The Importance of Knowing Our Costs
By: Vivian Lee, M.D., Ph.D., MBA | May 31, 2012 11:31 AMRecently, Robert Kaplan and Michael Porter, noted professors at the Harvard Business School, published an editorial in the New York Times entitled, “Why Medical Bills Are a Mystery”. They point out that one of the key reasons our nation is still struggling with the challenge of rising health care costs is that we, as an industry, simply do not know our costs. Because we do not know our costs, we are also unable to weigh up the costs and benefits of what we do compared to the outcomes we want to achieve.
For the most part, they are right. And for any of you who have worked in any other industry or business, this fact is really remarkable. Imagine a Ford plant not knowing what it costs to make an Explorer. Or a small biotech company owner not knowing what it costs to produce one of her medical devices.
At the University of Utah, we’ve launched an initiative called Value-Driven Outcomes, where we are developing the tools to understand our costs, to start with, focusing on what it costs to care for a patient for a given episode of care. We have a reasonably good understanding of our hospital costs. We need to work on building the tools to understand our physician and professional costs and to tie together our costs across the inpatient and outpatient spectrum.
This is a big project and will only be successful with wide engagement and input from everyone. It is being led by an executive team that includes hospital and UUMG leadership, IT and finance.
Why is this a top priority for me and for our leadership team? Many reasons. For one, by knowing what factors are contributing to costs and to variability in costs across patients and providers, we can start to develop ways for reducing those costs. We can provide the providers themselves the tools to understand how they practice and what the costs are of the care they’re providing. We can start to understand which of the things we’re paying for are contributing to patient’s well-being and which are unnecessary or even counterproductive.
Across the enterprise, we can understand how to make strategic decisions about new investments and business developments. We can negotiate in a much more knowledgeable and informed way with various payers because we will know what it costs us to provide the kinds of care that are needed. Our health care system is already doing a superb job providing high quality care with outstanding patient satisfaction. These tools will help us be even more effective and efficient and, above all, excellent.
Author: Vivian S. Lee, M.D., Ph.D., M.B.A.
About the Author: Dr. Vivian S. Lee is the Senior Vice President for Health Sciences at the University of Utah, Dean of the University of Utah School of Medicine, and CEO of University of Utah Health Care. Read her full bio herecomments powered by Disqus