Can a True-Cost Model Save Your Hospital?
If organizations are going to truly ferret out waste and reduce the cost of healthcare, then it's crucial to know the true cost of treatments and procedures.
Organizations will no longer be able to risk slim margins on the previously reasonable guesstimates that come from using ratio of costs to charges and relative value units.
"There's a heightened sense that we need to know what we can and can't afford to do. We need to know what our costs are, what the cost variations are between physicians, between patient populations, and why those costs are occurring," says Selivanoff in the article. "By applying this cost model, we can understand if the services we offer are value-add or not."
Micro-costing wasn't needed in healthcare until now, but healthcare reform makes it essential. It can be daunting to think about making another large change at your organization, especially after adding an electronic medical records system and preparing for the ICD-10 transition. Waiting to make these changes will not, however, diminish the degree of challenge.
Selivanoff suggests concentrating on high-volume procedures first to get at some swift savings, and then incrementally rolling out the program on a larger scale. There is some good news, though, for those organizations already operating under Lean and Six Sigma. This type of approach will dovetail nicely with your pre-existing pursuits to uncover process inefficiency and will help you find and trim more waste.
No one disputes that the current state of healthcare is a mess, but at this point, deciding who's to blame is less important than finding solutions. Healthcare leaders already know where to look: within their own hospitals.
Applying a new approach to cost accounting isn't going to be easy. But it won't be optional for much longer. Like it or not, changing your cost model is an idea whose time has arrived.
Karen Minich-Pourshadi is a Senior Editor with HealthLeaders Media.
- MU Compliance Announcement Sparks Concern, Confusion
- New G-Codes to Pay Doctors for Broad Array of Non-Face-to-Face Care
- Scary Financial Challenges for 2014
- Telehealth Improves Patient Care in ICUs
- CMS Sets 2014 Pay Rates for Hospital Outpatient and Physician Services
- LifePoint Bolsters Presence in Michigan's Upper Peninsula
- States Rejecting Medicaid Expansion Forgo Billions in Federal Funds
- Douglas Hawthorne—A Chance to Do Something Big
- Hospital M&A Volume Up, Value Down in 3Q
- Small Doesn't Mean Doomed