The first thing we proposed for a health company so that the Directors and Managers had useful information for decision making was to keep a cost accounting.
Later we wanted to link accounting, or rather the information system, to management. At that time we understood that the objective of a health company was to solve the health problems of its patients (from prevention to rehabilitation), then in some way the management was patient-oriented and we said:
"… The patient's expense depends exclusively on the treatment of his disease (pathology), that is the reality and therefore what the cost system has to show…". And so we proposed a cost system for these companies: Patient Costs and Pathology.
In the work that we present today, as a result of practical experience in trying to apply that cost system, we broaden the horizon a little more and propose a new management model incorporating a vision of healthcare processes and their management through costs: Costs by Patient, Pathology and Processes. The concept is simple: like any company, the health product / services are obtained through a process. Propose the management of the company through the processes and their costs is the objective of this work.
1. I ntroduction
At the VIII Congress of the International Cost Institute in 2003 we presented a paper in which we showed what our opinion was on the most appropriate cost and management system to apply in a Health Company. This system had not been created from a merely theoretical perspective but was the result of our practical experience as accountants and managers in trying to manage companies of this type.
From that moment on, we put a lot of emphasis on the practical application of the system, not only through hours of implementation work but also discussion with health technicians (doctors, accountants, paratechnicians, etc.) trying to achieve a multidisciplinary consensus that would support that opinion. Primary Cost per Patient and Pathology.
The work that we present today is the fruit of all this, where the conclusion was to reaffirm that primary concept to calculate costs and advance one more step in information for healthcare management, and therefore business.
The aggregate consists, in summary, of an innovative vision of the products / services provided by these companies, which are consumed by Patients with a specific Pathology. Before we saw the main products / services that the patient consumed such as: Hospitalization, Operations, Consultations and / or Emergency; Now the vision that we incorporate into the system is that the patient, depending on his pathology, consumes a set of these services and not each one of them separately ("The whole is more than the sum of the parts").
In this conception we understand that each product / service is created through a Process, which must be paid through a certain methodology to obtain the Cost Per Patient, Pathology and Process.
More than a cost system, we will see that its application undoubtedly leads to the reorganization of a health company, notably improving its healthcare and administrative management.
We structure the work so that it shows the aforementioned evolution.
2. The initial conception: the products / services provided and the costs per patient and pathology.
2.1. The operation of a health company, its products / services and their measurement.
Characteristics of Health Products / Services.
A health company is a complex organization from every point of view. Although there are different types of institutions, products / services are “manufactured” in the same way, since they all share the same characteristics, namely:
- They are intangible, perhaps the elements used to loan them are tangible (medicines, materials, plates, etc.), but the product itself is not. We could not say to a patient: "Here you have a gallbladder operation, take it." They are not homogeneous, that is, the same product can vary in costs depending on the pathology of each patient; and in turn the same pathology can cause different expenses. They are manual, that is, they cannot be manufactured in a production chain, but they are made by human hands. It is not easy to find a unit of measurement, that is, to quantify their production, which we will explain a little later.
Perhaps the second characteristic is the most complex, because it is the one that highlights that no matter how similar the disease is between two patients, the treatment will not be the same, and we will see that it will be a fundamental characteristic to define a system of Patient Costs and Pathology.
Products / services.
When a person attends a health company in general, he does so for one of these reasons, namely:
- You need a consultation with a doctor, You require an Internment, which can be Conventional, Intermediate Care or Intensive Care, A Surgical Intervention is performed, or You need Emergency care
So we can say that the products / services that are the reason for the existence of a company of this type are the ones mentioned above, which in previous works (1) we have classified as follows, namely:
Products / services that require hospitalization: either they are the consequence of another service (for example after a surgical intervention) or the patient enters directly to consume them (for example: Intensive Treatment Care); and
Non-Intern Products: All the rest of those mentioned above.
Graphically:
The entire company is organized in order to provide these products efficiently and effectively, which in the medical / administrative jargon of these companies we call them “Final Products / Services”, because they are provided directly to the patient.
But these products / services do not provide themselves, but require the support of other services that are often not seen by patients, but without them the operation of the company would not be possible. Let's see an example:
A person goes to the doctor because he has severe chest pains. In the consultation, the doctor tells him to carry out a front and profile chest plate and tells him that when he has the result, come again to show it to him. The patient does the paperwork, goes to Radiology, the plaque is done and five days later he returns with the results to the medical consultation. When seeing it, the doctor observes that the size of the heart is not normal and gives him a cardiologist.
In the example, the Final Product is the Medical Consultation, but to diagnose the doctor well, he needed to have a plaque, so a Radiology Service was needed, which is not a Final Service but rather a Service that provides technical support to the doctor; without the board the problem could not have been detected.
On the other hand, both when the person requested a day and time to see the doctor and when he did the paperwork for Radiology, he was attended by an administrative officer belonging to a Polyclinics and / or Imaging Service who coordinated everything, these services that also provide a Support but not medical. Neither without this support would it have been possible to provide the Final Service.
Therefore, the Final Services are supported in their activity by the Medical Support Services and the Non-Medical Support Services. Graphically.
The measurement of service products.
When you want to calculate costs, you need two elements: Total Cost Amount of what is being financed and its Production, and from the quotient of these figures the average cost is obtained.
The measure of a product is the minimum production unit of each service. In the case of these types of companies, production is generally measured as follows, namely:
| H.H. Production - Final Products | Area | Production unit |
| Final Products / Services | Conventional Room | Bed Days Occupied (1) |
| Special cares | Bed Days Occupied (1) | |
| Block | Intervention number. (two) | |
| Emergency | Number of Queries | |
| Polyclinics / Consultations | Number of Queries | |
| H.H. Intermediate Production | Area | Production unit |
| Medical support | Laboratory | UVL amount * |
| Imaging - RX | UVR amount ** | |
| Imaging - Others | Number of Studies | |
| Hemotherapy | Blood Volumes | |
| H.H. Support production | Area | Production unit |
| Non-medical support | Laundry | Kgs. Of washed clothes |
| Kitchen | Amount of servings |
Graph 3: production units of the different products / services
(1) _ In medical jargon the fixed cost of hospitalization is called the Pension Value
(2) _ ““ ““ ““ ““ “surgical intervention is called
Table Law
* _ Laboratory
Value Unit ** _ Radiology Value Unit
2.2. Patient Cost and Pathology System: Its philosophy and calculation.
The proposal for Patient Costs and Pathology arose more from a theme of improving business management through costs and not so much from the theoretical idea of applying a cost system in health.
We calculated a monthly amount of production service costs, namely:
We did it monthly and quarterly and classified them into variable costs (consumed by patients) and fixed costs (cost per use of services), for example:
For which we had an information system that we adapted to provide us with the necessary data to show the above costs with sufficient reliability.
We saw the monthly and quarterly variations with the doctors responsible for management and we acted on everything that was within our reach. But at a certain point we realized that this information was not enough. We had the idea that reality was like a circle where the management that generates the costs was at the center and we, who were on the outer edge, did not reach it with our information because the average costs:
a) They did not represent the reality of a health company. The costs are generated by caring for patients and not for a group of patients, so we had to pay each one of them.
b) They provided us with a guide in time but we could not change the problematic situations nor did we provide the doctors with detailed information in real time so that they could act.
Therefore the primary conclusion was to adapt the system to obtain costs per patient. As we put it in A Cost Proposal for Collective Healthcare Institutions (2003):
"… Why patient costs? For the second characteristic of the mutual product; it is the only viable answer from which reliable data can be obtained to make safe decisions. By means of the process cost system, average costs of sectors or even activities are obtained, but with these data I cannot distinguish the particular situations of each patient with respect to costs and therefore make the correct decisions… ”
Following this reasoning, and from the operational point of view of medical management, although it is an important variant to go from an average cost to a cost per patient, it is still insufficient because vital information is missing: in addition to the cost per Patient I must know what disease is being treated, that is, what is your pathology.
By having the cost information per patient we know how much was spent on it, but by having the cost per Patient and Pathology we not only know the expense but we will know the reasons for it.
There are several foundations of our opinion of calculating costs by Patient and pathology, among them we highlight:
a) As we said, it is the reality of a health company, since it is dedicated to the treatment of diseases (pathology) of its patients, and that is what must be paid for. There will be no correct clinical or medical management without this information.
b) The heterogeneity to which we referred at the beginning indicates that despite having two patients with the same pathology, their reactions may be different and therefore their costs will not be the same.
c) The vast majority of the world's health systems are organized so that both the income (that is, what is charged to each person) and its costs are related to the pathology of each member of the system. This is because these types of companies have the characteristic that they are Insurers, that is, for the value of a monthly fee they cover a number of health risks. So to have an economic balance they should have calculated their costs for pathologies.
Let's see an illustrative example of the importance of having information on costs per patient and pathology for business management in the health sector in these three scenarios:
2.3. The Medical Protocol: How much was spent vs. How much should have been spent
In the previous table it was clear that the most detailed analytical cost information that the accountants can provide for the management of these companies is by Patient and Pathology. But that is not all.
Contrary to thinking that the task has been completed when presenting the information, for efficient management the analysis has only just begun. What do we do, or what do medical managers do? Only one thing: verify that what was spent on the patient is correct. When we say this, we are not only saying it from an economic point of view, but it must also be verified that the quality of the service has been adequate.
There are several ways to do this, for example, the physician can take the medical history of the patients and evaluate the supplies provided and the actions taken by the treating physician (s).
But we accountants, once reality is verified and valued, do something else: We compare Real Cost vs. Standard cost. What would be the standard in this case? It would be the Medical Protocol.
The medical protocol is the set of therapeutic measures that are applied to a patient based on the pathology or pathologies that they present and that determine their treatment. The monetary value of said protocol is the Patient's Cost Standard.
The protocol and its monetary valuation must be loaded into the computer system so that the control is carried out in two ways:
a) During medical treatment. This will somehow ensure that the treating physician does not deviate from the protocol. For example, a patient who presents with a head trauma is treated by a doctor who wants to prescribe a liver enzymogram. When he tries to prescribe the study in the system, it is not allowed because it is not in the protocol. In this way we ensure that unnecessary spending does not occur and in turn that the service is provided with quality.
b) Later, when analyzing the information. The data is supposed to be uploaded to the computer system as will be explained later. Once loaded, a process must be generated that indicates the differences between the cost of the patients attended and the corresponding cost. In this way, the management of the treating physician can be evaluated.
In sum, the comparison between the real cost versus the standard cost (valued protocol) is a good measure of clinical performance with respect to that patient; deviations down or up from said Standard are ultimately deviations from the protocol.
2.4. The calculation methodology - The proposed cost system
The cost system that we propose to obtain costs for patients and pathology is very similar to that of Costs for Production Orders. We start by classifying all costs by their variability into:
- Costs Assignable to the Patient: they are the variable costs, that is to say all those that can be imputed without any problem directly to the patient. These are classic examples: medicines, materials for medical use, studies carried out, doctors' fees that have specifically seen only the patient. If there is no patient, these costs do not exist. Costs for using the services. They are those costs that although the patient is not the same exist. It is the fixed cost for the use of part of the company's facilities. They are clear examples: the right of table (that is, what it costs to enter a patient to the table of surgical block), the value of pension (how much it costs me per day to have a patient lying down), the medical consultation (how much it costs to the patient sits down with the doctor), etc.
Graphically:
Theoretically, the costs assignable to patients are directly imputed as in the production order cost system, while the costs for using services are calculated using the process cost system, using the ABC method for the distribution of costs. indirect.
For the costs assignable to patients, we will consider that the patient is a production order, therefore everything that is consumed in his treatment will be assigned to his order. These costs must be captured at the time they occur, so it is necessary to have a PC unit in each of the physical places where an input is provided.
For example: we should have a PC in the Surgical Block and in each intervention enter what each patient spent in the system; another one in the hospitalization rooms (be it conventional, intermediate or intensive care) and during the patient's stay recording the costs that originate from the patient's care; another in the pharmacy, and to register in the system the medicines that are provided to the patient, and so on in all the places where patients are treated and variable costs are generated.
It is important that the integrity of the data is respected, otherwise the information will not be reliable for decision-making.
To calculate the costs for the use of services, a cost accounting must be kept. They could be carried off-balance but it is not recommended because it does not give security to the system. Remember that these costs are calculated by the process cost system, therefore, accounting must contemplate the characteristics required by said system, of which we are interested in remembering the following, namely:
- Definition of cost centers in accordance with the objective of obtaining costs for products / services. For the case under study, an example would be the following:
Within each cost center are the items that express the concepts of expenses; for example for cost center 1.1.1. The subaccounts would be: 1.1.1.1. Remuneration 1.1.1.2. Social charges 1.1.1.3. Medications 1.1.1.4. Material for Medical Use….
- Distribution of costs. Bring all the costs of medical and non-medical support services to the final services, using the ABC costing methodology. Once the total costs have been obtained, the quotient for the production of each service (specified in 2.1.) Is obtained the average unit cost of the Costs for the use of services.
It is worth clarifying that:
a) costs assignable to patients or variable costs are not included in this procedure. Although these costs must be recorded in the accounting, they should not be included in the previous calculation because by their nature (which we explained above) they are directly attributed to the patient. In order for this not to affect the previous procedure, variable costs must be recorded in different accounting accounts, although they must be within the corresponding cost center. For example, suppose Figure 5 were an analytical report from Cost Center accounting 1.1.2. - CTI hospitalization for the period: 03/01/2005 to 09/30/2005 and that the accounting accounts were those that appear under the concept column. The cost for using the CTI services or CTI pension value would be $ 46.9 per day / bed occupied.See that variable costs are not included in this calculation, only fixed costs.
b) The calculation period must be representative of reality. Although it can be tested monthly, to calculate a representative cost, a period must be taken in which temporary fluctuations are eliminated. Personally we consider that any period greater than three months between March and September of each year illustrative of reality.
2.5. Management reports
The report that should be obtained from the information system should have the following structure shown in figure 10.
Other information that the system should provide, as we indicated in previous works (Montico, Velarde, 2003) would be:
a) The cost originated by the care of any patient for the desired period.
b) The costs per patient classified by pathology, by age and both together. Obviously in the periods you want.
c) Idem b) but also classified by the different sectors of the IAMC (Intensive care hospitalization, intermediate care, conventional, consultations, emergency, etc.).
d) Show variable costs for any modality a), b), or c).
e) Show the fixed costs for using the institution's services.
f) Show the costs of a certain defined mutual product.
3. The Assistance Processes. Your costs and the management of the company.
3.1. Definition and organization of the company by processes
So far we have talked about the cost system that seems most appropriate to apply in these companies, since it shows in numbers the purest essence of their activity: to provide the patient and according to his illness the best medical treatment for his cure.
This system, like companies, is organized so that the patient, according to his pathology, consumes certain products / services, for example a patient who undergoes a specialized operation consumes the following products, namely:
Surgical Intervention (table right: one)
Intensive Care Hospitalization (days / bed CTI: 8)
Conventional Hospitalization (Days / bed Conventional room: 2)
In other words, they will perform an operation, they will spend 8 days in CTI and 2 days in conventional or common hospitalization. This means that:
a) from the point of view of the system: we take the costs assignable to patients (variable) and the costs for the use of services (“fixed”) for each product / service that originated this care and we will obtain the cost of this patient, the which will be submitted to the corresponding analyzes; and
b) from a business point of view: the institution is organized, both architecturally and hierarchically, so that each product will be provided in different areas and will be supervised by the corresponding personnel.
So once the patient enters the company, he will go through several specialized hands: the doctor who operates him, the doctor in charge of CTI who will control him, the nursing graduates in charge of complying with medical orders and the treating doctor (who generally will be the neurologist who operated on it). Graphically:
As we can see, in general, health companies tend to establish a horizontal organization following an “architectural” model, that is, just as the Hospital is organized by floors, in which Conventional Rooms, critical care units (CTI) coexist, Surgical Block, etc., the organizational structure tends to assimilate to this concept and therefore there is a Head of Critical Care Unit (CTI), a Head of Surgical Block, a person in charge of Conventional Hospitalization or Sanatorium, etc., and so on. successively the organization chart is formed; a very simple example would be:
And if we review what were the products / services that we had defined since the beginning of the work, we see that they also have a similarity: B. Surgical - Interventions, Sanatorium - Hospitalization, Emergency - Emergency Consultation, etc.
But if we return to the example of the patient with a specialized operation, we realize that he did not consume a single product / service but consumed at least three: Intervention and hospitalization (CTI and common). And the same goes for all patients, practically no one consumes a single product but several.
At the beginning of the work we said that a person goes to a health company to consume any of the products / services (consultations, hospitalization, operations, etc.). Although this is true, it is a half truth, because in reality what the patient wants is for a doctor to treat him and the doctor to treat him consumes those products / services.
This is because the pathologies of the patients are resolved through a medical process or healthcare process that uses various products / services from these companies, to the point that the classification of the products is given by the same processes. Let's clarify.
A healthcare process can be defined as the set of successive phases or activities that tend to preserve or improve the clinical situation of a patient.
There can be as many processes as the company wants to define, for example, Urological, Pediatric, Neurological, Gynecological, Traumatological processes, etc., where each related pathology is treated, that is, urological processes will treat urological pathologies, neurological processes will deal with neurological pathologies and so on.
In turn, to treat each pathology clinically, the treating physician (s) use a set of products / services (interventions, hospitalizations, consultations, etc.).
The following graph of the Alto Guadalquivir Hospital is illustrative of the above, here the products / services that were defined are: Hospitalization (hospitalization), Pharmacy, Biotechnology and Surgical Block, and the healthcare processes that consume each of these products / services are the which are vertically defined:
In the case of the example that we previously handled it would be:
Therefore, we believe that the structure of the company must in reality have a more comprehensive concept of all the activity related to a patient who generally passes through various units of the entity in the "process" of the course of their treatment. So we must move from a structure only by departments of the organization to a structure by processes, establishing the different processes, and assigning responsibility to each of them.
In this way, from the hierarchical point of view and by way of example, the organization chart would be defined in this way, namely:
This can be applied beyond the fact that the architectural structure of the company continues to be organized in the same way, and although there may also be secondary managers of sectors and / or departments, but it is essential that management is done by processes.
3.2. Costs per patient and pathology in process management
Regarding the calculation of healthcare costs, there are no major changes to the methodology set forth in section 2 for costs per patient and pathology, since costs continue to be recorded under this modality, with the patient being the minimum unit of registration.
The most important change is given by the calculation of the structural costs or costs for the use of services (fixed costs) since they must reflect the incidence of the process. For example, before we calculated the cost of the polyclinic consultation, now we will have to calculate the cost of the consultation for each process: urological consultation, trauma consultation, etc. Let's see the changes by type of costs in more detail.
Assignable Costs to Patients. These costs (variable costs) do not change as they continue to be assigned to the patient. It is the patient according to his pathology that is classified in each healthcare process and the costs "follow" the patient no matter where the patient is.
Costs for using services. We have already explained that it was advisable to keep a cost accounting and that these costs be calculated at the starting point of the same to ensure the integrity and therefore fidelity of the information.
Section 2 (graph 9) shows an example of the chart of accounts that should be used when we wanted to calculate these costs for those products / services that we had defined. If we now say that the products are in some way the care processes, the situation at the accounting level does not change too much.
We have two accounting record options. One is to define other final service cost centers directly reflecting the care processes, for example:
And the second option would be to keep the same cost centers shown in figure 9 but within each one of them, make a sub-classification by processes, for example:
Either option is valid. In our opinion, the second is the most recommended, but only due to a practicality in operations, because: a) whoever already has defined cost centers, the change is less because they only have to add cost sub-centers; b) The information systems on which accounting is based to record operations will not change too much; and c) because in spite of changing the concept of management, we can still continue to have information by department as before.
The distribution of the costs of medical and non-medical support services will remain the same and the calculation of unit costs for the use of services will be carried out in the same way: Total Costs / Production; the only thing that changes will be only that now we will obtain the costs for using services by processes, if before we obtained this cost per consultation now it will be, for example, per urological consultation.
There are direct costs that cannot be attributed to each cost sub-center; instead, some way of distributing them will have to be found, but there will not be too many problems. For example, in the case of the remuneration of non-medical personnel.
Before when we calculated the cost of a consultation in general we had as costs the remuneration of technicians and non-technicians (whether nurses or archive personnel who manage medical records), now we will calculate consultations by processes it will be more complex to impute personnel not medical because they will generally be used to attend to various processes, therefore it will be necessary to assign that labor to costs per process using some criteria; in this specific case they would be distributed by the number of queries of each process.
3.3. Conclusion: Process management.
We believe that the advantage of all the above is not only the cost system that we accountants can propose, but the radical change in the management of the company by incorporating a vision of healthcare processes. The key of the administration is not only in obtaining a cost but that it represents the reality of the company and that through it we can manage it effectively and efficiently.
This management model allows establishing areas of responsibility that control, monitor and plan the activity carried out by the Hospital through its different healthcare processes.
The different managers of each process have a comprehensive vision of it and in turn can establish tight control over each activity in the process.
We understand that the control of each activity and associated tasks ensures the fulfillment of the objectives or the early detection of deviations if this occurs.
The fundamental concept is to establish predesigned processes with a clear definition of activities that have control parameters in order to establish compliance times and quality indicators at each stage.
This philosophy allows the concepts of the production process to be assimilated to the care processes and to apply all the quality control mechanisms.
In turn, the different processes can be grouped by "macro processes" searching for common elements among them and establishing "coordinators" by macro processes that will have control of all the processes and report to the General Directorate of the Hospital.
As we can see, the traditional vision of Service Heads, Process Managers, and Macro Process Coordinators is radically changed.
This vision of process lines is commonly applied in various industrial and commercial activities, so in the pharmaceutical industry, a division of the organization is established in various product lines, pharma, diagnostics, biotechnology, etc., which could be assimilated to the macro processes with management managers for each line of activity.
The previous perspective makes it possible to manage the Hospital with greater efficiency, since they are not independent units to which costs are assigned independently, but contrary sensu, they are units that depend on each other as they are chained in the same process, what unit n-1 does will affect the cost of unit n.
References Bibliographies
Giménez, Carlos and Collaborators. 2000. Costs for Entrepreneurs. Macchi editions.
Giménez, Carlos and Collaborators. 2001. Management & Costs - Increasing Profit, Continuous Improvement. Macchi editions.
Kaplan, Montico, Velarde. 2005. Costs in health institutions. II MERCOSUR Cost Congress.
Montico, Velarde. 2003. A cost proposal for Collective Medical Assistance Institutions: Costs per Patient and Pathology. VIII congress of the International Institute of costs.
Velarde, Testa, Antunez. 2001. Cost Systems and their relationship with decision-making in Collective Medical Assistance Institutions. Monographic research work.
