UPMC's Homegrown Tool for Activity-Based Costing

, May 5, 2014

Calculating the true cost of care is essential for evidence-based medicine, reduced variation of care, and the new world of value-based purchasing. UPMC built its own tool for use across its 22 hospitals.

Figuring out how to calculate the true cost of care in relation to patient outcomes is one of the biggest challenges hospitals face as reimbursements move toward value-based models.

While getting a handle on cost may not be easy to do, it will be critical for standardizing and improving clinical decision-making, says Robert DeMichiei, chief financial officer at University of Pittsburgh Medical Center, which is in the process of rolling out a new system-wide cost management system across its 22 hospitals.

"Healthcare is changing from a model that has always relied heavily on fee-for-service reimbursements. With the stress from commercial payers and government payers, everyone is now moving to reduce healthcare spending," DeMichiei says, adding that cost reductions have to be made smartly so as not to negatively impact clinical results.

"We are moving into a world with finite resources, but we also have to have exceptional outcomes," he says.


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