Embracing data-driven decision making in a healthcare setting requires agile thinking to pinpoint and respond to the short- and long-term needs of the organization. This shift requires finance departments to transcend from the typical focus on aggregating data to a value-added analytical view of hospital data. This new approach will provide greater visibility into changes in variables and assumptions and will require organizations to fully understand and ensure transparency exists for key performance indicators.
Micro-costing was introduced as the way to discretely measure and quantify true inputs to the cost of patient care. Healthcare costing has historically been isolated from true costs and has relied on averages of averages and “step-down” allocations that are often many layers thick. Most healthcare entities still use spreadsheets for costing and primitive methods that date back to an assembly line model – tools long abandoned by the manufacturing industry that created them. The result is rudimentary cost allocation that fails to match resources and related costs to their services. Allocation methods based on square footage to distribute utilities and administrative services (HR, finance, and procurement) are reasonable. However, using revenue, patient days, or admissions for allocating capital depreciation, pharmacy costs, and radiology utilization are inequitable. Often the drivers from budgeting and capacity planning are divorced from the costing process where assumptions are independent from the costing methodology. This makes it impossible to arrive at informed decisions that will improve financial results.
To stay competitive, healthcare organizations need to streamline inefficient processes and understand the types and the amount of resources they need to deliver care across the enterprise. This can only be achieved through cost transparency and micro-costing. To learn more download our white paper
In this video, my colleague, Lesli Adams discusses the intersection of cost, quality and the patient.
The Intersection of Cost, Quality and the Patient in Healthcare
Lesli and William Bercik, Oracle Director for Healthcare and former CFO, will be presenting a webinar, Align Patient Outcomes with Financial Data: A Formula for Correlating Cost and Quality on August 13, 2014 at 1:00 CT.
