Most providers have no idea what care delivery costs

The healthcare sector will never be able to get its costs under control unless it takes a close look at what every iota of delivering services will cost, according to a new report by Chilmark Research.

"As the cost of care continues to rise, cost management has become an important analytic and operational objective," said Chilmark Research Founder and Managing Partner John Moore in a statement.

The report advocates for what is known as “continuous costing”--keeping track of every expenditure and related trend in real time.

It also attempts to provide guidelines for the nation, which has by far the highest healthcare costs in the developed world, a source of rising anger among consumers. And not only is the United States' per capita spending the highest in the world, but quality and outcomes lag behind countries that spend far less money on care.

“Some providers break down profit and loss and budgetary variances at the department level. Others use RVUs or RCC processes for one more level of granularity,” the report said. “Few providers, though, know their costs of providing care beyond what shows up in the general ledger at the end of the year, quarter, or month.”

In order to achieve true continuous costing, providers must:

  • Accumulate all costs incurred for every material used or application of labor in order to produce a searchable database

  • Analyze variances in the costs of all procedures and activities 

  • Directly link to quality reporting systems in order to plot the cost versus the quality

“The key takeaway is what we pay for healthcare will continue to go up until providers get a handle on their costs of providing care,” Rob Tholemeier, Chilmark analyst and study lead author, told Fierce Health Finance.

“All the efforts to try to bring down what we pay for healthcare by continuing failed policies of reducing utilization or messing around with how we pay for healthcare will do nothing until providers use the data they already have to micromanage their costs," he said.

- read the Chilmark statement

- here's the report summary