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The healthcare cost management problem
A reform of the healthcare system is not possible without better ways of understanding the relevant costs and how to measure them. Actually, hospitals know very little about costs from the perspective of examining the value delivered for patients. In particular, they do not know the total cost that healthcare providers incur to deliver care for patients medical problems. To achieve that hospitals need more powerful costing systems.
Many hospitals have cost accounting systems that only allow them to measure and report costs per cost category, per department and per physician specialty. But to meet future cost management challenges they need to implement modern and more advanced costing systems that also provide relevant and accurate information of full costs of treating the patients problem. The strategic alignment problem.
Hospitals are typical high professional service organizations. Management, physicians and department heads frequently have different points of view on the intended strategic direction and its consequences for daily operations. Intra-organizational cooperation is sometimes difficult to organize. Many hospitals have recently gone through a merger or acquisition process and need to create a new organization to align all the departments towards the same objectives.
Hospital managers and directors have already taken steps to improve the internal cooperation between departments and have already introduced methods for total quality management (such as EFQM) and integrated process management. Sometimes the board already prepared a strategic plan, but physicians were not really involved in the decision making process. In many hospitals physicians show resistance to change when new strategies get implemented and usually perceive strategy and performance management as interference in their day-to-day practice.
Therefore hospital leaders look for more systematic and integrated approaches to strategy development and execution that help to align and motivate all department heads and physicians to implement strategy.