The Importance of Advanced Cost Accounting Solutions in Today's Healthcare Environment

With the current changing healthcare landscape, managing the cost of patient care has become a top priority for every hospital and healthcare delivery system. As advances in medicine enable healthcare organizations to provide more specialized and effective care than ever before, the cost of care for new technologies, drugs, medical devices, human capital, and administrative costs, continues to outpace reimbursements. As a result, cost accounting is becoming an increasingly important and strategic function in healthcare organizations. Decisions related to matters such as where opportunity exists for operational changes and/or process improvements that could generate significant savings, as well as which service lines to grow/expand, all require accurate and reliable patient-level cost data.

As revenue declines and margins tighten, hospitals and healthcare delivery systems must shift their focus to cost optimization if they are to remain successful. Historically, traditional cost accounting solutions have had significant limitations and produced unreliable data that key stakeholders did not trust and, therefore, did not use. As a result, healthcare organizations are now turning to advanced cost accounting solutions to better meet their cost data needs.

Specifically, they are implementing advanced cost accounting solutions to:

• Better understand actual margins – Advanced cost accounting solutions provide a full view of cost, coupled with payer contract revenue modeling projections. Taken together, this reveals actual margins and identifies where an organization may be losing money and how it can improve.
• Get a total picture of both inpatient and outpatient cost of care – Advanced cost accounting solutions provide the flexibility to integrate cost data from across the entire continuum of care, not just in a hospital setting.
• Identify opportunities to reduce cost – Organizations require cost data and analytics that advanced cost accounting solutions can provide to proactively identify cost reduction opportunities by service line, cost category, etc. The ability to further analyze and drill down into cost drivers has become a necessary skill set for every healthcare organization.
• Integrate cost accounting with overall financial management – This allows an organization to identify a cost savings opportunity through cost accounting and to react and/or adjust its long-range financial plan and operating budget.
• Access cost data through operational and executive dashboards – Advanced cost accounting solutions incorporate data presentation, dashboards, and reporting tools to make data actionable and user-friendly.

In conclusion, as healthcare shifts to more data-driven decision-making, having an advanced cost accounting solution that can provide healthcare organizations with clear visibility into key volume, cost and profitability measures across clinical service lines is essential. Advanced cost accounting solutions are one of the key building blocks that healthcare organizations will need to utilize to remain competitive.