The traditional annual budget at a typical hospital or healthcare system serves two purposes: 1) it provides a plan for the next year’s financial performance 2) it gives each department a target to which they will be held accountable. Finance departments love the budget because of the initial clarity and consistency it provides. However, anyone…
10 Tips for Shifting to Advanced Cost Accounting
Advanced cost accounting is the next big thing for healthcare organizations who want to streamline their accounting services and increase their bottom line. A matter of fact, many forward-thinking organizations have already implemented an advanced cost accounting framework to fuel their organization’s mission. Discover how you can too.
1. Make sure everyone on your team understands the major purpose of cost accounting.
Supply an easy, general definition of an advanced cost accounting software platform. Simply put, an advanced cost accounting software platform integrates cost data from a variety of sources to allocate costs to patient services. A robust advanced cost accounting software platform should effortlessly integrate existing software such as enterprise data warehouse (EDW), enterprise resource planning (ERP), and electronic health records (EHR). The true cost of service takes into account activity-based costing (ABC), relative value unit (RVU), supply costs, pharmacy costs, and time-based costs, among other things. Advanced cost accounting is multidimensional; therefore, it overcomes the one-dimensional limitations of legacy cost accounting.
2. Explain the benefits of an advanced hospital cost accounting system
Healthcare organizations are in need of cost accounting systems; however, they need to know how it can powerfully affect revenue. Some major benefits include more accurate risk analysis, clinical decision support, management of department costs, management of commercial contracts costs and others. Optimize hospital accounting services to maximize margins.
3. Understand that a slow decision support system (DDS) can’t compete anymore.
Those types of cost accounting systems in healthcare including some hospital cost accounting methods are sluggish, cumbersome, and unproductive. By using a dynamic advanced cost accounting system, hospital accounting staff can process in minutes a cost analysis that used to take days.
4. Realize that most healthcare systems are outdated and contain inaccuracies
Knowing the correct details that make up the cost of providing services is necessary to calculate true margins. Hospital accounting services and hospital cost accounting methods can improve with the right framework. If you have thin margins, it’s a sure sign that something is amiss in your hospital’s cost accounting allocation processes.
5. Learn why “cost” is the key to increased margins and realized missions
The healthcare industry’s endurance depends on how they manage costs. Take every opportunity to tighten up your organization’s hospital cost accounting efforts and your facility will likely thrive. Once you begin making changes, that momentum is hard to stop.
6. Know that a cloud-based solution is a good thing
This type of cost accounting platform allows you to streamline processes and integrate your existing software programs that you require. Other types of cost accounting systems in healthcare are limited in scale and ability. In addition, legacy hospital cost accounting software can’t be scaled up or down easily.
7. Keep in mind that advanced cost accounting systems can be as simplistic or complex as a healthcare organization needs it to be
The more meaningful data you extract, the higher the capability of realizing healthier margins. You can then allocate more revenue into development and expansion, and deliver higher-quality care with the least amount of expense.
8. Phase in your new advanced cost accounting solution
Healthcare organizations that have never utilized a standardized accounting system or hospital cost accounting software should start out slow and pace themselves, but start. No matter what size company, you can increase margins and make wise financial decisions when you track costs with a solution that utilizes technology advancements in speedy delivery of data and is easy to use.
9. Assign a team leader or IT professional to oversee the implementation
Name a staff member on your team to be involved in managing the shift to a new accounting framework. This contact should be the “go to” person between your organization and cost accounting software vendor.
10. Get assistance from a company whose mission is to help you fuel your company’s mission
Aligning your organization with a vendor that realizes the need of cost accounting systems is vital. Get the right software, customization, and support that will enable you make sense out of the data.
Every year, billions of monetary waste occurs in the healthcare industry. The good news is every healthcare facility can do something about it. The major purpose of cost accounting is to deliver the highest quality of care at the least amount of expense. Every dollar counts and in healthcare, it quickly adds up. See how streamlining the cost of service equals higher margins and better patient outcomes. It’s a formula where everyone can win.