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Can a True-Cost Model Save Your Hospital?

Karen Minich-Pourshadi, for HealthLeaders Media, February 13, 2012

Who's to blame for the mess healthcare is in today? According to the finance leaders surveyed in the HealthLeaders Media 2012 Industry Survey, the lion's share of blame goes to the government. Fortunately, survey respondents think they know who's going to fix the situation: hospitals. If that's the case, then I have a suggestion for how healthcare organizations can go about doing that: change your entire cost model and find out exactly what your true costs are.

According to survey respondents, the government (48%) and health plans (21%) are both at fault for where we are today in healthcare. It's a point finance leaders feel more strongly about than any of their C-suite peers who were surveyed.

"There's no other answer than the government is to blame for where we are today," says Ann Pumpian, senior vice president and CFO at Sharp HealthCare, a not-for-profit integrated regional healthcare delivery system based in San Diego, in the survey report.  

I agree that the government and health plans are responsible for the current state of things, but let's not forget that some of the blame also rests with healthcare organizations. After all, it's not as if healthcare has been ultra-progressive, especially in terms of adding and using technology or finding better ways to be efficient with resources.

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1 comments on "Can a True-Cost Model Save Your Hospital?"


John Doub (2/14/2012 at 11:02 AM)
Agreed 100%. When I was in private industry manufacturing products, we tracked total materials and labor for every product we built, applied overhead, and knew exactly what our cost was. At my hospital they have a cost model that is probably not close to reality. Also performance, outcomes, and profitability of physicians must be part of the score card. Unfortunately in healthcare, we can't just raise the price to increase margins, so knowing the true cost and chipping away at multiple products to decrease cost is the only viable alternative. Great article and well timed.