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Providers: It Pays to Know the True Cost of Healthcare

By Jonathan Bees  
   June 22, 2017

Healthcare leaders who are able to determine the true cost of care for all or most of the care they provide report year-over-year savings of 5% or more for their most recent fiscal year.

The biggest barrier to achieving sustainable cost reductions is the lack of data on the true cost of care (58%).  

So say respondents in the June 2017 HealthLeaders Media survey, Cost and Revenue Strategies: The Need for Transparency and Understanding True Costs.

This is followed by a closely grouped series of responses that cover a range of different areas: insufficient integration with care partners (45%), lack of technology in place to achieve goals (34%), with lack of patient engagement in their care (33%) and regulatory compliance (33%) in a tie.

Responses are fairly evenly spread across most of the factors, an indication that achieving sustainable cost reductions touches on all aspects of provider organizations.

While most providers recognize the need to determine the true cost of providing care, actually being able to collect and analyze this data is another matter.

For example, 36% of respondents say that they can determine the true cost of care for all (6%) or most (30%) care provided, and 51% say they can do this for some care provided, but 13% are unable to determine the true cost for any of the care they provide.

These results are nearly identical to last year’s survey: 6%, 29%, 51%, and 15%, respectively, and more improvement will be needed for providers to succeed in controlling costs and delivering value.

Note that there is a correlation between the level of savings respondents say they receive from cost reduction programs and their organizations' ability to determine the true cost of care.

Sixty-three percent of respondents who are able to determine the true cost of care for all or most of their care report year-over-year savings of 5% or more for their most recent fiscal year, while 44% of those who are able to determine this for some of their care indicate savings of 5% or more.

Just 32% of those who are unable to determine true costs for any of their care are achieving such savings.

There is also a correlation with operating margin. For example, the share of respondents estimating a positive margin of 6% or more is much higher for those who are able to determine the true cost of care for all or most of their care (31%) than for those who are able to determine this for some of their care (20%), and those who are unable to determine the true cost for any of their care (12%).

Jonathan Bees is a research analyst for HealthLeaders.


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