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Improved Health Care and Hospital Management with CostPerform™ Business Models
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Management of a rural hospital was approached by an HMO asking the hospital for a negotiated, lower cost per maternity patient in return for being the hospital of choice for all of its maternity cases. After considering the offer, the hospital management team found itself in a predicament. They could not determine if it would benefit, or if it would lose money on this group of patients at the negotiated rate. |
So how does management, not only respond to the HMO, but make all such decisions with a strategic eye on profitability and performance? The hospital had a large amount of data, but not the right information to guide its strategic direction and operational issues. Management could not determine the exact profitability mix of its inpatient and outpatient business lines, service lines, or its six rural health clinics. |
Using the CostPerform™ methodology and software, the consulting team supported Hospital management in analyzing and producing direct costs for specific procedures and for the services shared by all procedures. The shared service costs had been particularly difficult for management to allocate meaningfully by patient for each Diagnostic Related Group (DRG), or procedure. The CostPerform™ project cut through the hundreds of thousands of line items in the general ledger, revenue, and billing files in order to provide an integrated view of discounts, and profitability around patients, procedures, and/or service lines. |
Hospital Management was able to see: |
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All but one of the remote clinics cost more to operate than revenue generated. |
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Operating rooms and related services capacity was substantially in excess of usage. |
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Certain specialties previously believed to be significant profit centers were only marginally profitable. |
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Profitability was significantly impacted by a few payers – reimbursement rates were not adequate to cover costs. |
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This last finding influenced changes in accounting processes to book discounts to specific patients and procedures to sharpen the profitability information available to better assess HMO requests for special pricing. The information is also being used to focus on negotiations with current payers, and beginning to use the data to evaluate productivity of specific procedures, and productivity of service lines. |
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The hospital will continue the use of CostPerform™ in evaluating the next year’s performance to understand relative service line profitability trends over time and to evaluate the effects of changes in incoming patient problems and changes in staffing capacity implemented by hospitals in the U.S. |
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Financial and Non-Financial Performance Challenges Addressed With CostPerform |
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Hospitals face three critical, and related, pressures |
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How does a hospital predict total cost of patient care, regardless of the reason for their treatment? |
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How can it project and manage profitability? |
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How does a hospital contain costs in a way that supports effective capacity building? |
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CostPerform™ is a powerful software system and methodology that creates the context for budget and financial performance innovation at a level that results in significant performance enhancement. |
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This innovation results in better outcomes through cost control based on service level and planned service line growth. The CostPerform™ methodology and technology are specifically designed to address those challenges. The result is greater alignment, capacity and performance toward an organization's desired outcomes. |
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CostPerformT Provides Solutions for Multi-Level Challenges |
| Executive Level |
| In an environment where more and more hospitals are facing structural budgeting challenges, the need to introduce innovative solutions and strategic thinking into the process is critical. |
Provides Critical Information |
Currently the CFO cannot easily see what the total cost of each Diagnostic Related Group (DRG) will be
and what they will be under different service line strategies. While pieces of this information are available,
CostPerform™ offers the way to get the true picture in real time by linking the myriad of data into one tool. |
Enables Wrap-Around Solutions |
CostPerform™ enables you to see the costs as a patient uses the resources of multiple departments. |
Capacity and Resource Management |
CostPerform™ helps determine the resource requirements and implementation challenges of growth. You
will more confidently add capacity in key areas and strategically decide to avoid or redeploy overcapacity. |
Department Level |
Department leaders are challenged by the implementation of changes that can greatly affect the department's outcomes. CostPerform™ produces an accurate view that allows leaders to see the impact of alternatives in Service Line planning in order to: |
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Clearly define and understand processes that comprise efforts from multiple departments; |
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Identify correct analytics to track and test the outcomes of changes; |
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Create critical action items, such as, Service Delivery Level Plans and results; Requests for Additions of the latest equipment; Critical metrics to allow the management team to work together on solutions to problems and opportunities of the whole hospital. |
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We clarify the challenges at all levels of leadership and create a way to focus the management team on alignment to create solutions that address patient care levels and long-term profitability. |
What does this do for you? |
CostPerform™ technology and methodology provide a shared understanding of the capacities and costs of the processes within your organization. Currently leaders can't see the costs of Service Lines and DRGs. |
CostPerform™ gives you the ability to see where your resources are being used and what the hospital is getting in return. This allows you to: |
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Strategically budget based on profit structuring; |
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Search for best practices; |
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Complete Service Line planning for: |
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- Buildings
- Third Party Payers
- Capacity Hiring
- Specialist & Lab Billing
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Enhance patient care; |
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Create the roadmap for achieving the success of initiatives. |
Cost Perform Software and Methodology Advantages |
Web-Based Reporting and Graphics |
Interactive web-based drill down reports make process and activity-based costing and management (ABC/M) reporting useful for analysts and managers; Reports are standard and custom designed through a wizard for ease and repeatability. Graphical and tabular views of data and information are easy and automated. |
Build Models That Fit A Particular Business Fast |
The flexible architecture of the software allows for a more realistic replication of business processes and uniqueness. Furthermore, flexible architecture allows models to report overhead, interdepartmental services and direct activity components of each process, product or service cost separately and simultaneously. |
Actual and Unit Costs Visibility at Each State of Product/Service (Output) Flow |
Total and unit costs are visible throughout the various product/service stages. Additionally, consumption rates (pull) or fixed costs (push) drivers may be used through a single interface. This enables users to know what processes vary by service levels, what processes vary by process levels, and what processes remain fixed. |
Dashboard To Monitor Key Metrics and Project/Forecast Impacts on Resources, Processes, and Outputs |
Historical and planning models are built quickly. Planning models enable projection and forecasting capabilities. For instance, by varying product/service output quantity (volume) and productivity assumptions, analyses of the impact on budget and capacity can be analyzed. The dashboard feature allows for selected attributes to display in a dashboard and users can change the attributes to analyze impacts on resource capacity, process and output unit and total costs – a simple "what-if" scenario capability for planning and business intelligence. |
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