The current healthcare era will likely be remembered as the Wild Wild West of value-based care – opportunities and challenges abound at every turn as industry stakeholders blaze new trails to transform care delivery.

One particular challenge involves getting a handle on the costs of care. Successful participation in any risk-bearing arrangement requires that providers clearly understand this elemental information. If they don’t, it is difficult to fully appreciate the cost side of the value equation and establish appropriate reimbursement parameters.

Unfortunately for most healthcare organizations, the cost accounting function remains an enigma. Unlike other industries, healthcare has historically not had to examine financial transactions on a level that considers utilization, time spent with patients, resource use, and intervention cost. Yet, this kind of granular approach is required to completely cultivate value in the performance-based landscape.

Despite the uncertainty in capturing cost information, it is possible. Here are a few ideas for getting started:

  • Consider the current value-based models in which your organization participates. Select a handful of patients to analyze and ask: What are the costs associated with treating these individuals?
  • As part of this exercise, you should assess resources used and time required to meet patient needs. Determine the costs of care interventions and protocols. Quantify the cost differences between evidence-based care and outliers. Examine claims data, utilization information, clinical protocols, and time and motion studies.
  • Once you develop a cost accounting methodology for a handful of patients, you can begin to apply the strategy to larger groups, ultimately extrapolating a cost of care for the value-based model.

Right now, a cost accounting exercise will require a combination of technology and manual processes. Fortunately, the rapid evolution of new IT solutions in the market today will better enable the cost accounting function in the future.

In the meantime, organizations must embrace this concept to position successfully for the emerging frontier. Without it, the industry will never completely leave fee-for-service behind, limiting its ability to reenvision healthcare.


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