Cost management and the renewed imperative for cost accounting

The American healthcare delivery system is in the midst of tremendous change and is experiencing increasing financial pressure; yet adoption of cost accounting systems is still not widespread in the USA. The industry, consequently, has not fully tapped the potential of cost accounting to support management decision-making. Historically, there has been scant guidance to help providers match the power and sophistication needed from their costing systems with the imperatives of the reimbursement environment. Fortunately, national benchmarks, such as the Precision Risk Framework, the HFMA-Strata L7 Model and the Costing Maturity Model, are emerging. Adoption of these methodologies will allow healthcare entities to assess the efficacy of their current costing efforts and choose costing system elements that will give them the greatest return on investment (ROI). Each of these models is briefly presented and reviewed in this paper. Finally, 11 tactics are introduced that financial leaders can use to improve their costing efforts, regardless of their selected technologies, and without large capital expenditures.