cost centres that have not been deleted from the system with a very small amount of expenditure allocated to the code, or it could be a cost that should have been recharged out but has a small residual value.

Some trusts exclude these cost centres in the costing process to remove the burden of having to find allocation methods for these small amounts. In such cases, materiality limits need to be agreed by the director of finance and a reconciliation to board papers within tolerance limits maintained.

“All zero-balance cost centres and subjective code combinations are excluded from the trial balance. There are, however, some cost centres that have a small balance left on them at the period end – some of these are old cost centres that should have a zero balance but a ledger feed hasn’t been changed so the management accountant will journal the amount to the correct cost centre but enter an incorrect amount leaving a small balance.

“To stop a small amount such as £1.50 being allocated over different patients, we manually move the amount to the correct code in the trial balance and notify the management accountant to rectify the issue for the next period. This can reduce the size of the finance import considerably and cleans the costing output so users do not focus on small costs on their patient bills.”

Lincolnshire Community Health Services NHS Trust


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Non-patient care activities The costs of non-patient care activities – for example, clinical training and education, research and development, and commercial ventures – should be separately identified from the costs of providing patient care.

Education and training and research and development are funded separately from healthcare. In costing terms, these activities have generally been treated as cost-neutral in terms of the costs of patient care activities. In practice, the income received for these activities has been deducted from a trust’s overall quantum of cost before these costs are allocated to patient care activities.

Using income as a proxy for the costs of delivering training or research may well not reflect the actual costs incurred, and can distort the true costs of patient care.

Health Education England and the Department of Health are working with trusts to improve the NHS’s understanding of the true cost of delivering clinical placements and training posts. More information can be found at www.hee.nhs.uk/our-work/planning-commissioning/financial-planning.

It is becoming increasingly common for trusts to manage some services on a commercial basis to generate financial surpluses, which are invested in improving facilities for NHS patients. Again it is important to separately identify the costs of commercial activities. Typical commercial activities include:

• Commercial research and trials

• International healthcare management and consultancy

• Pathology services

• Pharmaceutical production

• Occupational health

• Retail space and site rental.

“We have worked with clinical education leads, directorate and service managers and clinicians to calculate education and training costs, which we have separated into new education cost centres in the general ledger.”



“Where trusts have a significant research and development department it is important to understand what activity this department undertakes. At our trust, the research and development department delivers elements of NHS (Standard) Care, which need to be taken into account to understand the full cost of the service being delivered. The HFMA Healthcare Costing for Value Institute is facilitating a research and development project group looking at costing of research and development services. Should you wish to join, please contact the HFMA.”

The Christie NHS Foundation Trust

“At our trust we have a private patient commercial venture. In order to understand the costs associated with the activity that the trust undertakes on behalf of this venture, all patients, both NHS and private, are costed. The private patient element is then reported as its own service line along with associated income to understand the profitability of the service.”



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Section 4 Mapping the general ledger to the costing system at a sufficiently granular level

It is important that costing practitioners extract sufficiently granular financial data from the general ledger for the costing system. While some expense lines are granular enough for cost allocation, some may need to be broken down further, especially once Monitor’s Costing Transformation Programme’s standardised resource structure has been defined (see figure below).

Costing Transformation Programme proposed costing method for patient care

The mapping of granular financial data to the costing system should not be regarded as a one-off exercise, but one that needs to be regularly reviewed. Without regular updates, the costing outputs will not be accurate.

More granular financial data can improve the accuracy of costing data as the case study below shows.

Some community services have started to link electronic staff record feeds to the general ledger using the assignment number. This allows a greater level of granularity as individual staff member costs can be attributed to patients to whom they have delivered care. Several acute trusts are looking to do this with medical staffing.

“The financial managers in each directorate have a list of their cost centres and where they are mapped to in the costing system. It is their responsibility to check that the cost centres are correctly mapped and to advise the costing team of any changes that need to be made to the costing system.”

Maidstone and Tunbridge Wells NHS Trust

“Different costs requiring different cost allocation rules can be hidden within one expense line. Under pathology there was an expense line named ‘miscellaneous items’, which had dry ice and general consumables. In the past, all the costs were spread across all pathology, which was incorrect as dry ice was only used for sent-away tests. By splitting out the two costs into two lines in the costing system, the trust was able to apply different allocation rules and therefore improve the accuracy of patient-level costing.”

Birmingham Children’s Hospital NHS Foundation Trust


General ledger Resource Activity Patient

Mapped Assigned Assigned

Resources mapped from a trust’s general ledger to a nationally standardised

resource structure

Resources assigned to activities

Resources assigned to the patients they

relate to

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Section 5Ensuring cost classifications are appropriate for the costing process

The HFMA clinical costing standards set out how costs should be classified to ensure a consistent assignment between direct, indirect and overhead costs across the NHS for costing purposes. This supports the costing allocation methodologies in the materiality and quality score (MAQS) template.

The hierarchy of direct, indirect and overhead costs in the general ledger may be different from the hierarchy set out in the HFMA clinical costing standards. The general ledger at some trusts follows Monitor’s service-line reporting (SLR) guidance, whose hierarchy is different to the HFMA hierarchy – for example, pathology costs may be recorded as indirect costs in the general ledger and SLR but are treated as direct costs in the HFMA clinical costing standards.

Costing practitioners need to compare the hierarchy of direct, indirect and overhead costs in the general ledger with the HFMA standards. The costing system has to be flexible enough to cope with the differing reporting requirements of Monitor, commissioners and internal stakeholders.

Assigning general ledger costs into direct, indirect and overhead groups improves the ability to analyse information at the organisational and patient level. It provides an understanding of costs that arise directly as a result of patient care and those that are more loosely tied to patient care and the costs that are incurred in maintaining the infrastructure of the hospital.


“The HFMA acute and mental health clinical costing standards set out examples of cost centre classifications for direct, indirect and overhead costs. These have been developed over time by the costing practitioner groups. The lists are not intended to be comprehensive, but they reflect a common approach across the NHS.”

Catherine Mitchell, HFMA head of costing and value

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Section 6Reconciling the cost quantumIt is crucial that the total expenditure used for costing (the cost quantum) can be reconciled to the annual accounts and board papers so that senior teams recognise the figures and are confident with the integrity of the costs.

Most organisations reconcile the patient-level cost (PLICS) quantum to their board reports on a regular basis. The quantum for PLICS and reference costs are different. The main reasons for the difference are likely to be:

• PLICS tend to use full income and expenditure downloads from a trial balance, while reference costs exclude clinical income for NHS patients

• PLICS includes private patient costs and income, which are excluded in reference costs

• Depreciation on donated assets is excluded from reference costs

• PLICS will include provider-to-provider costs, which are excluded from the reference cost collection

• Impairments, breast screening, home delivery of drugs, are all services that are in the list of reference cost exclusions but will form part of the PLICS quantum.

It is essential for the costing practitioner to understand who maintains the ledger and runs the reports for the board papers. Usually these are run from the trial balance, which can be used for the costing process, ensuring the same costing baseline and ‘one version of the truth’.

Most general ledgers are updated nightly, therefore the ledger values for costing should be produced at the same time as the trial balance for the board reports. This ensures the same starting positions for both sets of reports.

There may be costs in the general ledger which need to be excluded from the costing system – for example, provider-to-provider agreements or hosted contracts that are not part of a trust’s income and expenditure. These need to be identified and reconciled to the board papers.

The reconciliation statement should clearly identify all costs brought into the costing process from the trust’s operating accounts. It should also clearly identify any movement of general ledger costs that has taken place to create a better match between costs and activity in the fiscal (costing) period.

The reconciliation should clearly align the volume of products that have been costed in each resource type category to the activity levels that are captured in the trust’s source data. Again, any inclusion or exclusion of activity in a resource category to create a better match between costs and activity should be clearly documented, with explanations, in the reconciliation statement.

‘’A common issue is to have the trust-wide surplus or deficit showing on your PLICS output only for a senior executive to challenge the figure. This will damage the credibility of all the information behind the summary sheet, so it really is important to start with the correct reconciled costs. Once you lose credibility of the figures, you will find it hard to get clinical engagement.’’

Sheffield Teaching Hospitals NHS Foundation Trust


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Section 7Engaging with financial management and financial accounting in the overall costing processThe previous sections of this guidance have shown how important it is to engage financial management and financial accounting in costing to ensure that accurate financial data is used in the costing process.

Historically the general ledger has been designed and maintained to support the delivery of the annual accounts by financial services, with costing practitioners having little or no involvement in the process. The increasing importance of costing data means that this has to change if the quality of costing information is to improve. The requirements of costing need to be given the same consideration as the annual accounts when designing the general ledger.

It is important that the costing team has regular contact with both financial management and financial accounting teams to ensure that they are involved in any redesign of the general ledger and aware of any developments.

“The trust’s approach to service-line reporting, with our costing teams working closely with other financial and clinical colleagues, has had a significant impact in ensuring that patient-level costs are derived from accurate financial data. Closer scrutiny of financial data by clinical directorate teams has led to improvements in the quality of cost data in the general ledger. In contrast to the early days of costing when the costing teams worked in isolated silos, they now work closely with other parts of the trust, including the clinical directorates’ finance teams.”



“We try to account in our general ledger at a sufficient detail to split items out where appropriate – for example, buying external drugs. But in reality it’s not practical to over-detail your general ledger to match drivers, as your management accounts become very bitty and values appear insignificant at budget level. There are sometimes conflicting requirements between costing and financial management on the use of budget reports as financial management need the reports to reflect the requirements of budget holders to manage their spend. At our trust, we have a PLICS report suite, which financial management use to map the general ledger to the relevant cost pools. Giving financial management ownership of this process allows the requirements of both financial management and costing to be understood and taken into account.”


“When our trust was significantly restructured, the costing team worked closely with the management accounting team to map the old cost centres and hierarchy to the new ones at each level of the general ledger.”

Somerset Partnership NHS Foundation Trust



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The costing team needs to communicate with financial management teams regularly to ensure that areas of concern are identified. There are a variety of ways that costing teams can work more closely with financial management to address issues.

Software suppliers can play a role in providing data quality reports, which can help both the costing practitioner and financial management identify areas of concern. Some suppliers have built-in checks within their systems that quickly provide an error report before the whole scripts are processed.

Several trusts have adopted confidence scores at cost centre level so that focus can be directed at areas of low confidence and high materiality. This identifies areas such as mis-coding of high-cost consumables, for example. It also ensures that the correct accruals and prepayments are carried out by the financial management team, increasing the accuracy of reported costs.

“Transparency of the costs is key to improving the accuracy and understanding so a combination of business intelligence systems, regular reporting and delegation of ownership are the main tools to help the costing practitioner. Reports can be built into existing business information systems with the help of the costing suppliers and will help the costing team, financial management teams and the clinicians analyse and understand their costing structures.”

Coventry and Warwickshire Partnership NHS Trust

“Our trust has found the use of confidence scores a good way of improving the understanding of the costing process within financial management as well as leading to better engagement between the two finance functions.”




Appendix 1 Case study: Robust change control with an integrated service directory Oxford Health NHS Foundation Trust’s integrated service directory includes robust change control procedures, which means that any changes to cost centres are approved and communicated to all relevant staff.

At Oxford Health NHS Foundation Trust we have recently established an integrated service directory with 78 service lines for our community and mental health services, which are clearly defined and agreed. The service lines are based on specialist clinical areas and contract lines. The service lines will have a defined service-line strategy and will be embedded in the annual planning process. With all our care delivery teams mapped to the cost centres, service lines and contract lines, the integrated service directory now forms the backbone of information for the trust in terms of providing data on contract-monitoring, budget-setting, financial performance, activity, quality and staffing information at the service-line level through our data warehouse.

Change controlThe trust has developed an electronic change control form which staff are required to complete if they want to set up new cost centres, care delivery teams or service lines, or make any changes to the current services. Any changes or new services are only set up after all the mandatory fields are completed and approved by the appropriate person. Once a new service is set up or changes have been made, an email is electronically send to the relevant people in the services and all support functions (estates, HR, management accounts, costing, information and contracts).

Electronic change control form

Field Name Required Value

[Care Delivery Team Code]

[Care Delivery Team Name]

[Care Delivery Team/Ward Manager]

[Type - Ward/Community Team]

[Care Delivery Team Base/Building]

[Activity Type]

[Contract ID]

[Contract Name]

[Contract Provider Group]

[Cost Centre Code]

[Cost Centre Name]

[Cost Centre Budget Manager]

[Locality Code]

[Locality Name]

[Locality Manager]

[Service-Line Code]

[Service-Line Name]

[Service-Line Manager]

[Directorate Code]

[Directorate Name][Divisional Director]

[Start Date]

[Contact Details]

Next StepsOur next step is to review our general ledger structure and align it with our integrated service directory hierarchy. We are also in the process of developing a data quality dashboard which will allow a drill-down from the integrated service directory to a healthcare professional.

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Appendix 2 Case study: Service-line reporting securing improvements in cost dataGuy’s and St Thomas’ NHS Foundation Trust’s approach to service-line reporting has had a significant impact in ensuring that patient-level costs are derived from accurate financial data:

• Closer scrutiny of financial data by clinical directorate teams has led to improvements in the quality of cost data in the general ledger

• When new cost centres are created in the general ledger, directorate finance teams have to notify the costing team

• Senior members of the clinical directorates’ finance teams are required to sign off the allocation methodologies for the areas for which they are responsible

• The costing team works much more closely with other parts of the trust, including the clinical directorates’ finance teams.

At Guy’s and St Thomas’ NHS Foundation Trust we have built a programme of continual service-line review with clinical teams throughout the trust. The work requires clinical directors to identify a clinician to lead the review process in each of their services. The clinician leads a team, including a head of nursing or allied health professional, service manager and a management accountant, supported by the costing team. This team has responsibility to ensure there is:

• Clinical understanding and clarity of tariff payments systems

• Understanding and agreement of cost allocation methodologies

• Confidence in the quality of clinical coding

• Confidence in the quality of data capture

• Understanding of cost drivers within service lines

• Identification of areas of focus that have the greatest potential for efficiency improvements in delivering patient care, whilst maintaining or improving the quality of care for the patient

• Agreement to changes in the delivery of care for patients

• Quantification of part-year and full-year savings

• Identification of whether the redesigned service can be delivered within tariff.

Over the past few years the trust has moved towards a profitability-based approach for financial reporting, either service-line reporting-based or patient-level costing-based. As the trust’s costing model underpins the profitability models, this change has also had a direct impact on the way the trust undertakes the annual reference cost submission and other costing returns.

This approach has led to a cultural shift in the ‘ownership’ of the various financial models that underpin the trust’s profitability model. This cultural shift has been one towards full engagement with the trust’s clinical directorates, to the extent that they now have ownership of the ‘cost drivers’ within the profitability models. This approach provides clinical directorates with a higher level of confidence around the outputs of these models. This is in stark contrast to the early days of costing, when the costing teams worked in isolated silos and hardly ever engaged with the wider organisation.

For example, at the start of the annual costing round, senior members of the clinical directorates’ finance teams are required to ‘sign off’ the allocation methodologies for the areas for which they are responsible. Additionally during the year, as new cost centres are created on the general ledger, it is the responsibility of the finance teams to notify the costing team along with an allocation methodology for incorporation within the financial models.

Recently, the trust has started a rolling programme of service-line reviews within the clinical areas. The first stage of this process is to review the ‘Costing Book’ for the area under review to ensure that the allocation methodologies are still appropriate and fit for purpose. This process is part of a continuous improvement process within the trust.

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Appendix 3 Case study: Identifying education and training costs

Guy’s and St Thomas’ NHS Foundation Trust has separated education and training costs into new education and training cost centres in the general ledger.

Over the past 18 months our trust has worked with clinical education leads, directorate and service managers and clinicians to calculate education and training (E&T) costs of more than 100 programmes we have separated into new education cost centres in the general ledger for the first time in 2015/16. This has involved face-to-face meetings with the programme leads to produce a bottom-up costing to ascertain the level of E&T within the core budgets.

To reflect this in the general ledger we have created a range of internal recharge account/subjective codes as we do for integrated service-line reporting and internal trading. This has the effect of removing the costs from the source cost centre and transferring it to an E&T cost centre within the same specialty. By using a new range of internal recharge account/subjective codes, this has meant we are not adjusting the source account/subjective code and thus not interfering with the electronic staff record reconciliation that financial management maintain.

Similarly, we have performed the same exercise with E&T overheads, extracting these costs and posting them to the E&T cost centre. We have not attempted to make any adjustments for whole-time equivalents.

With respect to the postgraduate/undergraduate funding that the trust receives, pending the publication of an evidence based tariff, we have used the costing as a means of weighting these income streams. Consequently, each specialty’s designated E&T cost centre houses its costs and income, which helps us to ascertain levels of profitability for E&T.

Example reportService 1

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Note:The indirect costs shown in Education are predominantly the transfer of direct pay costs shown under Patient Care.Some areas don’t contribute to Education so they would have zero transactions in the Education section.Some areas don’t undertake commercial acttivities so they would have zero transactions in the commercial section.

Patient care

Annual YTD YTD

Plan YTD Plan Actual Variance

£000s £000s £000s £000s

Income 85,203 28,401 31,000 2,599

Direct (54,355) (18,005) (21,179) (3,174)

Indirect (13,340) (4,368) (4,718) (350)

Overhead (12,582) (4,194) (4,194) 0

Trading position 4,926 1,833 909 (924) Education

Annual YTD YTD


£000s £000s £000s £000s

Income 1,861 620 620 0

Direct 0 0 0 0

Indirect (2,243) (748) (748) 0

Overhead (319) (106) (106) 0

Trading position (701) (234) (234) 0

Research

Annual YTD YTD


£000s £000s £000s £000s

Income 237 78 164 86

Direct (237) (78) (184) (107)

Indirect 0 0 20 20

Overhead 0 0 0 0

Trading position 0 0 (0) (0) Commercial

Annual YTD YTD


£000s £000s £000s £000s

Income 0 0 0 0

Direct 0 0 0 0

Indirect 0 0 0 0

Overhead 0 0 0 0

Trading position 0 0 0 0 Total

Annual YTD YTD


£000s £000s £000s £000s

Income 87,302 29,099 31,784 2,686

Direct (54,591) (18,083) (21,363) (3,280)

Indirect (15,583) (5,116) (5,445) (329)

Overhead (12,901) (4,300) (4,300) 0

Trading position 4,226 1,600 676 (924)

Appendix 4 Case study: Restructuring the general ledger When Somerset Partnership NHS Foundation Trust underwent a structural reorganisation, the costing team worked closely with the management accounting team to map the old cost centres and hierarchy to the new ones at each level of the general ledger.

Background

We have grown from a relatively small trust and it has been standard practice since the costing/systems team was set up about a year ago that the management accounting team no longer owns the costing structure.

General procedure

It is part of the costing/systems team’s responsibility to maintain the financial systems, so this helps to keep a tight control of general ledger cost centres and subjective codes. If (as has happened) the reporting structure of the whole trust changed, the management accounting team send in their requirements to the costing/systems team, who adapt the structure of the general ledger to accommodate the changes. However, in the main this is done by just re-pointing general cost centres and subjective codes, so that the general ledger cost centres and codes themselves have not changed.

As part of this arrangement, any new general ledger cost centres and subjective codes have to be vetted and set up by the costing/systems team to make sure that they are consistent with the required coding structure.

Major exercise

As part of a major trust restructuring exercise a master spreadsheet was set up by the costing/systems team in order to map the old cost centres and hierarchy to the new ones at each level of the general ledger.

Through a series of look-up tables it was possible for each management accountant to allocate their cost centres into the hierarchy. Any old cost centres that were not allocated in the new structure by the management accountants at the first stage were automatically identified so that these could be slotted into the new structure after further work.

The result is that when it comes to the reference cost exercise, we are able to upload a balanced general ledger into our costing system, with relatively few conflicts with codes.

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Appendix 5 Case study: Use of confidence scores to drive improvements in costingNottingham University Hospitals’ costing team has worked closely with financial management to improve the understanding of the costing information and at the same time improve the quality of the allocation methods by using confidence scores and embedding the costing process within the directorate finance teams.

The directorate finance managers for each of the nine clinical directorates were asked the following question by the deputy director of finance: ‘On a scale of 1-10 (1 being low, 10 high) how confident are you of the costing information for your directorate in each of the five categories – income, pay, non-pay, internal trading, overheads, non-operating items?’

The scores at the beginning of the process were collected and published on a financial management scorecard in September 2012 (see below).

Financial management confidence scorecard September 2012

Confidence score 17 September 2012

Income Pay Non-pay Internal trading

Overheads NOI Total

ACM 6 7 7 6 8 8 7.0

CAS 5 9 7 5 6 5 6.2

DCS 8 8 7 5 6 8 7.0

DDT 6 9 7 6 6 5 6.5

DIRC 7 9 8 5 5 5 6.5

FAM 6 9 9 5 5 5 6.5

HNK 6 8 8 5 5 5 6.2

MSKN 5 8 7 5 6 8 6.5

SPS 5 6 5 5 5 5 6.2Total 6.0 8.1 7.2 5.2 5.8 6.0 6.4

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case study continued overleaf


Appendix 5 continued

This Net Promoter score (NPS) approach is used in many private sector services to gain feedback on the quality of service provided. The scoring works as follows:-

• 1-6 are detractors – these customers will openly talk negatively about your service

• 7/8 are passive – these customers will neither promote nor talk negatively about the service

• 9/10 are promoters – these customers will promote the service and pull others along.

The nine directorate finance managers, head of costing and head of financial management met for 30 minutes every Monday with a goal of achieving a 9 or 10 confidence score in every section by all directorate finance managers by 31 December 2012.

Each week the nine directorate finance managers were asked by the head of financial management: ‘What is the ONE thing you are going to do this week to improve your score in any one of the sectors?’

Typically the answer would be: ‘I’m going to sit with the head of costing and understand how income is mapped and how spell – FCE works’ or ‘I’m going to look at my internal trading detail and challenge the methodology’.

In the following week’s meeting, the question was asked: ‘What was the one thing you said you would do – and did you do it? If YES then what’s your new score?’. If the answer was no, then there would be challenge from other directorate finance managers. The scorecard was updated immediately following the meeting and displayed outside the deputy director of finance’s office.

This process was repeated over a 20-week period – the scorecard for 31 December 2012 can be seen below. The confidence scores had moved from an average of 6.4 in week 1 to 8.5. With each directorate finance manager promoting the costing information, the trust was ready to share PLICS information more widely within the organisation.

Financial management confidence scorecard December 2012

Confidence score December 2012

Income Pay Non-pay Internal trading

Overheads NOI Week 16 Total

ACM 8 9 10 9 9 9 9.0

CAS 8 9 8 8 9 8 8.3

DCS 9.7 9.5 9.5 8.3 9 8 9.0

DDT 8 9 9 8 9 8 8.5

DIRC 8 9 9 8 9 7 8.3

FAM 9 9 10 8 8 8 8.7

HNK 9 9 9 8 8 8 8.5

MSKN 8 9 9 8 9 8 8.5

SPS 8 8 7 8 8 8 7.8

Total 8.4 8.9 8.9 8.1 8.7 8.0 8.5

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Week 1

7.0

6.2

7.0

6.5

6.5

6.5

8.2

6.5

5.2

6.4

Improvement

2.0

2.2

2.0

2.0

1.8

2.2

2.3

2.0

2.7

2.1

Appendix 6 Glossary of terms

Account code Account or subjective codes are alpha-numeric codes given to specific types of income and expenditure. They make possible analysis of the same type of spending across different cost centres – for example, spending on training or travel expenses.

Allocation Allocating costs involves spreading costs from one to many based on a predetermined methodology – for example, the number and cost of each test.

Confidence scores Indication on a scale of 1-10 of how confident users are of the information presented to them, 1 being low and 10 being high.

Cost centre It is not possible to report every cost incurred separately, so costs are categorised into a number of distinct headings referred to as cost centres. The cost centres used by organisations vary according to their size, structure and range of activities but tend to be in line with budget headings in the general ledger. Cost centres often relate to a department – for example, wards, finance department, theatres and community teams.

Cost classification Cost classification allows for costs to be separated (classified) into a number of categories that allow further analysis; costs can be classified as fixed, semi-fixed or variable in relation to how they behave, or direct, indirect or overhead in relation to treatment or particular activity.

Cost driver The activity that causes a cost to be incurred.Cost pool All service costs (including direct, indirect and overhead costs) are grouped into cost pool groups or resource types

to enable analysis and accurate allocation to patients or service users.Cost quantum The total costs measured and allocated for a particular costing exercise. Data quality The degree of completeness, consistency, timeliness and accuracy that makes the data appropriate for a use.Direct costs Costs that directly relate to the delivery of patient care – for example, medical and nursing staff costs.Dump code A dump code is one set up for a non-defined area or expense. Transactions charged to a dump code must be

moved routinely to a more appropriate code. For example, all equipment and prostheses for all theatres may initially be charged to one code.

Expense line An expense line records all the costs of a particular type, often using one account code.Feeder system A system that feeds into the costing system. For example, a theatre’s system may provide important data about the

time and resources consumed by different patients in theatre.Finished consultant episode (FCE)

A consultant episode (an episode of treatment under one consultant) that has finished.

General ledger The general ledger contains all the financial transactions that affect a trust. It is usually fed from a number of other ledgers, such as accounts payable, accounts receivable, cash and assets.

Indirect costs Costs that are indirectly related to the delivery of patient care. They are not directly determined by the number of patients or patient mix but costs can be allocated on an activity basis to service costs.

Materiality Information is material if its omission or mis-statement could influence the economic decision taken on the basis of the financial information. Materiality depends on the size of the item, judged in the particular circumstances of its omission or mis-statement.

Overhead costs Overhead costs contribute to the general running of the organisation but cannot be directly related to an activity or service. For example, the cost of the human resources department of a hospital may be apportioned to individual departments using the number of staff working in each one.

Patient-level costs Patient-level costing involves allocating the costs of resources, wherever possible, to an individual patient.PLICS Patient-level information and costing systems (PLICS) identify and record the costs of individual patients. Assigning

costs to individual patients provides opportunities for a much greater understanding of how costs are built up.Reference costs NHS organisations must submit a schedule of costs of delivered healthcare to allow direct comparison of the relative

costs of different providers. The results are published each year in the National Schedule of Reference Costs.Resources Costing in healthcare is about quantifying in financial terms the value of resources consumed – for example, in

delivering patient or service user care, or undertaking research and development. Examples of resources include nurses, doctors, drugs, catering, and heating.

Spell A spell of care covers the whole period in hospital, from admission to discharge or death. In that time the patient may be seen by more than one consultant and receive several episodes of treatment.

Subjective code See definition for account code.Trial balance High-level summary of all income received and expenditure incurred by an organisation; it should balance to zero.

Trial balances are normally used to make sure that entries into the ledger are correct and balance.Unit cost Total cost (including overheads) of producing one unit of activity for a particular service – for example, a pathology

test or an MRI scan.Work in progress Patient care that has been delivered, incurring costs, but where the patient episode has not yet completed enabling a

finished consultant episode to be assigned.

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Appendix 7 HFMA Acute and Community Costing Practitioner Groups

This guide has involved debate and discussion with members of the HFMA Acute and Community Costing Practitioner Groups. The HFMA would like to thank all of those individuals and their teams who have been involved in the groups.

The HFMA Acute Costing Practitioner Group includes representatives from the following organisations:

• Alder Hey Children’s NHS Foundation Trust

• Birmingham Children’s Hospital NHS Foundation Trust

• Frimley Health NHS Foundation Trust

• Guy’s and St Thomas’ NHS Foundation Trust

• Liverpool Heart and Chest Hospital NHS Foundation Trust

• Maidstone and Tunbridge Wells NHS Trust

• NHS Wales Health Collaborative

• North Tees and Hartlepool NHS Foundation Trust

• Plymouth Hospitals NHS Trust

• Princess Alexandra Hospital NHS Trust

• Royal Bournemouth and Christchurch Hospitals NHS Foundation Trust

• Royal Devon and Exeter NHS Foundation Trust

• Royal Free Hampstead NHS Trust

• Royal Liverpool and Broadgreen University Hospitals NHS Trust

• Salford Royal NHS Foundation Trust

• Sheffield Teaching Hospitals NHS Foundation Trust

• The Christie NHS Foundation Trust

• The Walton Centre NHS Foundation Trust

• University College London Hospitals NHS Foundation Trust

• Wrightington, Wigan and Leigh NHS Foundation Trust

Support provided by:

• Paul Briddock, HFMA director of policy and technical

• Alexandra Callaghan, Royal College of Nursing

• Stephen Fenton, NHS England

• Julia Gray, Monitor

• Scott Hodgson, HFMA costing standards lead

• Nisha Mistry, Department of Health

• Catherine Mitchell, HFMA head of costing and value

• Ben Renshaw, HFMA committees manager

• Gary Shield, National Institute for Health and Care Excellence

• Yang Tian, Monitor

• Ann Trudgeon, independent consultant

• Becky Vine, HFMA Healthcare Costing for Value Institute manager

• Terry Whittle, NHS Trust Development Authority

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Appendix 7 continued

The HFMA Community Costing Practitioner Group includes representatives from the following organisations:

• Betsi Cadwaladr University Health Board

• Birmingham Community Healthcare NHS Trust

• Bridgewater Community Healthcare NHS Trust

• Cardiff and Vale University Health Board

• Coventry and Warwickshire Partnership NHS Trust

• Dorset Healthcare University NHS Foundation Trust

• First Community Health & Care

• Gloucester Care Services NHS Trust

• Homerton University Hospital NHS Foundation Trust

• Humber NHS Foundation Trust

• Lancashire Care NHS Foundation Trust

• Leeds Community Healthcare NHS Trust

• Lincolnshire Community Health Services NHS Trust

• Liverpool Community Health NHS Trust

• NHS Wales Health Collaborative

• Northamptonshire Healthcare Foundation Trust

• North East London NHS Foundation Trust

• North Essex Partnership NHS Foundation Trust

• North Tees and Hartlepool NHS Foundation Trust

• Oxford Health NHS Foundation Trust

• Pennine Care NHS Foundation Trust

• Shropshire Community Health NHS Trust

• Somerset Partnership NHS Foundation Trust

• Southern Health NHS Foundation Trust

• Wirral Community NHS Trust

Support provided by:

• David Allen, Health and Social Care Information Centre

• Paul Briddock, HFMA director of policy and technical

• Stephen Brookfield, National Institute for Health and Care Excellence

• Julia Gray, Monitor

• Scott Hodgson, HFMA costing standards lead

• Nisha Mistry, Department of Health

• Catherine Mitchell, HFMA head of costing and value

• Mandy Nagra, NHS England

• Ben Renshaw, HFMA committees manager

• Yang Tian, Monitor

• Becky Vine, HFMA Healthcare Costing for Value Institute manager

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Published by the Healthcare Financial Management Association (HFMA)1 Temple Way, Bristol BS2 0BU Telephone: 0117 929 4789 Email: [email protected] Web: www.hfma.org.uk

The lead authors were Scott Hodgson, HFMA costing standards lead, and Catherine Mitchell, HFMA head of costing and value.

While every care has been taken in the preparation of this publication, the publishers and authors cannot in any circumstances accept responsibility for error or omissions, and are not responsible for any loss occasioned to any person or organisation acting or refraining from action as a result of any material within it

© Healthcare Financial Management Association 2016. All rights reserved

The copyright of this material and any related press material featuring on the website is owned by Healthcare Financial Management Association (HFMA). No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopy, recording or otherwise without the permission of the publishers.Enquiries about reproduction outside of these terms should be sent to the publishers at [email protected] or posted to the above address.

Published February 2016

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