Question

Cost accounting is one of the most challenging areas in accounting to understand. “A cost accounting system is a system for recording, analyzing and allocating cost to the individual services provided to patients (e.g., medications, procedures, tests, room and board) (Becker's Hospital Review, 2014). The healthcare industry has been working toward the goal of correlating cost with quality. Read Porter, M. E., & Lee, T. H. (2016). From volume to value in health care: the work begins. Jama, 316(10), 1047-1048. Discuss how healthcare providers and patients can benefit when cost is correlated with quality of the healthcare services provided.

Answer 1

According to the article by M.E. & Lee, T.H. (2016) Health care is finally entering an era of significant change, and the model for health care delivery is being redesigned from the ground up. Redesign is being accelerated by a long-needed transition in the payment system away from fee-for-service to value-based payments. The clear message of the article is that hospitals, health care centres, and clinicians should no longer be spending time discussing whether to participate in bundled payment programs but instead focusing on how to do the work necessary to succeed under them.

This article shows that achieving better quality and lower costs is possible, and everyone can benefit patients, hospitals and physicians, and society. However, it is also clear that value improvement is not business as usual; it is an entirely new way of managing.

The three fundamental strategies discussed in this article to accomplish the volume to value are First, value improvement became the organization’s business model, as opposed to maximizing fee-for-service revenue. As a long-term agenda, the health care organization made substantial investments in new systems for measuring, analyzing, and reporting clinical outcomes and costs at the level of individual patients. A second strategic choice was to organize the work around specific patient conditions. The health care leadership understood the limits of the typical approach of targeting “generic” high-cost areas that include all patients, such as reducing readmission. Instead, the real opportunity to drive major efficiencies and improvements in quality occurs through focusing on specific patient conditions and optimizing their care. Third, the organization created multidisciplinary teams to drive the improvement effort. Leadership recognized that value is created not through specialty silos but through teams working together to integrate and improve care across the care cycle.

Recommendations of the study were listed about by Lee and colleagues First development of true integrated practice units, consisting of co-located multidisciplinary teams—not just to plan process improvement but to actually deliver care for patients with specific conditions. Second, although the organization’s initial focus has been on inpatient episodes, the ultimate opportunity is rethinking the full continuum of care. Looking across inpatient care, outpatient care, and rehabilitation will create new opportunities for value improvement. Third, the organization needs to continue its march toward comprehensive outcome measurement, moving beyond generic outcomes like mortality and readmission to functional status, pain, and condition-specific complications. Fourth, the organizational leadership should be proactive in negotiating bundled payment contracts and other reimbursement models that provide rewards for creating value for patients across the continuum. Such contract arrangements bring all stakeholders into alignment.