Governmental and Private Sector Accounting in the Healthcare Field

2010, October 12 Governmental and Private Sector Accounting in the Healthcare Field

Governmental and Private Sector Accounting in the Healthcare Field: Reducing Costs to Make Healthcare More Affordable

Healthcare costs have risen astronomically over the past two decades and this has resulted in the role of accounting in the health care industry undergoing change. It is reported that the "escalation in medical costs has been the number one issue in health care for almost three decades. The Government and third party players have attempted to reduce the cost of health care by either paying a fixed fee for a procedure or a pre-approved annual budget based on a defined patient mix and census projection." (Seetharaman, Raj, and Saravanan, 2010, p. 1) According to the American Medical Association, "inefficiencies in health care delivery add cost and detract value from the health care system." (nd, p. 1) Noted as factors that contribute to inefficient use of services are those of: (1) fragmentation of care; (2) lack of available data resulting from comparative effectiveness research (CER) and lack of incentives to consider both costs and benefits in health-related decisions. (American Medical Association, nd, p.1)

I. Accounting Problems in the Health Care Industry

It is reported that the primary problems that accounting in the health care industry face are those of: (1) lack of research in the health care industry of the supply chain system; (2) too many different approaches to research of the integrated systems and information technology which results in confusion; and (3) too little research on an integrated approach to health care Total Quality Management. (Seetharaman, Raj, and Saravanan, 2010, p. 1)

II. Technology And Changes in Health Care Delivery

Technological applications offer the potential to "…profoundly change the methods of delivering health care. New information systems promise to reduce some costs significantly in the daily hospital procedures." (Seetharaman, Raj, and Saravanan, 2010, p. 1) It is reported in the work of Seetharaman, Raj, and Saravanan (2010) that "…total quality patient management is becoming an integral cost-reduction tool." (p. 1) Seetharaman, Raj, and Saravanan additionally report that the market for health care service delivery "has been steadily moving into private sector or profit organization as part of the global phenomenon." (p. 1)

III. Reasons for High Costs & Strategies to Reduce Costs

The reasons stated for such rises in health care costs include the following stated by the American Medical Association: (1) the rising toll of preventable disease; and (2) inefficiencies in the health care system. (nd) Broad strategies identified by the American Medical Association include those stated as follows: (1) reduce the burden of preventable disease; (2) make health care delivery more efficient; (3) reduce nonclinical health system costs that do not contribute to patient care; and (3) promote value-based decision making at all levels. (nd, p. 1) The work of Lovins (2010) states that it is possible to improve quality and reduce costs as well as improving the delivery of healthcare through use of Healthcare information technology. Lovins (2010) states that of all the provisions that have been included in the health care bill "the most important element may be the Independent Payment Advisory Board, which will have the ability to set policy for Medicare based on the success of the pilot programs." (p. 1) The legislation is stated to "...ultimately make payment contingent on quality for which the collection, reporting and payment structuring will be dependent on increasingly sophisticated ICT systems." (Lovins, 2010, p. 1) Incentives for health care providers implementing smart health care IT process include qualification for "$25 billion in bonuses for meeting meaningful use criteria under the American Recovery and Reinvestment Act. Hospitals will qualify for bonus payments beginning in October 2010." (Lovins, 2010, p. 1) Lovins reports that the effort at Duke University's Durham Regional Hospital includes an effort to "transition to electronic medication reconciliation" and reports that one of the largest of all healthcare organizations in the state of North Carolina "recently reduced 30-day readmission by more than 60% by tightening up the discharge medication reconciliation process." (Lovins, 2010, p. 1)

IV. Solution & Implementation of Solution in Reducing Healthcare Costs