Costing in a complex environment case study: How AdventHealth and Mount Nittany expect to better understand their OR labor costs

The healthcare financial environment was already complex, with changing payer requirements and mergers and acquisitions taking place. Then COVID turned healthcare organizations' finances upside down. In this environment, cost accounting is more important than ever.

In a May Becker's Hospital Review webinar sponsored by Syntellis Performance Solutions, financial experts from leading provider organizations discussed how today's environment has driven the need for greater costing accuracy and described solutions to meet healthcare organizations' advanced costing needs. The panelists were:

  • Barry McBroom, corporate director of cost accounting, Altamonte-Springs, Fla.-headquartered AdventHealth
  • April Strouse, manager of financial reporting and budgeting, Mount Nittany Health System in Central Pennsylvania
  • Moderated by Catherine Savage, senior industry practice lead, Syntellis Performance Solutions 

Four key takeaways were:

  1. Accounting in healthcare is more challenging than ever. There are multiple business imperatives in healthcare today. Among them are managing through COVID-19, addressing competitive threats, managing the transition to value-based care and bending the cost curve. For each of these imperatives, accounting is more important yet more challenging than ever.

    According to a 2020 Kaufman Hall survey, 87 percent of healthcare organizations said cost transformation was their number one strategic priority, yet 75 percent missed their target cost reduction goals. And, according to a Syntellis survey, 68 percent say they lack advanced decision-support tools that provide a high degree of confidence in their ability to track and manage performance. "We've got cost versus quality issues; it can't just be at any cost anymore," Ms. Savage said.

  2. The financial imperatives within healthcare are driving demand for greater costing accuracy. Drivers for costing accuracy include the more complex environment, increased physician involvement, more source systems for cost modeling and more sophisticated costing methods. In addition, COVID introduced tremendous business disruption and need for costing agility.

  3. A quality advanced costing solution needs to be reliable. "The adoption of more advanced costing methods can introduce greater efficiency and accuracy in your costing process and can make costing a more strategic function in your organization," Ms. Savage said.

    A reliable solution is transparent, efficient and sophisticated. It also needs to be automated and repeatable, so cost results can be cranked out regardless of personnel turnover or other interruptions. And it must be capable of using real vendor costs. Such a solution will help the financial organization build trust to ensure buy-in with costing results and allows techniques like microcosting of supplies and even OR labor.

  4. Syntellis' AxiomTM Enterprise Decision Support (EDS) has provided costing success for health systems. Mt. Nittany Health, which includes a 260-bed hospital, outpatient facilities and a physician group, has a five-person financial planning team. Prior to adopting Axiom, "there was just a lack of precision, it was challenging to use and the reporting was insufficient," Ms. Strouse said. Mt. Nittany Health then adopted Axiom for budgeting, forecasting, financial planning, comparative analytics, capital planning and tracking, and costing and decision support. This resulted in detailed costing and an easy-to-use and repeatable process, along with superior reporting and highly customizable dashboards.

    "Our decision [at AdventHealth] to go with Axiom was heavily influenced by several things," Mr. McBroom said. AdventHealth has over 50 hospital campuses and hundreds of care sites. "The ability to be able to audit and trace the lineage of cost data through the system was key. Our prior systems were large black boxes when it came to tracing cost lineage, scalability was another big factor, but our top priority was a cost accounting system that had a robust set of costing tools," Mr. McBroom said. AdventHealth expects to have greater confidence in cost results, comparative analytics at all levels and broader buy-in. "It has been and continues to be an exciting and rewarding journey." 

Healthcare systems have been through a great deal of transformation in recent years, as mergers and COVID have demanded new costing strategies and capabilities. A partner such as Syntellis can help organizations meet today's costing demands.

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