Payback

Developing accurate and timely cost information in the O.R. will more than pay for the systems and personnel required to provide it. Cost savings come from many sources. By providing cost data to physicians the hospital can demonstrate the need to reduce variation in resource usage patterns across physicians. Physicians realize that they work in an environment increasingly driven by the constraints of managed care and capitation, and they are hungry for this data. All it takes are some informed decisions by the physicians and staff to reduce the costs of joint implants or IOL’s and the system has paid for itself. Decisions such as these are not a one-time cost reduction, but rather, yield ongoing cost reductions, year after year.

Other cost savings will come from improved inventory control, automation of patient charging, and a significant reduction in lost charges, as noted above. Lost charges are often due to poor maintenance of the patient charge master file. With a fully integrated system in place to charge the patient, the system essentially becomes the charge master file. Some might say, why charge the patient at all if we are no longer reimbursed based on charges? There is one significant reason: cost data. Healthcare has moved from an environment of cost-led pricing to price-led costing. The patient charging mechanism is the method for capturing detailed resource utilization by patient. If organizations do away with certain levels of detail in their charging systems, they lose the ability to identify costs.

Additional savings occur when the organization as a whole has the ability to accurately identify costs. Integrating accurate cost data into the Decision Support system gives that organization the ability to make informed financial decisions. A complete financial picture by patient allows the hospital to track performance at numerous levels, including physician, product line, payer, and plan. In an environment of capitation and managed care, the ability of the organization to track performance at these levels is critical. With this type of data, the system can pay for itself by giving management the accurate information necessary for making critical business decisions.

As demonstrated above, the Surgery department can greatly benefit form having a system in place to identify costs. Many hospitals have stopped short of full system implementation for a variety of reasons. However, it is well worth the time and effort to fully implement and maintain a costing system for Surgery. Once the weakest link in the organization’s cost accounting system, the Operating Room can become the strongest.

Anne Farmer, Vice President
TriNet Healthcare Consultants, Inc.
annef@trinethealth.com
978-692-1009

Ken Merbler, Consultant
TriNet Healthcare Consultants, Inc.
kenm@trinethealth.com
978-692-1009