Executive Summary of AOM Paper No.502

Transcription

1 Executive Summary of AOM Paper No.502 Title Purpose Background Conclusion/ Recommendations Advice Sought Review of HA s Private Patient Revenue Management System To present and seek members advice on and endorsement of the Report of the Internal Taskforce s Review of Hospital Authority s (HA) Private Patient Revenue Management System and the recommendations made. The recent Queen Mary Hospital incident concerning possible cases of irregularities in the billing and revenue sharing with The University of Hong Kong (HKU) for private patients has raised considerable public concern. This has prompted HA to review the current private patient billing and revenue collection systems across the whole of the HA. An Internal Taskforce has been formed and its scope of work covered the following: (a) An analysis of the income and activities of the private patient services provided by the HA, in particular the two teaching hospitals, for the last three years; (b) A review of the current control systems surrounding the revenue for private patient service in the whole of HA; and (c) A review of the existing practices in relation to fee sharing arrangements with the two Universities. The Taskforce concluded that (a) While HA s private patient billing system in the past was largely manual and therefore contained inherent weaknesses, they are satisfied that with the incremental improvements in processes and controls made, particularly with the two phased implementation of Privately Financed Medical Services System ( PFMS), controls have been strengthened. (b) Overall the current Private Patient Billing Systems comply with HA s financial regulations and policies and now contain sufficient controls to reasonably ensure such revenues are properly recorded. (c) Management has agreed to a number of PricewaterhouseCoopers (PwC) recommendations as stated under paragraphs 16 and 17 and in Annex 4 of the full Taskforce Report. Members are requested to comment on and, as appropriate, endorse the following: (a) The findings and the conclusion of the Taskforce as set out in paragraphs 8 to 17 and 18 to 20 respectively and in the appended full Report; and (b) The recommendations and follow up actions being taken by HA management to further enhance the control environment as set out in the way forward under paragraphs 21 and 22.

2 Quality Patient-Centred Care Through Teamwork For decision on AOM-P502 Hospital Authority Review of HA s Private Patient Revenue Management System Purpose This paper presents and seeks members advice and endorsement of the Report of the Internal Taskforce s review of HA s Private Patient Revenue Management System and the recommendations made. Background 2. The recent Queen Mary Hospital (QMH) incident concerning possible cases of irregularities in the billing and revenue sharing with The University of Hong Kong (HKU) for some of the hospital s private patients has raised considerable concern. Following initial investigation and contact with HKU, this matter was referred to the appropriate external authorities for investigation. 3. Additionally, in response to this incident and in order to assure the effectiveness of the internal controls in our current Private Patient Revenue Management System across the whole of the HA, the Chief Executive formed an Internal Taskforce (Taskforce). Its brief is to ascertain and report back on the effective functioning of the internal control systems surrounding revenue management for private patient services in HA hospitals. Members of this Taskforce include the Cluster Chief Executives responsible for the two teaching hospitals respectively, Head Office Finance executives and Director (Finance) as the Convenor. The Report of the Taskforce (Report) 4. A detailed Report that concludes the Taskforce s work and its assessment of the effectiveness of internal controls over HA s current Private Patient Revenue Management System is appended for members reference. The Report also includes the Executive Summary from HA s external auditor PricewaterhouseCoopers s (PwC) Report on Internal Controls Review of the HA Billing and Revenue Business Processes for Private Patient Services.

3 The following paragraphs are an Executive Summary of the Taskforce s Report highlighting key findings and conclusion as well as the recommendations to further improve the timely communication and formalisation of the understanding between HA and the two Universities recommended in PwC s Report. Scope and Approach Scope of Work (Page 1 of Report) 6. In addition to HA s concern, much public interest has been raised over private patient services and the billing for these services across the whole of the HA. To address this, the Taskforce covered the following: (a) (b) (c) An analysis of the income and activities of the private patient services provided by the HA, in particular the two teaching hospitals, for the last three years; A review of the current control systems surrounding the revenue for private patient services in the whole of HA; and A review of the existing practices in relation to fee sharing arrangements with the two Universities. Approach and Methodology (Page 4 of Report) 7. To achieve the above, the Taskforce s approach was to examine the current arrangements for the billing for private patient services in HA and the fee sharing arrangements with the Universities by: (a) (b) Meeting with relevant representatives, including Cluster General Managers (Finance); and Conducting desktop and physical walk-through of the HA private patient billing and settlement processes of predominantly the two teaching hospitals and Queen Elizabeth Hospital (QEH) which collectively represent 89% of the total revenue from private patient services. Taskforce Findings (Pages 4 to 12 of Report) (I) Analysis of Income and Activities of HA s Private Patient Services 8. A summary of the medical fees received from private patient services in the HA and amount of professorial fees paid to the two Universities over the past three financial years is tabled below. The Taskforce Report (Page 5 and Annex 1) provides further analyses of these activities and fees over the last three financial years for members further reference. 2

4 /07 $M 2005/06 $M 2004/05 $M Total Billing for Private Services (a) HA retained Income (b) Payment of Professorial Fees to Universities (c) Universities % (c/a) 24.9% 25.3% 28.1% 2006/ / /05 Private Service Activities Inpatient Bed days 47,973 45,059 41,858 Outpatient Attendance 39,356 28,274 23,475 (II) Review of Current Private Patient Billing Control Systems in HA 9. To help make its prospective assessment of the current processes and internal controls, the Taskforce was briefed on: (a) (b) The system weaknesses identified by HA s internal auditors in their look back of past private patient services billing transactions in QMH; and Improvements made since 2003 in HA s private patient billing systems that have been made as part of the continuous improvement process. Past Private Patient Billing System Weaknesses 10. As a reference point to identify the key controls and risks in the current private patient billing system, the key system weaknesses identified by our internal auditors in past private patient billing control systems and procedures operating in QMH was used. These are summarized below: (a) (b) In-complete billing cycle: In the period prior to September 2005, the private patient billing control system in QMH did not contain a fully effective end-to-end completeness check to ensure all attending private patients were billed for procedures performed; Compliance with prevailing fees and charges policies and practices: The previous requirement for staff of frontline clinical departments to enter only limited information into the manually prepared billing forms had restricted the hospital finance department s ability to routinely check that the fee to be charged was within the gazetted fee range for the procedure. Additionally the system did not include a quality check back for private patient procedures performed, on a full or sample basis, to other hospital records, such as the medical record, Clinical Management System or Operating Theatre System, to confirm the completeness and correctness of the fees to be charged. Reliance was placed solely on hospital staff completing the manual billing form to ensure its correctness; and 3

5 - 4 - (c) Professorial Fee Waiver Arrangements: QMH is not informed of the criteria established by HKU for their staff in granting professional fee waiver to private patients. QMH staff are therefore not able to confirm the correctness of the professorial fee waivers granted other than that they are authorized by a HKU professorial staff. 11. From these observations and its own initial risk assessment, the Taskforce considered that the types of itemised fees subject to most process risk HA-wide were those for consultation and procedures. Other fees, such as charges for private patient s daily maintenance (for in-patient), drugs, radiology and pathology tests and other therapeutic treatments, have greater segregation of functions and cross-checks established. The professional fee sharing and waiver arrangements were also assessed as an area of concern. Improvements over Recent Years to Strengthen Overall Internal Controls 12. The Taskforce noted that progressive enhancements have been made to improve HA s private patient billing control systems. The most significant enhancement was the implementation of the feeder Privately Financed Medical Services (PFMS) system to route the private fee billing information to HA s main billing engine, Patient Billing/Revenue Collection (PBRC) System. Further details of these enhancements are chronologically listed in Annex 2 of the Report. The key enhancements and changes include: (a) (b) (c) Manual procedures have been replaced by PFMS allowing ordering, billing and fee collection to be done directly in each clinic; The new workflow under PFMS offers better segregation of duties and helps to minimize the risk of input and calculation errors; and Billing and fee collection can be performed in a more timely manner in private clinics while, at the same time, patient convenience has been improved. Current Private Patient Billing Control Systems in the HA 13. Overall, the financial controls and IT systems in the current private patient billing system are largely generic across HA hospitals with some local variation to cater for organizational structure and related segregation of duty arrangements. Annex 3 of the Report provides an overview of the current key controls in place, their function and a description of other steps to mitigate residual risks in the overall process. 14. While such systems are not usually designed to totally block potential fraud, the Taskforce is of the view that the current HA private patient billing systems, on balance, provide a reasonably effective means to prevent possible fraud and to handle regular patient services billing transactions on a prospective basis. The Taskforce also recognizes that both from a historical and current standpoint the 4

6 - 5 - University honorary consultants working in the HA are in position of trust and as such there is much reliance on their professional integrity in the present operating arrangements. 15. Given the importance of this matter, the Taskforce considered it important to also gain independent assurance on the adequacy of the internal controls in place in the current system. HA s external auditor, PwC, was therefore engaged to perform an independent audit of HA s private patients revenue system. Their review confirmed that the current system contains a reasonable number and type of key controls and they did not note any internal control weaknesses designated as high importance in the current system of internal controls specifically and solely related to the HA portion of revenue (i.e. excluding revenue to the Universities). 16. Nevertheless, while noting and supporting HA s PBRC revamp project, PwC has made a number of recommendations to further improve internal controls in the interim period. These are detailed in Annex 4 of the Report. (III) Fee Sharing Arrangements with the Two Universities 17. PwC has also recommended in their detailed report that The HA should consider the need for a revised and more current version of the revenue sharing agreement [with the Universities]. Variations in practice between different hospitals should also be analysed and discussed to understand the basis and rationale for the discrepancies. HA management agrees with the recommendation as it can provide the following benefits: (a) (b) Consolidate and simplify management of the existing agreements into one single document; and Eliminate minor variations in practice such as the need for the professorial staff to seek prior approval for professorial fee waivers and the use of pre-numbered waiver forms in one University and not the other. Taskforce Conclusion (Page 13 of Report) 18. HA s Private Patient Service is provided on a limited scale to afford patients with the means for accessing specialized services not generally available in the private sector and is a relatively smaller component of HA s total services. Although the past private patient billing system was largely manual and as a result therefore contained inherent weaknesses, the related risks have been largely mitigated by progressive system enhancements. 19. Overall, the Taskforce were satisfied with the incremental improvements in processes and controls that had been achieved, particularly from the implementation of the PFMS phase 1 for outpatient services. With the 5

7 - 6 - implementation of PFMS phase 2 for inpatient services underway, the Taskforce concluded that the current Private Patient Billing Systems comply with HA s financial regulations and policies and now contain sufficient controls to reasonably ensure such revenues are properly recorded. 20. In addition, this view was confirmed by PwC following their independent review of the current control environment of HA s Private Patient Billing Systems. Way Forward (Pages 13 and 14 of Report) PBRC Revamp Project 21. The PBRC revamp project currently underway will provide HA an end-to-end enterprise billing capability and a definition of the range of services. It is anticipated that this capability will, through its support for itemized private patient services billing and its integration of the feeder clinical systems, provide an improved control environment. Management Action Plan to PwC Recommendations 22. In relation to the recommendations made by PwC (Annex 4 of the Report), action has already commenced to implement the suggested enhancements as soon as possible across all relevant HA hospitals. This will include working closely together with the working group recently setup by the HKU Council, following their acceptance of the report from their Committee of Enquiry, in order to achieve end-to-end improvements where possible. Decision Sought 23. Members are requested to comment on and, as appropriate, endorse the following: (a) (b) The findings and the conclusion of the Taskforce as set out in paragraphs 8 to 17 and 18 to 20 respectively and in the appended full Report; and The recommendations and follow up actions being taken by HA management to further enhance the control environment as set out in the Way Forward under paragraphs 21 and 22. Hospital Authority AOM\PAPER\ July

8 The Report of the Internal Taskforce s Review of Hospital Authority s (HA) Private Patient Revenue Management System July 2007

9 CONTENTS Page EXECUTIVE OVERVIEW iii I INTRODUCTION Background 1 Scope of Work 1 Private Patient Services in HA 1 Financial and Accounting Regulatory Framework 2 Overview of Existing Private Patient Billing Systems and Procedures 3 II TASKFORCE APPROACH AND FINDINGS Approach and Methodology 4 Taskforce Findings 4 Analysis of Income and Activities of HA s Private Patient Service 4 Review of Current Private Patient Billing Control Systems 5 - Past Private Patient Billing System Weaknesses - Improvements over Recent Years - Current Private Patient Billing Control Systems - Independent Review by PwC Review of Fee Sharing Arrangements with Two Universities 10 Enhancement of Fee Sharing Arrangements with Two Universities 12 III CONCLUSION AND WAY FORWARD Conclusion 13 Way Forward 13 - PBRC Revamp Project Expected Deliverables - Management Action Plan i

10 Annexes 1. Analysis of Income and Activities of HA s Private Patient Services 2. A Chronology of the control enhancements implemented in the Private Patient Revenue Management System 3. A Summary of the Salient Controls 4. PricewaterhouseCooper s (PwC) Assurance Report - Executive Summary - Management s Response to Key Recommendations 5. PBRC Revamp Project Scope from an Information Technology Perspective ii

11 EXECUTIVE OVERVIEW 1. This Report concludes the work of the HA Internal Taskforce, established by the Hospital Authority s (HA) Chief Executive in March 2007, to report back on their review over the adequacy of internal controls in HA s Private Patient Revenue Management processes across the HA and recommendations for improvement. 2. The Report describes the risk assessment approach and methodology in performing the health check on the current systems of internal control in relation to the private patient fee billing and collection processes in the HA. Coverage also includes reviewing the handling of the fee sharing arrangements with the two Universities. Past Private Patient Billing Systems 3. Members particularly noted that past private patient billing systems were largely manual and as a result therefore contained inherent weaknesses. As a reference point to identify the key controls and risks in the current private patient billing system, the Taskforce was also briefed by our internal auditors on the key system weaknesses identified in their look back of past private patient billing control systems and procedures operating in Queen Mary Hospital (QMH). Improvements over Recent Years has Strengthened Overall Internal Controls 4. The Taskforce noted that progressive enhancements have been made to improve HA s private patient billing control systems. The most significant being the implementation of the feeder Privately Financed Medical Services (PFMS) system to route the private fee billing information to HA s main billing engine, Patient Billing/Revenue Collection (PBRC) System. Further details of these enhancements are chronologically listed in Annex 2 of this Report. Current Private Patient Billing Control Systems in the HA 5. Overall, the financial controls and IT systems in the current private patient revenue system are largely generic across HA hospitals with iii

12 some local variation to cater for organizational structure and related segregation of duty arrangements. Annex 3 of this Report provides an overview of the key risks, current key controls in place and a description of their purpose and function to contain residual risks in the overall process. 6. While such systems are not usually designed to totally block fraud, the Taskforce is of the view that the current HA private patient billing systems, on balance, provide a reasonably effective means to prevent possible fraud and to handle regular patient services billing transactions on a prospective basis. The Taskforce also recognizes that both from a historical and current standpoint the University honorary consultants working in the HA are in position of trust and as such there is much reliance on their professional integrity in the present operating arrangements. 7. Given the importance of this matter, the Taskforce considered it important to also gain independent assurance on the adequacy of the internal controls in place in the current system. HA s external auditor, PwC, was therefore engaged to perform an independent audit of HA s private patients revenue system. Their review confirmed that the current system contains a reasonable number and type of key controls and they did not note any internal control weaknesses designated as high importance in the current system of internal controls specifically and solely related to the HA portion of revenue (i.e. excluding revenue to the Universities). 8. Nevertheless, while noting and supporting HA s PBRC revamp project, PwC made a number of recommendations to further improve internal controls in the interim period. These along with management s actions are detailed in paragraph 22 of this Report and further in Annex As a consequence of these reviews, an update of the current documentations of the private patient billing systems and controls for respective hospitals has been achieved. Way Forward 10. In relation to the recommendations made by PwC (Annex 4 of this Report), action has already commenced to implement the suggested enhancements as soon as possible across all relevant HA hospitals. This will iv

13 need to include working closely together with the working group recently setup by the HKU Council, following their acceptance of the Report from their Committee of Enquiry, in order to achieve end-to-end improvements where possible. v

14 I INTRODUCTION Background 1. The recent Queen Mary Hospital (QMH) incident concerning possible cases of irregularities in the billing and revenue sharing with The University of Hong Kong (HKU) for some of the hospital s private patients has raised considerable concern. Following initial investigation and contact with HKU, this matter was referred to the appropriate external authorities for investigation. 2. Additionally, in response to this incident and in order to assure the effectiveness of the internal controls in our current Private Patient Revenue Management System across the whole of the HA, the Chief Executive formed an Internal Taskforce (Taskforce). Its brief is to ascertain and report back on the effective functioning of the internal control systems surrounding revenue management for private patient services in HA hospitals. Members of this Taskforce include the Cluster Chief Executives responsible for the 2 teaching hospitals respectively, Head Office Finance executives and Director (Finance) as the Convenor. Scope of Work 3. In addition to HA s concern, much public interest has been raised over private patient services and the billing for these services across the whole of the HA. To address this, the Taskforce covered the following: (a) (b) (c) An analysis of the income and activities of the private patient services provided by the HA, in particular the two teaching hospitals, for the last three years; A review of the current control systems surrounding the revenue for private patient service in the whole of HA; and A review of the existing practices in relation to fee sharing arrangements with the two Universities. Private Patient Services in HA 4. The main rationale for the provision of private services at 1

15 public hospitals is due to the fact that there are levels of specialized expertise and facilities in the public medical sector (especially at the teaching hospitals), which are not generally available in the private sector. It is therefore considered appropriate to offer the public, some of whom might want to procure private services, a means for accessing these specialized services. To ensure public services would not be adversely affected by private services, the latter is only provided on a limited scale. Private patient services represent 0.62% and 0.47% of HA s service provision for inpatients and outpatients respectively. In 2006/07, HA s private service fee income amounted to $196Mn. 5. Some of HA s private patients in designated hospitals are treated by University staff appointed as honorary consultants in the HA. This arrangement allows patients to access special expertise and facilities in the public hospitals. For HA private patients treated by University staff, an agreement between the Government and the University in 1948 serves to govern the sharing of income collected from these patients in major specialties. Similar agreements for other clinical specialties were also developed afterwards. Under these agreements, fees from such private cases other than maintenance fees and medication charges are shared between HA hospitals and the Universities on agreed percentages by department/specialty. HA will retain 25% and pay 75% of this fee income to the two Universities for most specialties. In 2006/07, the payments of professorial fee to the Universities amounted to $64.9Mn (Annex 1). Monthly reports on the amount of professorial fees to be paid to the Universities are generated from Patient Billing / Revenue Collection System (PBRC). These reports are sent by QMH and PWH Finance Departments to their respective University for checking of accuracy and completeness. In addition, detailed calculations of the payments due are further analyzed by department/specialty and by patient. Financial and Accounting Regulatory Framework 6. Given the extensive financial operations of the HA, a comprehensive Financial and Accounting Regulatory Framework of HA has been laid down to ensure an effective internal control system is in place, including those over billing and settlement functions. As specified in the HA Financial Regulations, the hospital s CCE/HCE (as budget controller) is responsible for ensuring that adequate controls are in place and are 2

16 complied with on a day-to-day basis. Additionally, as part of the statutory external audit of HA s Financial Statements and internal audit activities over revenue cycle and cash collection respectively, the main PBRC billing system has been regularly tested. Overview of the Existing Private Patient Billing Systems and Procedures 7. HA s main patient billing engine is the PBRC, a legacy system developed in the early 90 s to cater for HA s mainstream public patients. PBRC calculates maintenance fees and attendance fees by applying the gazetted charges to patient activities interfaced from clinical systems namely Integrated Patient Administration System (IPAS) and Outpatient Appointment System (OPAS), and records the revenue and receivables accordingly. Public patients are charged a flat per diem maintenance fee while private patients, besides the per diem maintenance fee based on the class of ward occupied, are also charged for individual treatment received such as doctor consultation fees, medication, investigation and procedures on an item by item basis. 8. As there is no direct interface from other clinical systems, such as the radiology and pathology information systems that record itemized services consumed by patients separately, private patient itemized charges as described above cannot be captured directly into PBRC. A separate feeder system called the Privately Financed Medical Services System (PFMS) has therefore more recently been developed to capture the manually collated required data which in turn interfaces with PBRC for billing. Nevertheless, whilst collation of the private patient itemized charges currently relies heavily on manual processes and documentation, management accepts and manages these risks in the short term while the overall HA billing system is being revamped. Full integration and automation of the charging process requires complex multi-system interfaces from and modification of various clinical systems and standardization of the definition of services. Presently, a new patient billing system development project is underway and would address the private patient fee integration issues when fully developed. 3

17 II TASKFORCE APPROACH AND FINDINGS Taskforce s Approach and Methodology 9. To achieve its scope of work, the Taskforce s approach was to examine the current arrangements for the billing for private patient services in HA and the fee sharing arrangements with the Universities by: (a) (b) Meeting with relevant representatives, including Cluster General Managers (Finance); and Conducting desktop and physical walk-through of the HA private patient billing and settlement processes of predominantly the two teaching hospitals and Queen Elizabeth Hospital (QEH) which collectively represent 89% of the total revenue from private patient services. Taskforce Findings 10. The following sets out the Taskforce s findings in relation to the scope of work: Analysis of Income and Activities of HA s Private Patient Services 11. In summary, the medical fees received from Private Patients Services is setout in the table on the following page. Annex 1 provides further detailed analyses of these activities and fees over the last three financial years. 4

18 Hospital 2006/ / /05 $M $M $M Queen Mary Hospital i) Inpatient ii) Outpatient a) Total Gross Fee Billi ng for Private Services HA Retained Income Payment of Professorial Fees to Universities Prince of Wales Hospital i) Inpatient ii) Outpatient b) Total Gross Fee for Private Services HA Retained Income Payment of Professorial Fees to Universities Other Hospitals i) Inpatient ii) Outpatient c) Total Other Hospitals HA Retained Income Payment of Professorial Fees to Universities Total Income Billing for Private Services (a+b+c) HA Retained Income Payment of Professorial Fees to Universities Universities % 24.9% 25.3% 28.1% 2006/ / /05 Private Service Activities Inpatient Bed days 47,973 45,059 41,858 Outpatient Attendance 39,356 28,274 23,475 Review of Current Private Patient Billing Control Systems 12. To help make its prospective assessme nt of the current processes and internal controls, the Taskforce was briefed on: (a) The system weaknesses identified by HA s internal auditors in their look back of past private patient services billing transactions in QMH; and (b) Improvements since 2003 in HA s private patient billing systems that have been made over recent years as part of the continuous improvement process. 5

19 Past Private Patient Billing System Weaknesses 13. As a reference point to identify the key control points and risks in the current private patient billing system, the key system weaknesses identified by our internal auditors in past private patient billing control systems and procedures operating in QMH were used. Their findings in this respect were discussed with the Taskforce and subsequently with PwC at the commencement of their independent review of H A s current private patient billing processes. These are summarized below: (a) In-complete billing cycle: In the period prior to September 2005, the private patient billing control system in QMH did not contain a fully effective end-to-end completeness check to ensure all attending private patients were billed for procedures performed; (b) Compliance with prevailing fees and charges policies and practices: The previous requirement for staff of frontline clinical departments to enter only limited information into the manually prepared billing forms had restricted the hospital finance department s ability to routinely check that the fee to be charged was within the gazetted fee range for the procedure. Additionally the system did not include a quality check back for private patient procedures performed, on a full or sample basis, to other hospital records, such as the medical record, Clinical Management System or Operating Theatre System, to confirm the completeness and correctness of the fees to be charged. Reliance was placed solely on hospital staff completing the manual billing form to ensure its correctness; and (c) Professorial Fee Waiver Arrangements: QMH is not informed of the criteria established by HKU for their staff in granting professional fee waiver to private patients. QMH staff are therefore not able to confirm the correctness of the professorial fee waivers granted other than that they are authorized by a HKU professorial staff. 14. From these observations and its own initial risk assessment, the Taskforce considered that the types of itemised fees subject to most 6

20 process risk HA-wide were those for consultation and procedures. Other fees, such as private patient s charges for daily maintenance (for inpatient), drugs, radiology and pathology tests and other therapeutic treatments, have grea ter segregation of functions and cross-checks established. The professorial fee sharing and waiver arrangements were also assessed as an area of concern. Improvements over Recent Years to Strengthen Overall Internal Controls 15. Recognizing the changing environment and the historical weaknesses described in paragraph 13, a number of enhancements have been m ade to improve HA s private patient billing control systems, the most significant being the implementation of the feeder Privately Financed Medical Services (PFMS) system to route the private fee billing information to HA s main billing engine PBRC. In addition, a number of new control and collection facilitation initiatives have been implemented in the private patient services area. Details of these enhancements are chronologically listed in Annex 2, for members information. The key control elements of these changes are: (a) (b) (c) Manual procedures have been replaced by PFMS allowing ordering, billing and fee collection to be done directly in each clinic; The new workflow under PFMS offers better segregation of duties and helps to minimize the risk of input and calculation errors; and Billing and fee collection can be performed in a more timely manner in private clinics while at the same time patient convenience has been improved. Current Private Patient Billing Control Systems 16. The current systems of internal control are built around the key components of people, processes, documentation of policies and procedures, systems and organization. The Taskforce, in its internal assessment of the current control framework, has met with relevant finance staff and conducted a walk-through of the control environment in the HA, fee sharing arrangements, payment of professorial fees to the Universities and processes as documented by the three key hospitals - Queen Mary 7

21 Hospital, Prince of Wales Hospital and Queen Elizabeth Hospital. The current private patient billing from these three hospitals represented 89% of the total revenue from private patient services. 17. Annex 3 provides a summary overview of the current key controls in place, their function and a description of other mitigating steps to mitigate residual risks in the overall process. Areas presented are: (a) Inpatient billing, (b) Outpatient billing, (c) Payment of professorial fees to the Universities for private patients, and (d) Professorial fee waivers for private patients. 18. The Taskforce noted that where there is a heavy reliance on manual data collation for private patient itemized charges, sufficient preventive and detective control measures have been put in place, where currently practical, to reasonably ensure completeness, accuracy, authorization and timeliness of data, thereby cost-effectively mitigating the risks involved. The Taskforce recognizes that the PBRC revamp project currently underway will through its support for itemized private patient services billing, its definition of services and its integration of the feeder clinical systems provide an improved control environment. On balance, the Taskforce therefore recommends at this time that priority should be given to this revamp project over any possible further enhancements to the PFMS standalone system as this would significantly outweigh any short term gain that could be achieved. 19. Overall, and in the medium term, the Taskforce is satisfied that the current Private Patient Billing Systems contain sufficient controls to reasonably ensure such revenues are properly recorded and comply with HA s relevant financial regulations and policies. The Taskforce also recognizes that both from a historical and current standpoint the University honorary consultants working in the HA are in position of trust and as such there is much reliance on their professional integrity in the present operating arrangements. Independent Review by PwC 20. Given the importance of this matter, the Taskforce considered 8

22 it important to also gain independent assurance on the adequacy of the internal controls in place over HA s Billing and Revenue Processes for Private Patient Services. HA s external auditor, PwC, was therefore engaged to perform an independent audit of the private patients revenue system to provide assurance on the adequacy of the internal controls in place and, as appropriate, to make recommendations on improvements. 21. PwC s Summary Report on their Internal Controls Review of the HA s private patients revenue system is included at Annex 4 for members reference. The following is an extract of their conclusion: This report covers our review of the billing and revenue business processes for private patient services (PPS) provided in Hospital Authority (HA) hospitals as carried out in May Our review covered the current billing and revenue cycle at the following three HA hospitals, which represented 89% of the total revenue from private patient services: Prince of Wales Hospital (PWH); Queen Mary Hospital (QMH); and, Queen Elizabeth Hospital (QEH) Our review indicated that a reasonable number and type of key controls have been embedded within the billing and revenue cycle. Consequently, we did not note any internal control weaknesses designated as high importance in the current system of internal controls specifically and solely related to the HA portion of revenue (i.e. excluding revenue to the Universities). 22. Whilst noting that Private Patient Services is a relatively smaller component of HA s total services, PwC supported the overall priority currently being given by HA to replace PBRC with a new IT system that will automate and integrate billing and medical recording functions as this will both improve efficiency and overall control by greatly reducing reliance on manual processes. To further improve internal controls in the interim period, PwC has made recommendations in respect of the following: (a) Professorial fee waiver arrangements: HA should work 9

23 together with HKU to enable that University to implement a more formal and independent professional fee waiver approval process at QMH similar to that already in place between Chinese University of Hong Kong and PWH. Action: HA has commenced to work with HKU to establish a more formal professional fee waiver system which includes open and transparent guidelines. (b) Provision of itemized summary of professorial fees waived: Until HKU confirms that it has formalized its professorial refund waiver system, as suggested in the previous point, HA should provide an itemized summary of professorial fees waived by HKU staff (including case numbers and amounts involved) to enable the University to regularly verify and reconcile the amounts waived. Action: HA has commenced to discuss with HKU the information required in addition to that already provided. (c) Sample checking of medical records to billing records: HA should implement sample checking for clinical procedures requiring manual input for billing purposes to ensure compliance of individual patient billing with prevailing fees and charges policies and practices. Action: HA has already implemented this for outpatient and inpatient billing and this practice is currently being extended to all other relevant hospitals. (d) Timeliness of billing: HA should consider expediting the private patient billing process by adopting the practice of billing at the point of order entry when requests for medical services are raised. Action: HA is currently considering this practice at the working level for possible adoption. Review of Fee Sharing Arrangements with the Two Universities 23. The HA and the two Universities share the common mission to serve the community with a high standard of clinical service, and the vision 10

24 that education and research enable the maintenance and advancement of such standard. Indeed, clinical services, teaching and research are in essence not separable and all have been contributing resources to these activities. 24. Following the establishment of HA in 1990, financial arrangements betwee n the HA and the Universities were agreed, covering, amongst other things, private patient services. Accordingly, private patients a re subject to different fees and charges for different services. These fees and charges are published in the gazette and include: (a) (b) (c) (d) (e) Maintenance fee (for inpatient). The fee includes accommodation in private wards, general nursing services, catering, and domestic services; Medication fee (for both in- and out-patients); Doctor fee (for inpatient); Consultation fee (for outpatient); and Itemized charges (for both in- and out-patients, including diagnostic and therapeutic/operative procedures). 25. For maintenance and medication fees, as HA bears all the costs, HA retains all of these fees collected. Income earned from doctor fees, consultation fees, and itemized charges is shared between the HA and the respective Universities according to agreements as summarized in the following table. 11

25 Department University s share (%) Inpatient Outpatient Anaesthesia (Note 1) Clinical Oncology (Note 2) 25/75 25/75 Diagnostic Radiology (Note 3) 25/75 25/75 Medicine Obstetrics and Gynaecology Ophthalmology Orthopaedics and Traumatology Paediatrics Pathology Psych iatry Surgery Notes 1. Includes Intensive Care Unit fees for CUHK % payment is applicable to Clinical Oncology services except for Chemotherapy services which is paid at 75%. 3. The sharing percentage for services related to the CUHK s Ultrasound and MRI is at 75%. Enhancement of Fee Sharing Arrangements with the Two Universities 26. PwC has also recommended in their detailed report that The HA should consider the need for a revised and more current version of the revenue sharing agreement [with the Universities]. Variations in practice between different hospitals should also be analysed and discussed to understand the basis and rationale for the discrepancies. HA management agrees with the recommendation as it can provide the following benefits: (a) Consolidate and simplify management of the existing agreements into one single document; and (b) Eliminate minor variations in practice such as the need for the University staff to seek prior approval for professorial fee waivers and the use of pre-numbered waiver forms in one University and not the other. 27. Given the nature of the discussions this undertaking requires joint discussions with the two Universities. HA will work closely together with the working group recently setup by the HKU Council, following their acceptance of the report from their Committee of Enquiry, in order to achieve end-to-end improvements where possible. 12

26 III CONCLUSION AND WAY FORWARD Conclusion 28. HA s Private Patient Services is provided on a limited scale to afford patients with the means for accessing specialized services not generally available in the private sector and is a relatively smaller component of HA s total services. Although the past private patient billing system was largely manual and as a result there fore contained inherent weaknesses, the related risks have been largely mitigated by progressive system enhancements. 29. Overall, the Taskforce was satisfied with the incremental improvements in processes and controls that had been achieved, particularly from the implementation of the PFMS phase 1 for outpatient services. With the implementation of PFMS phase 2 for inpatient services underway, the Taskforce concluded that the current Private Patient Billing Systems comply with HA s financial regulations and policies and now contain sufficient controls to reasonably ensure such revenues are properly recorded. 30. In addition, this view was also confirmed by PwC following their independent review of the current control environment of HA s Private Patient Billing Systems. Way Forward PBRC Revamp Project Expected Deliverables 31. As explained earlier, one main limitation of PBRC is its inability to capture activity data directly from the various clinical systems for itemized charging of private patients. In hindsight PBRC was developed when there was only a need for a simple charging schedule for hospital services based mainly on per diem flat fees. The existing design and legacy architecture are unlikely to meet the growing needs of a sophisticated billing system with complex charging rules such as package deal and itemized charges. 32. Under the PBRC revamp project, the project has never simply 13

27 been a case of replacing the legacy PBRC system, but actually providing a platform that entails moving the Hospital Authority from a simple fees collection capability to an end-to-end enterprise billing capability. Annex 5 provides an overview of the planned project scope. Consequently a major component of the PBRC revamp program involves substantial preparation work in relation to data from the clinical systems before the data can be fed into the PBRC system for billing. This has been the primary focus of the progress in the past. 33. In order to deliver this enterprise billing capability, the HA requires the ability to identify services received by individual patients and translate that information into an accurate and auditable bill. This in turn requires that the HA leverage its existing clinical systems (such as OTS, RIS, etc) to provide data on services provided to a new flexible billing solution. It is anticipated that this end-to-end enterprise billing capability will address the system issues identified within the current PFMS system environment. Management Action Plan 34. In relation to the recommendations made in the PwC report, these will be implemented according to the HA management responses as stated in the PwC Executive Summary and in more detail within Section 5 of PwC s detailed report. 35. With the release of HKU s report, HA will need to review the report and work with the HKU to enhance end-to-end systems and communication where possible. 36. From the system development perspective, the recommendations in PwC report have been passed to the PBRC redevelopment team for inclusion into their design functional requirements. In addition, with the participation of the respective cluster finance heads in the PBRC revamp project, these recommendations will be satisfactorily monitored. 14

28 Annex 1 Analysis of Private Fee Income in HA in 2004/ / / / /05 HA Retained Income Payment of Professorial fee to Universities Total Billing for Private Services HA Retained Income Payment of Professorial fee to Universities Total Billing for Private Services HA Retained Income Payment of Professorial fee to Universities Total Billing for Private Services $Mn $Mn $Mn $Mn $Mn $Mn $Mn $Mn $Mn Inpatient Queen Mary Hospital (QMH) Maintenance fee & Medication [N1] Itemized charges Prince of Wales Hospital (PWH) Maintenance fee & Medication Itemized charges Other hospitals Maintenance fee & Medication Itemized charges Total Maintenance fee & Medication Itemized charges Total Inpatient Outpatient QMH Itemized charges Medication and others PWH Itemized charges Medication and others Other hospitals Itemized charges Medication and others Total Itemized charges Medication and others Total Outpatient Total Fee Income for Private Services Private Services Activities Inpatient Outpatient Inpatient Outpatient Inpatient Outpatient Bed days Attendance Bed days Attendance Bed days Attendance QMH 18,699 24,130 15,548 22,463 14,778 19,801 PWH 6,818 11,099 5,541 3,409 5,707 2,243 Other hospitals [N2] 22,456 4,127 23,970 2,402 21,373 1,431 Total 47,973 39,356 45,059 28,274 41,858 23,475 Notes: [N1] Maintenance fee and medication are not subject to sharing with universities. [N2] Most of the bed-day occupied by private patients in Other Hospitals are Civil Servants or HA staff who enjoy medical benefits in private wards at concessionary rates. Therefore, although the bed-day occupied in these hospitals are high, income remains at a relatively low level as compared to QMH and PWH.

29 Annex 2 A Chronology of the control enhancements implemented in the Private Patient Revenue Management System Date Jan 2003 Feb 2003 Nov 2004 Aug 2005 Process and Control Enhancements As private patients may come from foreign countries, HA has been accepting foreign currency notes for fee settlement. An internal circular was revised to recapitulate this practice. Deposits and bills for private patients are usually of high dollar value. Credit card was introduced as a new settlement means to facilitate settlement of these transactions. The flat deposit rate for private patients was revised to tiered levels to commensurate with the charges to be levied. Patients requiring major operations should pay a higher deposit. The Gazetted charge of private consultation fee was revised from a fixed fee to a price range to better reflect the actual cost, complexity and expertise required for individual cases. Dec 2005 A new system, Patient Financed Medical Services (PFMS) System, phase 1 was rolled out in Dec 2005 for private outpatient services to facilitate billing of itemized charges which was done manually. Main feature includes the following:- The automated feature in the new system has replaced the existing manual procedures. For example, before the implementation of PFMS, a manual checklist ticked by doctor in charge was used to record all itemized charges, including indication of professorial fee waiver, for each private patient. The checklist would then be passed to the Shroff Office for fee calculation and bill generation. With the new system, charging information is interfaced from PFMS to the main billing system on a timely manner after clinical staff has input the chargeable items in PFMS. In addition, billing is no longer dependent on the manual checklist which may be lost in transit and calculation error is eliminated. A charge rate table with all the itemized charges has been uploaded in PFMS for each hospital. The fixed price or price range for each item have been preset according to the Gazette and HA s internal accounting circular. This minimizes the risk of input error or levying a charge outside the Gazetted range. PFMS allows the input of services and fee collection to be conducted by different personnel through granting of different access right. This

30 Date Process and Control Enhancements segregation of duties improves internal control. Since all the itemized charges are captured in the system, reports can be generated for management review. PFMS is a web-based system which can be deployed in private clinics for inputting of itemized charges and collecting related income. Patient convenience has been greatly improved by this one-stop service. Mar 2006 Phase 2 PFMS was rolled out with two enhancements:- It captures drug charge for outpatients and discharged inpatients directly interfaced from pharmacy system It was extended to handle private inpatient cases. Jan 2007 Jul 2007 The structure of price catalogue in PFMS was revised to facilitate frontline staff selecting the correct itemized charges to minimize the risk of input error. A function was added in PFMS to simplify the bill format by grouping similar items together. A lump sum operation charge was previously shown on bills and receipts. The PFMS was enhanced to provide breakdown, namely, the surgeon charge, anesthetist fee and operation theatre charge, automatically. The breakdown will facilitate patients to claim back their medical bills as these are usually required by insurance companies.

31 Annex 3 A Summary of the Salient Generic Controls over HA s Current Private Patient Billing System (I) Inpatient Billing Process Overview

32 (I) Inpatient Billing Process Ref Key controls steps Significance of control Patient deposits All private patients are required to pay a deposit corresponding to the class of ward he/she occupies. Admission Patient completes a Private Ward Patient Demographic Data Form to register the personal data. Admission clerk prepares medical folder ( 牌 板 ), assigns private inpatient reference, and creates a patient Case Number in Integrated Patient Administrative System (IPAS). This helps to mitigate any credit risk that may arise as payment has been received prior to services rendered. Segregation of duties between the Admissions Office and the attending doctor. The creation of a case number helps ensure only patients with a system record can receive medical treatment. 2.2 Daily, IPAS automatically interfaces each patient s room night spent to Patient Billing/Revenue Collection (PBRC). A system control ensures completeness and accuracy of maintenance fees Consultation/other specialties Ward Nurse/Clerk will record the number of consultations and operations undertaken on a Summary Charge Form which is signed by the doctor-in-charge upon discharge. The price of each consultation and operation is advised by the doctor-in-charge in accordance with the HAHO Operations Circular 19/05 and Accounting Circular 7/05. The Doctor-in-Charge also signs on the form to indicate approval of information. An independent party is responsible for ensuring the completeness and accuracy of the consultation fees in accordance with the Gazette (also enforces segregation of duties).

33 (I) Inpatient Billing Process Ref Key controls steps Significance of control 3.2 A Clerk prepares an Itemized Charges Form to record other treatments ordered for the private inpatient (e.g radiology, laboratory Allied Health etc). Ward manager/ward-in-charge/nursing Officer will check this charge form to ensure all treatments have been included and properly classified. Helps to ensure completeness and accuracy of the total bill by ensuring services provided by other specialties are included Collate billing information After provision of services, respective departments will send Returns on Services (with price for items with a price range in Gazette) which will be kept in the patients medical record folder. Clerk checks the Itemized Charge Form against the Returns on Services and system reports (for pathology and radiology services) to ensure accuracy and completeness. Acts as a monitoring control to help ensure that all services provided have been billed by comparing the patients medical record folder to the Itemized Charge Form (completeness). 4.2 Upon discharge, ward manager /ward-in-charge / Nursing Officer will check the accuracy and completeness of the Itemized Charges Form to ensure all services will be billed and then sign on the form. 4.3 The Nurse then sends the following documents to the Shroff (or Finance Department) for billing: Summary Charge Form An additional check by a separate reviewer on the accuracy and completeness of the itemized charge form. Actual billing is performed by an independent party to ensure segregation of duties. Accuracy of the charges is also independently verified to the Gazette. Itemized Charges Form The Discharge Form (signed by doctor); 4.4 The Main Shroff Clerk / Finance Clerk receives from the Ward the above

34 (I) Inpatient Billing Process Ref Key controls steps Significance of control documents for billing and checks the fees against Gazette/ accounting circular to ensure amount quoted is correct Monitoring and checking On a periodic basis, a process to review outstanding billings is carried out and any charge forms not yet billed will be followed-up by the Finance Department. Helps ensure the completeness of billings by making sure that all private cases in IPAS have been billed.

35 (II) Outpatient Billing Process Overview

36 (II) Outpatient Billing Process Ref Key control steps Significance of control Registration Patient arrives at Outpatient Clinic and presents the HK ID card for identification and registration. Clinic Clerk marks the attendance record on Outpatient Appointment System (OPAS). Consultation/other specialties Doctor advises Clinic Nurse on consultation provided and complexity of procedures to be performed. Clinic Nurse selects these items on a Summary Charge Form. Doctor or Clinic Nurse signs next to the selected items for billing. Segregation of duties between the Registration Office and the attending doctor. The creation of a case number helps to ensure that only patients with a system record can receive medical treatment. An independent party is responsible for ensuring the completeness and accuracy of the consultation fees in accordance of the Gazette (also enforces segregation of duties). 2.2 Doctor records information into Clinical Management Systems (CMS) after consultation. Referrals for Pathology and Radiology services are placed using the CMS system. Itemised Charge Forms will be used by doctor/nurse/clerk to record the name of procedures to be provided by other specialties and the price. 3 Collating billing information and Settlement 3.1 Prepayment has to be made for services to be rendered by other specialties. 3.2 Based on the charge forms, the Clerk inputs the charge information into PFMS and checks to ensure the charge codes selected correspond to the services specified. 3.3 Clinic Shroff collects the revenue in Patient Financed Medical Service System (PFMS) The CMS and Itemized Charge Form helps ensure an audit trail of services rendered and hence completeness of procedures charged. This helps to mitigate any credit risk that may arise as payment has been received prior to services rendered. Actual billing is performed by an independent party to ensure segregation of duties. System-enforced setting of charge codes ensures that only appropriate revenue is

37 (II) Outpatient Billing Process Ref Key control steps Significance of control for all procedures to be provided to the patient. Prices will follow the amount preset in PFMS or a price suggested by doctor if there is a price range in Gazette. The charge codes in PFMS are assigned with a fixed percentage for revenue sharing purpose. 3.4 Respective departments check the Itemized Charge Form stamped Paid by Shroff before provision of services. For services with a price range in Gazette, the final price will be marked on the Itemized Charge Form which will be passed to Shroff to arrange additional billing or refund. subject to revenue-sharing. Acts as a monitoring control to help ensure that all services provided have been paid before provision of services Monitoring and checking Daily, the Finance Department or Clinic Shroff-in-Charge will reconcile OPAS attendance record to billing record to ensure completeness of bills issued. Helps ensure the completeness of billings by making sure that all private cases in OPAS have been billed.

38 (III) Revenue Sharing Arrangement for Private Patients Overview (applicable to Prince of Wales Hospital and Queen Mary Hospital only)

39 (III) Revenue Sharing Arrangement for Private Patients (Applicable to Prince of Wales Hospital and Queen Mary Hospital only) Ref Key control steps Significance of control Define revenue sharing percentage A set of charges in PBRC is categorised into a chart of account (COA) code and each COA is assigned a revenue-sharing percentages preset in the system. These COA are selected for each item on a bill when it is issued from PBRC. System mapping of the COA helps ensure that only the revenue subject to professorial fee payment is captured. As the sharing percentages are hard-coded into the system, only personnel with appropriate system access can change these parameters. (system-enforced segregation of duties) Calculate monthly share to university Based on the COA, the system automatically calculates the revenue to be shared with the university each month. Payment / Monitoring An Account Officer ( AO ) reviews the revenue sharing calculation and signs on worksheets and system generated reports. An automatic control calculates the monthly revenue to ensure accuracy and completeness. Manual reconciliations provide an additional check that only the appropriate revenue is paid to the Universities.

40 (IV) Professorial Fee Waivers for Private patients overview (Applicable to Prince of Wales Hospital only ) (HA agrees to devise a similar system in QMH /HKU as an action point to PwC recommendation point 5.1.)

41 (IV) Professorial Fee Waivers for Private Patients (Applicable to Prince of Wales Hospital only) (HA agrees to devise a similar system in QMH /HKU as an action point to PwC recommendation point 5.1.) Ref Key control steps Significance of control Approval of professional fee waiver The Chinese University of Hong Kong (CUHK) Departmental Head reviews and signs on the Endorsement Form for Fee Waiver upon approval. Review billing with waive form For billed cases, Clerk of Clinic/Main Shroff daily passes the following documents to the In-charge of Clinic/Main Shroff for checking on each waived case. Establishes a pre-approval process at the University and that they are aware of the fee-waiver. Helps ensure that waived private patient fees have the appropriate pre-approval from the University and appropriate documentation is in place The Waiver Form (copy); Receipt (copy) / Bill (send original to CUHK for settlement); and Summary Charge Form (inpatient/outpatient) (copy). Shroff-in-charge verifies and signs on the Waiver Form (copy) next to Shroff signature. Monitoring Shroff-in-charge files the signed Waiver Form (copy) into a file in the order of a serial number assigned by Clinical Sciences Administration (CSA) department. Shroff-in-charge then sends a copy of the Shroff-in-charge signed Waiver Form to CSA for their reference. Provides evidence and accountability that the fee-waiver has been verified and appropriate approved. Provides the University with a copy of the pre-numbered, approved Waiver Form so they have an audit trail of what has been processed.

42 Annex 4 Hospital Authority Report on Internal Controls Review of the HA Billing and Revenue Business Processes for Private Patient Services June 2007

43 Contents Page 1. Executive summary 2 2 Conclusion 6 [Note: The balance of this report is not included with the Taskforce Report] 3 Background 7 4 Scope and approach 10 5 Detailed findings and recommendations 13 Appendix A Keys to importance of issue and suggested timeframes for implementation 21 This report is intended solely for the information of the Hospital Authority. Its existence may not be disclosed nor its contents published in any way without the prior written approval of PricewaterhouseCoopers Ltd. PricewaterhouseCoopers Ltd. does not accept any responsibility to any other party to whom this report may be shown or into whose hands it may come.

44 1. Executive summary This report covers our review of the billing and revenue business processes for private patient services (PPS) provided in Hospital Authority (HA) hospitals as carried out in May PPS represents 0.62% and 0.47% of HA s service provision for inpatients and outpatients respectively. Income from these services amounted to approximately $208 million in 2005/2006 representing 13% of the HA s annual fee income. Out of this $208 million, $80 million was subject to a revenue-sharing arrangement with two universities, where an agreed portion of the revenue earned was subsequently paid to the universities upon patient bill settlement. In 2005/2006, the total amount of revenue paid was $53 million. Our review covered the current billing and revenue cycle at the following three HA hospitals, which represented 89% of the total revenue from private patient services: Prince of Wales Hospital (PWH); Queen Mary Hospital (QMH); and, Queen Elizabeth Hospital (QEH).

45 Conclusion Our review indicated that a reasonable number and type of key controls have been embedded within the billing and revenue cycle. Consequently, we did not note any internal control weaknesses designated as high importance in the current system of internal controls specifically and solely related to the HA portion of revenue (i.e. excluding revenue to the universities). Whilst PPS is relatively small in the overall context of HA total services, we note and support HA s integrated approach to imminently develop and roll out its next-generation IT systems to automate and integrate its billing and medical recording functions including PPS. This should further improve both the efficiency and overall control of all HA billing and revenue business processes However, to further improve internal controls in the interim period, the HA should consider implementing the following recommendations relative to the cost and benefit of each: Professorial fee waiver arrangements Under the prevailing revenue-sharing arrangement between the HA and the universities, university staff are able to decide on whether to waive the professorial fee portion of the charges for PPS. However, we understand, guidelines setting out the criteria for waiving professorial fees by university staff for PPS rendered have not been clearly documented and communicated by the universities While CUHK has taken steps to formalized their internal arrangements and documentation in conjunction with PWH, HA should work together with The University of Hong Kong (HKU) to enable the University to implement a similar formal and independent fee waiver approval process at QMH. This would ensure that a separate and independent approval of waivers for professorial fees due to HKU is obtained prior to medical services being rendered, and would help reduce the potential risk of inappropriate fee waivers being granted by individual HKU staff. (Point 5.1)

46 1. Executive summary (continued) Provision of itemized summary of professorial fees waived Formalizing the professional waiver system, as suggested in the previous point, should enable HKU to sufficiently verify the professorial fees waived by their staff and ensure that their records on fee waivers are complete. However, until HKU has confirmed that their internal checks are reliable in this area using their own data, it would be helpful for the HA to provide an itemized summary of professorial fees waived by HKU staff (including case numbers and amounts involved) to them regularly to enable them to verify and reconcile the amounts waived. HKU should then be able to utilize such an itemized statement as a full completeness check. (Point 5.1) Sample checking of medical records to billing records The current billing and revenue processes are dependent on a number of manual controls that by their inherent nature are prone to human error. As an interim measure until automated interfacing controls have been built between the various IT systems to billing, we recommend that the HA should implement sample checking of medical records against private patient billing records. This will ensure for clinical procedures requiring manual input compliance of individual patient billing in accordance with prevailing fees and charges policies and practices. PWH has already implemented this for outpatient and inpatient billing but we recommend this practice be extended to all other relevant hospitals. (Point 5.5) Timeliness of billing Patients are required to pay a deposit upfront before services and a final bill prepared for the any differences. The timeliness of final inpatient billing varies across the HA hospitals as the underlying billing process is performed differently. Until the planned longer term solution is implemented, the HA should consider expediting the private patient billing process by adopting the practice of billing at the point of order entry when requests for medical services are raised and forgoing confirmation with the referred departments or specialties on actual services rendered. We recommend that the topic of timely billing for private patient services be discussed by the finance heads of the respective hospitals to understand differences in approaches adopted and to determine an appropriate solution to improve timeliness of final billings. (Point 5.6)

47 Details of these recommendations have been set out in the background and Section 5 of this report. We have discussed our findings with Management and appropriate actions/recommendations have been agreed with them to address these issues within acceptable time frames. Please refer to Appendix A for the keys to the importance of issues and suggested timeframe for implementation.

48 1. Executive summary (continued) Scope and Approach Our review focussed on identifying opportunities to improve the current internal control framework to reduce the residual risks as appropriate in the billing and revenue business process for private patient services at three Hospital Authority hospitals. This was achieved by reviewing the existing control framework, identifying issues and recommending best practice solutions. Our work covered the current and prospective systems for raising and billing of fees for PPS. We conducted interviews and walkthroughs with process owners to gain an understanding of the business process which was then documented in flowcharts supplemented with supporting narrative. Subsequent to the interviews, we reviewed a sample of supporting documentation which enabled us to understand if the identified controls within the billing and revenue cycle are being carried out consistently. The level of testing was limited to small samples taken from the current control environment. This approach was taken because the focus of our work was on the current system of internal control not on the history of transactions and changes in controls. Some of the internal control changes have been very recent and hence our work on these was limited to an assessment of their design (i.e. no transactional testing performed).

49 2. Conclusion Basis of conclusion We have completed our review of the current billing and revenue business process for Private Patient Services (PPS) in accordance with our engagement letter dated April 24, The scope and approach of our work is set out in that letter and further explained in Section 4 of this report. As noted in our engagement letter, we adopted a review and comment approach to the exercise. Because our procedures did not constitute an assurance engagement made in accordance with Hong Kong Standards on Auditing, Hong Kong Standards on Review Engagements, or Hong Kong Standards on Assurance Engagements, we do not express any assurance on the internal controls over the billing and revenue cycle for PPS. Conclusion As explained in Section 3 of this report, the HA has implemented key controls in the billing and revenue business processes for PPS. These have been strengthened further in 2007 with additional controls being implemented and further automation of certain processes. We therefore did not note any incidents of internal control weaknesses designated as high importance in the current system of internal controls specifically and solely related to the HA portion of revenue (i.e. excluding revenue to the universities). However, during the course of our review, we did identify a number of areas where internal controls could be improved. These have been summarized in the executive summary and are explained in detail in Section 5 of this report.

50 Action required It is important for the HA to consider carefully whether, how and/or when to implement some or all of the recommendations noted in this report. The PPS revenue is an important part of the HA business, but there are time constraints and costs involved in implementing the recommendations raised. These need to be considered having regard to (i) the benefits achievable, (ii) the consequential reduction in financial and reputational risk and, (iii) other important projects that may be of a higher priority for the HA. In summary, immediate implementation of certain recommendations is not necessarily in the overall best interests of the HA.

51 A Summary of Management s Responses to PwC s 4 Key Recommendations [Risk Classification/Action] 1. Professorial fee waiver arrangements [Medium risk /Immediate] Guidelines setting out the criteria for professorial fee waivers should be formally documented and communicated by the universities. HA agrees with the recommendations and will work with HKU to enhance end-to-end systems and communication of the requirements following the release of their HKU Council s report. 2. Provision of itemized summary of professorial fees waived [Medium Risk/Immediate] Until the universities have confirmed that their internal checks are reliable in this area using their own data, it would be helpful for the HA in the interim to provide an itemised summary of professorial fees waived by university staff (including case numbers and amounts involved) to the universities regularly to enable them to verify and reconcile the amounts waived. The universities should then be able to utilise such an itemised summary as a completeness check. HA agrees with the recommendation and will work with HKU to enhance end-to-end systems and communication of the requirements following the release of their HKU Council s report. As noted by PwC, the CUHK already has introduced a revised fee waiver approval process. All waiver data is at the University s disposal and they are knowledgeable of the number and amount of waivers processed in terms of completeness.

52 3. Sample checking of medical records to billing records [Medium Risk/Immediate] An independent party should perform random sample checking between the patient s available clinical records and the billing records to ensure completeness and accuracy of invoices. This sample checking should not necessarily be performed on all items of the bill. Rather, focus should be given to the high-value clinical procedures such as surgical operations or interventional procedures. HA agrees that the practice of random sample checking should be adopted where it has not already been implemented. This has been implemented at the three reviewed hospitals immediately and the others will be followed up. 4. Timeliness of billing [Low Risk/Medium Term] Alternatively, the HA should consider the appropriateness of billing for services upon order entry rather than wait for confirmation of services rendered from the other specialties. We suggest that the finance managers of QEH, PWH and QMH should discuss the differences in billing practice and decide on the most appropriate approach to ensure timely private inpatient billing so that such practice is consistent across all three hospitals, as far as practicable. As a longer term solution, clinical systems should be automatically interfaced to the billing system for the real-time update of billing information. HA agrees to the recommendation that timeliness of final billing should be improved to provide better customer service. The need for the interfacing clinical systems to the billing process is recognised and is an integral part of the PRBC Revamp project and it will provide a more complete and longer term solution to address billing on demand.

53 Annex 5 PBRC Revamp Project Scope from an Information Technology Perspective (source: PBRC Project) Notes: CSSA ERP GCRS GOPC HKPMI IPAS LIS MSW OPAS OTIS PBRC PMO PMS RIS Comprehensive Social Security Assistance Enterprise Resources Planning Generic Clinical Requests System General Outpatient Clinics Hong Kong Patient Master Index Integrated Patient Administrative System Laboratory Information system Medical Social Worker Outpatient Appointment System Operating Theatre Information System Patient Billing / Revenue Collection System Project Management Office Pharmacy Management System Radiology Information system