Challenges and Typical Model Purposes
Hospitals are similar across countries in the way of working so implementing a model will never have to start from scratch. Some software vendors offer pre-made models where some structures and definitions are pre-defined and ready to use. But we often recommend you to do your own, as a “generic” model does not necessarily fit your challenges and situation. When hospitals construct costing based on DRG (Diagnosis-Related Group), the challenges is often the data quality. Patient registrations are often inaccurate related to exact treatment and if treatments are changed or extended, it is not always added to the base registrations and the plug and play solutions does not handle this. When it comes to treatment of mental illnesses, we see the biggest challenge, because in many countries, hospitals are only compensated for the original treatment. This means that if the patient develops additional diseases during the hospitalization, this will often not be registered as a treatment and the hospitalization duration will be linked to the original disease and the healing period will appear long. Again the plug and play solutions do not handle this, whereas we put a lot of energy into this as without this transparency, you risk making decisions based on wrong conclusions and you do not see the expected changes.
Calculating and reporting Cost per user/ Cost per patient can be very time consuming and we have heard of hospitals spending as much as 3-4 months on this. A Cost Transparency Model is designed and implemented in 2-3 months and then it takes a day to run, validate and report and it can run as often as wanted and show real time results on the spot if wanted.
Pharmaceuticals is much like manufacturing companies but challenges for pharmaceuticals is the big difference between prescription and non-prescription medicines, if they are produced in the same process lines. The R&D phase is often also much longer than other industries (except from electronics for instance). Some research is done in clean-rooms, which are costly to have but these exists even within electronics.
A DANISH MUNICIPALITY had 3 hospitals and wanted a Cost Transparency Model to be able to bench-mark, identify best practice and to do DRG costing. For several years, they had seen results and performance being more and more different between the hospitals. Of course the hospitals had a different mix in types and number of operations. The list of operations and treatments was several hundreds and many showed big differences between the hospitals. After an assessment period, we made a generic model for the three hospitals. Previous, internal examinations had indicated that the salary level and material usage was very different and one hospital was much more focused at the patient and had more patient conversations between doctor and patient which for a long time had been used as the explanation. The Cost Transparency Model showed more to that story.
The cost differences between knee operations for instance was found in the activities. It was not true that one hospital had more patient conversations, they had almost the same but one hospital used a doctor more frequently whereas another hospital used nurses and there is a huge salary difference. The biggest reason for the difference in this operation type was the scanning. Operation guidelines described that a scanning should be done. One hospital did always a MR scanning whereas another did CT scanning and then MR scanning if they did not find all the answers in the CT scanning. And the costs between a CT and a MR scanning are huge.
Today, the hospital still uses the model for bench-marking and DRG reporting, which is done in 2 days including validating and analyzing results. But they also use the model for budgeting. It is used to let doctors and nurses have an cost understanding. It is though important to mention, that the focus should never purely be on costs, the treatment and patients well being always comes first.