Healthcare has a cost problem, and Kaiser plans to solve it

With 39 hospitals, nearly 12 million patients and health plan members, and more than 200,000 employees, Oakland, Calif.-based Kaiser Permanente is one of the largest and most influential healthcare organizations in the U.S. Over 15 years ago, Kaiser recognized IT had to be a major part of the movement to change healthcare, and that realization led to the rollout of a systemwide EHR that helped establish the organization as a national leader. Now it is set to make another major move, this time in cost accounting.

Although EHR systems are widely used by hospitals and health systems today, that wasn't the case in 2005 when Kaiser began its multibillion-dollar rollout of the Epic EHR. Dubbed Kaiser Permanente HealthConnect, Kaiser's comprehensive EHR is one of the largest private electronic health systems in the world today.

As hospitals and health systems across the country explored ways to deliver high-quality care more efficiently, Kaiser's systemwide EHR helped it make significant progress toward that target and set a path for others to follow. In fact, a recent survey of 285 hospital executives recognized Kaiser as the top healthcare organization for providing high-quality care at a sustainable cost.

As Kaiser achieved success with HealthConnect, the system continued to explore new ways to use IT to improve the affordability of care for its patients and members. One challenge they encountered was a lack of access to accurate cost information. While access to accurate cost data is core to driving affordability and delivering value, less than 10 percent of hospitals and health systems have advanced cost accounting systems, also known as business decision support, capable of accurately measuring cost and margins and providing this information across the continuum of care.

To address this issue, Kaiser will be launching a National Cost Accounting Program that will provide its team with accurate and actionable cost information. To support this program, Kaiser will deploy Strata Decision Technology's StrataJazz® application, currently used by 200 healthcare delivery systems and over 1,000 hospitals across the U.S., across all Kaiser regions and venues of care.   

The cost accounting system will provide advanced methodologies, including time-driven, activity-based costing, supply-based, pharmacy-based costing and relative value unit costing, to create cost per service calculations that will inform analytics and reporting to drive affordability, quality and transformation. Kaiser will then bring the clinical data from Epic together with cost data from Strata to better understand and deliver value for its members.

The need to understand cost is becoming more important for hospitals and health systems every day as the industry makes the shift from fee-for-service to value-based payment models, a model where Kaiser serving as both a health plan and a provider has long been recognized as a pioneer. By implementing an advanced cost accounting tool across its hospitals, clinics and health plan business, Kaiser will once again raise the bar and set the path for other health systems to follow.  

More article on healthcare finance:
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