| Description |
The skyrocketing costs in health care are important to many Americans. This project analyzes health care costs at BirthCare-HealthCare (BCHC), a practice group owned by the University of Utah College of Nursing. The focus of the project is on the financial management of a health care practice as a contributing factor to skyrocketing health care costs. The goal of this analysis is to use accounting in a proactive manner that both facilitates the growth and development of BCHC and reduces the dollars spent by society on health care. Our analysis of BCHC's financial management is based on the principles of activity-based cost accounting (ABC). Specifically, the scope of the standard ABC model is expanded to deal with the complexity of the health care environment. We developed a two-tiered model, which is used to determine the costs of health services offered by BCHC and to evaluate the profitability of providing care to different patient categories. The results of the application of this two-tiered model are then compared to BCHC's current fee structure and revenues. We concluded that there are two major obstacles inhibiting the growth and development of BCHC. First, there is an inverse relationship between the costs incurred by BCHC in providing health services and the current fee structure for those same services. Second, due to low reimbursement rates by some third party payers, the burden of paying for some of BCHC's services is effectively shifted to BCHC and to third party payers who reimburse at higher rates. The effect of cost shifting by third party payers with low reimbursement rates was found to conflict with the interests of both BCHC and society. An alternative fee structure and reimbursement level is explored that both provides for the future growth and development of BCHC and reduces the total dollars society spends on health care. |
