It doesn’t take a newsflash or headline for you to know that the cost of healthcare has gone up. Not only has it gone up year by year, but most in the healthcare industry can’t explain exactly why this is the case. Obviously, there are new machines and technological advances that must be paid for. There are also staffing requirements that may require an increase on the system as a whole, but these don’t explain the almost 25 percent increase in per capita costs between 2007 and 2014. As such, the need to understand and gain more control over healthcare cost accounting, which is an activity-based accounting tool that brings to light how money is being spent in an organization.
We already know that data is being collected each time that we visit a doctor’s office or emergency room. This information is valuable for many reasons beyond reporting to the government or getting reimbursements from insurance companies. In fact, much of the documentation helps to treat you and other patients because we are all quite similar in symptoms and results. However, we have all been reduced to data points and treatment codes rather than actual patients during some point or another in our healthcare histories. A general standard of costs was established somewhere along the way, and everyone agreed to it. It stated that for healthcare treatment “A”, the cost would be such-and-such amount.
Everyone seemed happy to go along with this because the healthcare staff seemed to get paid, all the necessary supplies were being purchased and the doors were staying opened. But this is far from being truly accounting savvy. In just about any other business, whether large or small, executives and decision makers knew where just about every penny was being spent and where waste needed to be cut. In the healthcare industry, no one has been paying attention and we all know that the government doesn’t work on efficiencies or the need to meet them.
There have been enough people in the healthcare community that have taken a look at the current healthcare system and costs involved and have felt that continuing down this path will not lead to controlled healthcare costs, a better healthcare system or better outcomes for patients. As such, they began searching for a set of standards and practices that would eliminate the guess work, promote transparency and ultimately lead to efficient and effective healthcare treatments.
Activity-based accounting has been used in other industries with great success. The trade off, though, is that it is not a simplistic accounting system, but is an in-depth analytical instrument that takes a tally of things like workforce, costs for individual departments, return on investments, supplies and other purchases. What this means is that every penny is tracked, and correlated with how it is spent. This is far different than the 30,000-foot perspective, which guesstimated what it cost to treat each patient with their specific needs.
Obviously, a huge change in perspective is not going to go over without some serious convincing, and that convincing comes when healthcare decision makers are able to cut the waste, improve care and efficiency and also produce more positive outcomes for patients. This doesn’t happen overnight, nor should it. Care time and consideration should take place, and the individual needs of each organization should be carefully determined. Because each organization serves a different population, there are different needs. The data that each healthcare facility obtains will lead to clear and transparent understanding of business practices.
This may be a bit too simplistic, too, because healthcare treatments and attention doesn’t always follow a simple office visit and everything is done. There can be many doctors and healthcare professionals involved in one person’s care, such as cancer treatments or an automobile accident. But, what if a patient wasn’t subjected to unnecessary tests or follow-up visits? What if a better path to recovery involved policy changes that the patient never saw, but included more efficient care? These and other questions could be answered positively each and every time with the help of healthcare cost accounting.
With more efforts put in by the healthcare professionals, and with closer attention paid to information revealed from the ongoing collection of data, patients will see results in their care, and organizations will see a significant drop in the financial burdens previous placed on them. One change could mean a world of difference, but this means dropping the old way of doing things and moving to a proven set of standards that can and will make a difference.
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