Cost Accounting

- Interim presentation

Columbia-Bassett SLIM LSS Project

● Amy Block
● Yongha Kim
● Amanda Wang
 Team Structure

Stakeholder
CEO Tommy Ibrahim

Sponsors
Advisory Role Lee Marley
Paul Swinko
Supervisor
Dr. Henry Weil

Black Belt Green Belt Green Belt Green Belt

Aslam Khan Amy Block Yongha Kim Amanda Wang
DMAIC
Define

Phase Steps Deliverables

Define 1. Define the current state 1. Project Charter

2. Refine the problem 2. SMART* customer
statement & goal requirements /
3. Set project goals expectations
4. Identify stakeholders
5. Determine customer
requirements

* specific, measurable, attainable, realistic, testable

Current State
Bassett currently does not have a cost accounting system in place.
What is “Cost Accounting”? (This was our first major question!)
In healthcare organizations, cost accounting is used to determine the cost of each service
or product used in patient care, providing detailed information that can be used for
analytics and decision-making.
We are trying to address actual cost to the organization for a given procedure, rather
than what is billed to the patient. Right now, that is not determined in advance or
averaged. Better awareness of standard costs could help guide meaningful clinical
decisions, stabilize budgets or the labor pool, improve negotiations with vendors or
insurance, and advance Bassett’s participation in “bundle payment” options.
TBD
● Bassett is currently exploring the possibilities of adopting commercial cost
accounting software, such as True Cost or Strata
● Optum is a new vendor being used for IT and some data analysis, but unclear
whether they will contribute to cost accounting
Customer Requirements

● Create a process / set of data that will help us “vet” the efficacy of a cost
accounting software we try
● A “deep rather than wide” dive into all the steps of one particular process

Rather than analyzing variation of cost between different subtypes of a procedure

(for instance, different clinicians or comorbidities), we are looking to establish a
methodology for describing cost!
Problem Statement

Understanding our cost structure helps our

organization provide financial accountability and
transparency to patients and make better
organizational decisions based on real data.

We aim to collect data on a designated surgical

procedure to evaluate cost components and total
cost of a specific hospital procedure.
 Knee Replacement

We plan to focus our project on

(uncomplicated) knee replacements.

According to CMS Inpatient Charge

Data, MS-DRG 470 “Major Joint
Replacement or Reattachment of Lower
Extremity without MCC” was the DRG
code with the second highest number of
total discharges nationally and in NY
state.
 Project Scope

Included: The perioperative cost of a specific surgical procedure (knee

replacements) from pre-op to post-op, as a list of component and sum costs, using
a given number of patient procedures. This includes hardware, labor,
medications, cost of hospitalization for knee replacement. Goal: n = 30

Excluded: We will focus on the code MS-DRG 470, which excludes major
complications or co-morbidities (MCC) of surgery. Although this DRG code
includes hip replacements, we will focus on a single type of surgery for now. We
will exclude costs associated with post-hospitalization rehabilitation.

TBD: Facility costs, operational costs shared across the hospital system (e.g.
stretcher, electricity, robotics, original cost of reusable equipment), care within
ASU and PACU.
SIPOC - working list

Suppliers Inputs Processes Outputs Customers

surgeons Labor of providers Scheduling of Patient with Hospital system -
surgery artificial knee financial

anesthesiologist Surgical tools Pre-operative EMR charting Hospital systems -

preparations, supply chain
authorizations management
CRNA prosthesis Peri-operative EMR OR personne
anesthesia
Scrub tech/nurse Surgery patients

Circulating nurse Billing

Medical supply Documentation

companies
Business Benefits

● Understanding of the components of cost involved in knee replacement

procedures
● Reference data to compare to when trialing computer cost accounting
model
● Pilot project will help us create a process that can be applied to other
procedures
Patient Benefits

● More accurate prediction of what a procedure will cost to

patient’s insurance, and therefore to them as co-pay or
co-insurance
● Clearer cost structure may change CMS or private insurance
approvals or coverage, with aim of smoother approvals
Goals

1. Seek input from key stakeholders involved in orthopedic procedures

to determine what data to collect.
2. Collect data on 30 individual cases of knee replacements,
potentially randomized from a set of dates.
3. Analyze cost structure and components & analyze mean cost and
variation of procedures
Possible Challenges & Risks

● Obtaining buy in from surgical/anesthesia staff and OR personnel

● Connecting purchase to use of supplies (units, etc.)
● Anticipating level of variation between procedures, practitioners, patients,
etc.

● Pushback from OR staff when they anticipate second-guessing their

clinical decision-making
● A given data set will not be representative of the variable costs of the
procedure as performed
● Scope constraints are arbitrary and cannot be aligned with software
models due to proprietary algorithms
Tentative Timeline

Timeline Dates Key Milestones

Midpoint August (8/4) Solidify project plan, recruit stakeholders,
Presentation finalize specifics of data collection
September Obtain itemized bill for 30 procedures,
and identify cost components consistent
with our scope
October Analyze data, use Six Sigma tools or
similar to evaluate variability between
procedures
November Validate with Optum and their cost
analysis

Formalize methodology for cost

accounting
Final
December, TBD Project wrap-up and debrief
Presentation
Next Steps

Arrange meetings with stakeholders who can help refine the project goals and
data collection

● Surgeons, Nurses, Techs

● Anesthesia, CRNAs
● Scheduling
● Facilities management
● Supply chain/supply management
● Radiation technologists, C arm, etc.
Contacts to pursuit

Deborah Cornell, Manager of Clinical Operations

Julie Breachy, Manager, Department of Surgery

Oliver Bourgeois, Finance Manager - Medical Group Services

Joe Ruffino, Director of Supply Chain Management

Charles Spencer, Business Intelligence Analyst

Thank you!

Questions?