Nobody Knows What Anything Costs
This is Robert Kaplan (Balanced Scorecard) and Michael Porter (5 Competitive Forces that Shape Strategy) in Harvard Business Review:
There is an almost complete lack of understanding of how much it costs to deliver patient care, much less how those costs compare with the outcomes achieved…. Cutting payor reimbursement does reduce the bill paid by insurers and lowers providers’ revenues, but it does nothing to reduce the actual costs of delivering care. Providers share in this confusion. They often allocate their costs to procedures, departments, and services based not on the actual resources used to deliver care but on how much they are reimbursed. But reimbursement itself is based on arbitrary and inaccurate assumptions about the intensity of care.
This is Michael Ramlet, writing in The Morning Consult:
I can personally attest to the woeful state of provider accounting systems from having advised hospital CFOs. Currently non-profit hospitals are exempt from following “Generally Accepted Accounting Principles (GAAP). Consequently, provider financial reports should be viewed as at best educated guesses, and more often as creative financial engineering. The lack of accurate financial reporting undermines academic/government research as well as the potential for payment innovation (ex: bundled payment) and improved care coordination (ex: accountable care organizations).
If providers don’t know how much it costs to deliver care, insurers and government agencies must be shooting in the dark.
I agree totally with the conclusion. Nobody knows what anything really costs in health care.
No one knows what anything costs. Amen.
I used to work for finance at one of the largest non profit hospital systems in the country. We know exactly how much everything costs, we know exactly how much we are overcharging our patients and their employers, we know exactly how much money it will take to pay and grow our huge executive salaries, our lobbyists, our over populated administrative staffs, our air and car fleets, new real estate, billboards, newspapers, and TV advertising so they don’t write anything bad about us. We know everything. Where do you think the profits go, when we balance our budgets? We own everything in the cities and towns we are in and we hurt the local employer groups by overcharging them for healthcare. Non profit in healthcare means assets, assets, assets and we big systems grow because the ethical rural hospitals and any other hospitals with reasonable chargemasters are ripe for the picking. If the National, State, and Local politicians could stop listening to and getting paid by the huge hospital system lobbyists they would see that you must regulate chargemasters at non profit hospitals and get rid of all so called “non profit” insurance companies (BCBS) too. Until then, our accountants will manipulate the figures and the books as we laugh our way to the banks at our overseas accounts. The statement should be “the lack of ethical and honest reporting by non profit hospitals undermines the entire US healthcare system.” By the way, the true cost of all healthcare services in our system was 3% BELOW Medicare at the macro level. Any excess was gravy to pay for more assets and to waste away or hide from the IRS by overstating the “reported” costs and our indigent care populations.