Detailed Cost Accounting a Must in an Era of Reform
An hfm Web Extra
A shift in focus from large patient populations to clusters within specific services as healthcare reforms are implemented will fuel the need for detailed cost accounting.
In the current insurance marketplace, consumers experience significant barriers to changing insurers. Insurance companies created these barriers to limit risk and control their claims expenses. Lower claim expenses translate into lower premiums, and lower premiums, all things being equal, encourage greater sales volumes, which lead to greater profit.
Under the new model, insurance companies will lose these barriers (such as precluding patients with preexisting conditions), but buyers can still be attracted by lower premiums. Because insurers cannot directly control claims costs by not taking risky patients, insurers will attempt to keep their premiums down by transferring the risk of claims costs to providers. Saddled with this new risk, providers will maximize their profits by managing the delivery of patient care and choosing only those care options that create the best outcomes at the lowest cost.
Attempts to manage cost will involve two distinct activities: controlling the efficiency of each department delivering services and assessing the financial impact of alternative treatment options, such as drug or radiation therapy versus surgery. Both of these activities will require cost data at a detailed level.
As providers compare their costs with others, they will discover that some providers have inherently lower costs. This will encourage "make or buy" decisions, leading to mergers and acquisitions, joint ventures, and creative contractual relationships, all backed by reliance on detailed cost accounting data.
For more information, see Paul Selivanoff's "The Impact of Healthcare Reform on Hospital Costing Systems," hfm, May 2011
Publication Date: Monday, May 02, 2011