Profit & Loss
The NHS Payments by Results (PbR)
initiative will require hospital executives to focus on
maintaining a high level of efficiency in the medical and
hospital services they offer.
When the PbR earnings scheme is fully
implemented, managers must focus entirely on earnings from
the patients they serve and not on the commissioning funding
streams. And the CostFlex system provides a powerful tool
for managers to monitor, plan for, and learn from the actual
results of ongoing operations.
Marginal costing, which was discussed
in a separate section, plays a significant role in the
learning process. For example, if a major product line
shows a loss when the PbR earnings are less than the sum of
the costs, management needs to be able to look below the
surface and determine what components of costs are the major
contributors to the loss.
In the sample report displayed (click
the button labeled “Resource Consumption”)
direct costs are isolated, subtracted from the net revenue
earned by the PbR tariffs, and shown as a percent
contribution to indirect expenses. If the PbR earnings do
not cover direct expenses, obviously major problems exists
with that service line.
Other reports help dive into the cost
drivers to uncover the operational realities. Reports will
show which cost centre's resources are consumed by each
service line. The productivity monitoring system
(discussed in a separate section) will show if the managers
of those cost centres are able to control their direct
overhead costs. Trend reports and graphs will uncover the
effects of inflation, and clinical pathway variance reports
will isolate negative practice patterns. And the many
benchmarking features in the CostFlex system will allow
management to ascertain the feasibility of further
reductions.
