What You Need To now About Healthcare cost management
The Healthcare industry and its management along with other issues surrounding this topic has always been the main concern among countries including the United States. Cost management of health systems has also been one of the biggest hurdles of every country, and in some nations, health care costs around 16.9% of their gross domestic product (GDP) while in other industrialized countries about 9 to 11% is spent for this industry.
Healthcare is seen to continue to be a challenge even in the coming years as health care costs will continue to rise, but there are now ways or options that companies can use to soften the blow even when health insurance rate increases. Cost analytics is said to be the solution to reduce costs and increase the efficiency in a health system while at the same time still maintaining a high level of quality of care and services.
In the United States, 15 cents of every healthcare dollar goes to revenue cycle processes that are mostly inefficient which makes its cost management very ineffective. It is said that from the $2.7 Trillion spent on healthcare, around $400 Billion is simply used up in payments, claims, processing, bad debt, billing, and revenue cycle management. This inefficiency is somehow blamed partially in the payer-provider transactions.
Revenue leakage has resulted from the mismanagement of physician groups as well as private medical practitioners who focused on patient billing instead of creating financial controls that would be effective in the revenue cycles. Because the issue of health care is very isolated such that health care providers, health plans, clinical and financial departments are not in sync or working together cost management in this industry has always been a concern.
To try providing a solution, clinical and financial qualitative leaders have come together with the hope to achieve a common goal which is to find out the real cost of healthcare services in all its aspects including location, service line, caregiver, or resource population. Due to the rising costs in medical services, revenue management will no longer be effective but instead, the use of precise cost analytics and management technology is considered to be the solution.
The fee- for- service system that gives incentives to health care providers to perform more tests and procedures to come up with the best clinical results will no longer fit in the new solution. The healthcare industry is now gearing towards a value-based system where results are greatly assessed based on the combination of cost and quality.
The Value-Based System
In this new method, RVUs or the Relative Value Units and RCC (Ratio of Cost) would no longer be effective because the use of this new system means accurately measuring resources, cost objects, and activities such as patient episodes of specific services and care provided on them. In this new method, healthcare costs can be reduced because revenues and also expenses can be identified based on the services provided and the resources that were used to deliver care for every patient throughout treatment.
One approach is called Activity Based Costing which measures the cost as well as the performance of activities, cost objects, and resources then designates the latter to activities than activities to patients but all are based only in their actual use. This method is an efficient way to do healthcare costing.
In a shared- risk model, there is a need to study patient-level data as the information that can be obtained from it can control continuing costs as opposed to the old system where financial data is collected. Through patient data, physician variability can also be reviewed in terms of treatment paths and bundled payments can be negotiated.
What can a cost analytics solution provide?
This kind of solution can offer information to come up with well- informed decisions that affect several aspects such as internal hospital services center, physician practice variance, health plan contracts, supplies rationalization, and service line analysis.
Cost analytic solution offers an analytical and systematic approach that represents real cost and operational data with regards to the treatment of every patient as well as their medical condition. Through these analytics, health care personnel are also able to determine the most efficient and effective ways to deliver care to a patient.
Costs in the health care industry are high because a lot of providers do not obtain and compute the data about the potential cost of care of the patients. To make this an effective strategy, start by creating an understanding of resource utilization via cost per patient per service, variance of physician practices, and center services.
From the operational and financial point of view, the obtained information from patients will allow the system to understand the essential aspects of operational costs when health or hospital systems move to a value-based model of care.
Using cost analysis to determine physician variability by a similar medical conditions is needed to enhance the organization’s care delivery system through a subspecialty. With this approach, doctors will also realize the effect of their activities with regard to expenses.
With horizontal cost tracking analysis, cost- level medical condition as well as physician and service line will be revealed; and activity, as well as cost data, can be accessed through linking individual centers such as operating room, radiology, cath lab, etc.
Health care systems that will utilize this approach will certainly reduce and manage their costs while improving their results. Using cost analytics will help as well in creating bundled payment options, and may offer possible operational savings by determining which services can be consolidated in certain locations, and at the same time remove locations that do not offer a high level of performance with regards to expenditure and quality.
This type of strategy can be an incentive to support an organization of how they can redefine their operations as it will allow them to track patient expenses and activities.
What you need to ask before implementing this system
- Do we have a dedicated leader and team? – in order for this to work, you need to have strong support from leadership.
- How can goals and methodologies be established?- you need to have goals that will be consistent with your main objectives.
- How long will it take?- when your team, methodology, and vision are ready and complete, visible results may take place within the period of 18 months.
What you need to consider prior to using this approach
- the urgency to have transparency of expenses
- innate challenges in comparing the service expenses incurred across several locations
- the relative quality of previous models and the old systems hospital organizations were structured
- the need to have a clear methodology based on the activities
- the scope of physician variability in treating medical conditions in different locations which provide possible performance improvements.
For this strategy to work, a team of dedicated staff both from finance and operations is needed as this process can take about 2 years to be completed, but certainly, this will be worth the time and effort as it will reduce expenses in the health industry.
With this latest method, data can provide information on profitability by service line, DRG, medical condition, and physician variability. This represents a progressive approach that is directed at resource consumption, revenue, and expenses as well as operational information via patient level.
Healthcare cost in Singapore is definitely expensive, and this is the reason why expats who are moving there get their own private health insurance. But with this new approach, they may not need one.