Business Objects is betting that financial managers in hospitals are getting tired of guessing at the actual costs of providing services and procedures in their facilities.
This summer, the Silicon Valley business intelligence company released "Activity Based Costing for Healthcare," and some early feedback from users is bolstering its belief that it's got a winner.
The system allows financial managers to allocate costs not only down to the patient level, but to the charge level, and then rebuild them based on service lines, patient pathways and other ways of aggregating costs based on activities.
Paul Henry, senior financial analyst for Cascade Healthcare Communities, a small hospital network in central Oregon, has been using the solution since the start of the year. "As a system, we were struggling to define how to use our assets in an efficient way," he explained. "We suspected we were duplicating services at different cost profiles. Even though we owned two hospitals (just 15 miles away), we weren't operating them in a cost-efficient way."
With a major expansion in the works and a plan set forth to reorganize the hospitals along a service-line management model, Henry was desperate for good data. He says he found that in the Business Objects solution, which uses Excel spreadsheets and a Sequel [check] database.
"This system has made it easy to do the analyses we needed," he said.
One example Henry offers is a new view into the system's chargemaster.
"We discovered our entire chargemaster is based on revenue capture, not costs," he said. "For example, the charge code is the same for inpatient and outpatient dialysis - because we didn't get paid any differently. But we had way different cost profiles for the two."
The system also gets high marks from Dan Green, director of budgeting and financial analysis at St. Mary's Health Care, a 324-bed facility in Grand Rapids, Michigan, a member of Trinity Health.
"Knowing the total cost to provide a service gets complicated because patients visit several different departments," Green said. "This gives you a different view, a different lens that transcends the entire organization."
Both Green and Henry say the tool enables them to go to clinical departments with better information about patient populations. First, it inspires greater confidence in the financial decisions hospitals are making these days, and second, it can provide clinicians with insight about their patients.
For example, Green says the costing solution will identify ways to reduce lengths of stay and control prescription drug consumption.
It also pays dividends in the business office, Green says. "The speed and ability to turn information around is amazing," he says. "We could, in the past, spend days just tracking data - never mind analyzing it... This information will also assist the hospital in evaluating contracts."
It's also helping to make purchasing decisions. The hospital is contemplating a new MRI unit, Green says, "so I can look at the volumes, my gross charges, my net revenues, my costs ... and use this for a pro forma."