The most effective cost accounting systems have flexible data integration, the ability to adjust costs by specialty, and other key capabilities.
From our sponsor Kaufman, Hall & Associates
With mounting pressures to improve the overall value of care, healthcare organizations should have a more complete picture of costs incurred for the care of their patients. This requires incorporating cost data from providers across the care continuum. For decision support reporting and a broader look at patient care costs, many organizations are moving to add into their cost-accounting systems and processes both “professional services” data from clinics and physician practices within and outside their network and their own facility-based inpatient and outpatient data.
Physician employment changes also are driving the need to combine professional and institutional data. With the dramatic rise in physician employment by hospitals, individual employed physician costs are becoming organizational costs. The proportion of physicians who are employed by hospitals rose from 26 percent in 2012 to 38 percent in 2015. One in four physician practices was owned by a hospital in 2015 ( Physician Practice Acquisition Study, Physicians Advocacy Institute, September 2016).
New payment structures that require providers to assume responsibility for quality, outcomes, and costs also are requiring healthcare organizations to combine data. With bundled payments, for example, organizations are paid a predetermined amount based on anticipated costs across a full episode of care, including the procedure work-up and preparation, inpatient stay, rehabilitation services, all follow-up visits, and other related care.
The Challenge: Accounting for Greater Variations
In combining professional services and hospital facility information, organizations will need to address new levels of complexity in cost accounting systems, processes, and data. The following are some potentially complicating factors.
Array of electronic health record (EHR) systems. While hospitals typically use one of five major EHR systems, more than 630 IT vendors are certified by the federal government to provide EHRs for physician practices, according to the Office of the National Coordinator for Health Information Technology.
Significant variation in payment coding systems. The American Medical Association’s list of CPT codes rose to 10,000 in 2016 (Clack, C., “FY2016 CPT Updates,” Journal of AHIMA , February 2016, pp. 48-49). The current International Classification of Diseases (ICD-10) contains 71,924 codes for procedures and 69,823 for diagnoses, according to the National Center for Health Statistics.
Provider variation. “Professional services” encompasses a range of specialties and clinical license levels. Finance leaders need a cost accounting system that allows them to differentiate visits to cardiologists from those to orthopedic surgeons, or to primary care physicians versus nurse practitioners.
Breadth of care sites. Costs associated with physician phone consultations are different than the costs of consultations in patients’ homes, hospitals, or physicians’ offices.
Combining data from such a wide variety of systems is a substantial challenge. Despite the difficulties, data similarities do exist across institutional and professional organizations, including patient demographics, payer data, and some clinical data (e.g., episodic diagnostic data or chronic disease information). Both entity types often share common data related to organizational structures and financial information. For example, both typically organize financial data in common general ledger and payroll formats containing departments, accounts, job codes, and pay types.
The Solution: Versatile Cost Accounting Capabilities
Combining professional services and institutional data for cost accounting allows organizations to more accurately attribute care costs for patients moving across different providers and care sites. Effectively integrating the two requires that organizations have a cost accounting system that allows them to account for previously mentioned challenges. These capabilities should include the following.
Flexible data integration. A powerful, yet easy-to-use data loading system helps standardize data from multiple systems into a single costing solution that reclassifies and allocates costs organizationwide.
Multi-entity support. Support for hospitals, clinics, medical groups, and other associated entities is critical to improving the validity of costing data organizationwide.
CPT and modifier support. Providing CPT, HCPCS, and revenue code charge-level support ensures the ability to accurately calculate cost and reconcile data. This should include capabilities to adjust costs at the CPT- or HCPCS-modifier levels.
Ability to adjust costs based on specialty. Accurately allocating shared costs in provider settings requires adjusting methods (e.g., relative value units [RVU]) based on providers’ or offices’ specialties.
Allocating provider labor directly to patients. The cost accounting system should support allocation of providers’ fully burdened costs to their patients, regardless of where the patients were seen.
Accounting for provider type. Abilities to adjust RVUs based on provider type should be supported to account for variations in scope of practice and skill.
Cost accounting or decision support systems should have patient identification or enterprise master patient indexes to allow patient tracking across the care continuum. The system also should combine inpatient and outpatient service line definitions using DRGs or ICD/CPT codes to consolidate professional and facility encounters into standard service lines.
Promoting Better Understanding
Historically, cost accounting has focused primarily on department-level costs within hospitals. Incorporating professional services data allows finance leaders to allocate actual provider-level costs to specific patients using various methods that improve the validity of costing information. Although this approach may require nontraditional cost accounting reconciliation at the departmental level, having the broader picture with more accurate, reliable, and actionable data is critically important to understanding all relevant costs in an increasingly value-focused environment.