Clarke_webFrom the President

Richard L. Clarke, DHA, FHFMA

Have your management reports changed dramatically in the past five years? Do you understand your cost of providing services? Are you confident in the accuracy of your costing approaches?

If your answer to each of these questions is no, then pay attention, because the world is changing. In this issue of hfm, John Glaser, PhD, Peter Markell, CPA, and John Stone, information and financial officers at Partners HealthCare in Boston, describe two key issues facing provider organizations in the future-increased accountability for care and increased adoption of interoperable electronic health records (EHRs). They note that payment reform and increased federal support for IT investments are driving these changes.

Leading healthcare provider organizations are working to reengineer care and administrative processes to reduce harm (improve safety) and improve quality of care. And when used as strategic tools, EHRs make more data available to measure, compare, and benchmark improvement efforts. But provider organizations cannot rely solely on EHRs and other IT tools as the means to achieve the dual goals of improved safety and quality while also improving efficiency. Provider executives also require new ways to develop and present financial information to help them make effective decisions about their improvement efforts. Specifically, providers need new approaches and standards for management reporting, financial reporting, and costing. Current systems at most organizations are inadequate.

In many organizations, management reporting has not changed significantly for years. Department budget-to-actual data are routinely presented-often in an account-by-account framework. Similarly, general-purpose external financial reports have not changed significantly for decades. Both types of reports should present data in ways that support effective decisions by both internal and external stakeholders.

Costing systems used by providers, especially hospitals, also need to be improved. HFMA research suggests that these systems tend to rely on traditional cost-apportionment techniques first developed with the advent of Medicare more than 40 years ago. Most hospitals still use some form of the ratio of cost to charges applied to charges to apportion cost elements to care procedures. In the past, these approaches were sufficient because costing accuracy was not critical for decision making, especially for volume-based payment.

With increased accountability for care, and increased IT support, these costing approaches are inadequate. Decision makers require better data in a format that follows how care improvement efforts are managed-at the care process level. So to adapt to a future that requires effective and meaningful use of EHRs as well as increased accountability for safety, quality, and cost, financial leaders must rethink how their organizations perform reporting and costing. We must reengineer financial processes to support the reengineering of care and administrative processes.

HFMA is embarking on a project to help financial leaders do just that. Working with thought leaders in the field, we will identify effective approaches to measuring, reporting, and costing of financial and clinical information to help decision makers with their improvement efforts. We believe that finance has a key role in supporting financial, administrative, and clinical decisions about the key issues facing providers in the future.

Publication Date: Monday, February 01, 2010

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