The Need for Profitability and Cost Management in Healthcare

Recently, I had the pleasure of interviewing Bart Stoehr, Senior Director and Product Manager for Oracle Hyperion Profitability and Cost Management and Cynthia Thomas Moehlman, Director for MarketSphere Consulting and Oracle Partner,  about the need for profitability and cost management in the healthcare field.

Cynthia started the conversation by telling our audience how much healthcare has changed over the last several years, most significantly with the enactment of the Affordable Care Act in the USA. This changed the landscape from a fee for service model to an emphasis on value. This emphasis shifted reimbursement to reflect an ‘episode’ of care in an attempt to lower the cost of medical care while maintaining the quality of care. This shift places much more emphasis or focus on the cost of all the services required for an episode of care, rather than the individual tests, procedures and services provided to a patient. She further explained that not only is understanding the true costs important, but also being able to compare those costs to all hospitals in their network and other networks is an important way to analyze their cost structures and then take action to improve it.

Cynthia provided an excellent overview of a pilot implementation in a US hospital and the tools used to accomplish the task. Oracle Hyperion Profitability and Cost Management (HPCM) was used to cost out 400 unique services that were applied to 1.5 million records each month. A huge amount of monthly data was generated and stored with historical data to enable year-to-date reporting, and the entire end-to-end process from the general ledger through to reporting took only about 3 hours. Never before had they been able to achieve this level of detailed reporting due to the large volumes of data and the complex calculations. It took five people from MarketSphere (supplying HPCM, business, technical and reporting expertise) with the finance team from the hospital about seven months to complete the pilot and create an initial set of a dozen reports. These reports enabled them to make better financial decisions, decisions about which services to offer, and better operational decisions.

Bart confirmed that the healthcare reform act was not only a US phenomenon, but was appearing more frequently world-wide. He talked about a Middle Eastern Hospital that faced pretty much the same challenges as the one in North America. This healthcare facility was able to leverage HPCM to understand the following:

1. Trend in Costs versus operations by specialty (Oncology, Orthopedics, etc)

2. Trend in Costs versus operations by department (lab, OT)

3. Cost reduction by service line

4. Cost per clinician, per specialty

5. Profitability by service by specialty

This healthcare facility learned first hand about the power that a costing tool can bring to them to improve overall hospital operations, lower cost, and move them to a value-based healthcare delivery paradigm.

The world of healthcare is certainly changing, and the emphasis on better cost understanding and better patient outcomes makes a lot of sense.

To listen to the entire podcast click here.

For more information about Oracle Hyperion Profitability and Cost Management, click here. 

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This blog will highlight key EPM market trends, recent events and other news of interest to our field, customers and partners.

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