Improving Clinical Efficiency By Controlling Costs and Using The Ready Time System

One of the most common ways to evaluate the cost of doing business and assessing clinical efficiency is to calculate the cost for every patient encounter. Determining the cost of seeing a patient may seem like a simple formula: divide total operating costs by the number of patient encounters. However, using this formula really is too simple.

To improve the cost per encounter requires some combination of decreasing costs and/or increasing the number of encounters. So a thorough analysis and understanding of actual costs is more likely to lead to cost reduction and increased efficiency.

The use of cost accounting principles and practices is recommended for managing and measuring clinical productivity, determining reimbursement strategies, and understanding the cost per unit in the delivery of a product or service. Cost Accounting is defined by the business dictionary as “a method of accounting in which all costs incurred in carrying out an activity or accomplishing a purpose are collected, classified and recorded.”

Costs can be defined as direct and indirect. Direct costs are the medical costs that have to do with the patient encounter; for example, physician and support staff time and drugs and medical supplies. Indirect costs are operating costs, such as personnel, office overhead, general administrative costs including insurance premiums, supplies, professional and IT support services.

To maximize revenue and control costs:

  • Use sound cost accounting practices.
  • Accurately determine costs of each product and service.
  • Ensure the physician's time is spent with the patient and not on routine duties that can be handled by clinical support staff.

To achieve bullet #3 requires use of a systematic work­flow process in addition to cost accounting. Implementing the Ready Time System will maximize individual physician capacity. Physicians will see more patients per day which will generate incremental income for the practice. Managing the costs of a practice will reduce the costs per patient encounter thereby increasing revenue, and managing the work flow will improve patient satisfaction.

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