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For hospitals and health systems, understanding costs at a granular level has never been more crucial. Alternative payment models, for example, bundled payments and capitated/global payment models, necessitate a thorough understanding of costs in order to assure proper pricing and avoid losses. Healthcare organizations must also identify areas of wasteful spending in order to reduce per-patient costs and the fixed overhead burden.

Many healthcare organizations face these challenges to effective cost accounting:

  • Overly simplistic methods
  • resource-intensive processes
  • Data lacks timeliness, insights to guide decisions
  • Hospital-centric models
  • Lack of buy-in from key stakeholders

Challenge Due to Over Simplistic Methods:

 When an institute does not evolve with the time and does not utilize modern technology, then a problem in bookkeeping will emerge, and this challenge will become inevitable to cut down the ill process Ration of cost to charge method. Clinicians rely on their data about cost management when they have concerns regarding methods of calculation.

Resource-intensive processes

Staff time and capital resources are useful organizational assets, and they may drain out the progress and create challenges in the development of quick reports with inept data and discrete information which provide no help. Time management is the most important thing for Physician to estimate the productivity percentage. The main focus should be meaningful granularity.

Data lacks timeliness, insights to guide decisions

71 % of finance leaders distrust their cost accounting systems because they receive data that is erroneous or ill-timed to assist short-, medium-, or long-term planning. Data’s utility in guiding action is limited by outdated data, a lack of detail, and the inability to incorporate information from throughout the continuum of care.

Hospital-centric models

Traditional costing structures are centered on the hospital side of the business and spread general historical ledger (GL) costs over volume. However, the percentage of physician practices controlled by hospitals or health systems nearly increased from 25% to 44% between 2012 and 2018.

Lack of buy-in from key stakeholders

For a variety of reasons, leaders, physicians, and other healthcare providers may be hesitant to endorse new cost-cutting efforts. For starters, they may be unaware of their role in cost accounting or the benefits these processes can provide in terms of cost management and strategic thinking. Focusing solely on finance office improvements while ignoring C-suite leaders and clinical stakeholders misses out on crucial change management possibilities. Furthermore, stakeholders find it difficult to trust the results due to a lack of transparency about where the data extract from and how the conclusions are calculated.


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