The Key To Figuring Out Your Cost Per Case

Historically, the cost of a surgical procedure has been a difficult equation to solve. As the US healthcare system moves more and more toward a value-based system, hospitals require now more than ever an accurate understanding of their procedure costs. These accurate procedure costs then need to be compared to outcomes in order to perform key analyses such as: which surgeons have the best/worst outcomes relative to cost; which procedures have the best/worst outcomes relative to cost; which surgical supplies have the best/worst outcomes relative to cost; how is my hospital performing in cost per case vs. my peers, etc.

The main components that need to be gathered to calculate the cost of any case include: labor costs, overhead costs and supply costs. The first two items are typically easy to calculate because the formulas for overhead costs and labor costs are well-understood by financial experts in hospitals. Multiplying these factors by the duration of a case will give an accurate depiction of a case’s overhead and labor costs. However, as this article by Peter Nelson at Health Data Management explains, supply costs can be a little tricky to calculate:

“More often than not, bedside and procedural documentation for supplies remains a time-consuming, largely manual process.

It’s not uncommon for a clinician to add a product by name or even scan a product barcode only to discover the system doesn’t recognize the data. The clinician then must find the information and manually enter the data into the EHR, an occurrence that takes place about 50 percent of the time.

Not only is this inefficient, but it’s also error prone. Clinicians often use their own terms to identify a product. The result is incorrect, incomplete or missing information that makes it nearly impossible for supply chain and revenue cycle teams to accurately identify every product involved in a procedure.

This has implications for reimbursement, not to mention the wasted clinical time spent in the EHR find[ing] supply data versus providing more valuable patient care.

If the industry wants to accurately account for the products used in the course of care, prepare for recalls and capture a greater percentage of case charges, it must ensure the systems supporting every aspect of care are connected and able to share timely and accurate data.

…Data is the lynchpin to understanding the total cost of care. The industry must do everything possible to maximize existing investments in EHR, ERP and supply chain systems to ensure that clean, accurate data can be accessed and shared across these systems to help improve efficiency and enhance patient care.”

Read the entire article here: How healthcare can solve supply cost confusion

As hospitals look to accurately calculate their cost per case, the system that they are using for supply and implant documentation becomes critical. They must have a supply management system that integrates with their EHR and materials management systems. These integrated systems, sharing a single item master, will allow data to flow seamlessly throughout the various information systems regarding supply spend. As the article mentions, this is the critical component for accurately calculating cost per case. If your current supply and implant documentation system is falling short, consider a system such as iRISupply that integrates with your EHR and materials management systems to send verified and accurate supply and implant usage data between the 3 systems. For many hospitals, this is the missing piece to mastering cost per case and value-based outcome measurement.