Rx for Healthcare Providers
Pervasive Costing at All Levels
Amit Gupta
Senior Manager Solutions Consulting
Oracle - APAC
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The “Triple Aim” of Healthcare Reform
Model of evidenced based care and wellness
• Individual outcomes improve over time (i.e.,
patients receive quality care) = outstanding
customer service
• Populations of patients experience improved
overall health (i.e., patients with like
attributes, conditions, improve across the
board) = high quality services
• The costs to deliver high quality individual
care and overall health for the population
goes down = lower costs
Better
Health
for the
Population
Better
Care
for the
Individual
Lower Cost
Through Improvement
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The Big Idea: How to Solve the Cost Crisis
in Health Care
“To put it bluntly, there is an almost complete lack of understanding of how
much it costs to deliver patient care, much less how those costs compare with
the outcomes achieved. Instead of focusing on the costs of treating individual
patients with specific medical conditions over their full cycle of care, providers
aggregate and analyze costs at the specialty or service department level.”
Robert S. Kaplan (Baker Foundation Professor at Harvard Business School)
Michael E. Porter (Bishop William Lawrence University Professor at Harvard Business School)
Harvard Business Review Magazine, September 2011
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Challenges for Leading Hospitals
1. How
Delivers
quality
services
to all people,
and
where required
do we
improve
outcomes
withoutwhen
raising
costs?
2. Do
A robust
financing
mechanism
we control
the equation
of revenues and service delivery?
3. Are
A well-trained
adequately
workforce
we able to and
recruit,
train andpaid
retain
the right people?
4. Do
Reliable
information
which
to base decisions
we understand
theoncost
of delivering
care? and policies
5. Do
Well
facilities
and logistics
to deliver
quality service
wemaintained
have the right
technology
to meet
our challenges?
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Traditional Costing
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Healthcare Organizational Structure
Traditional “GL” Reporting
Lab
Services
Radiology
Services
Nursing
Surgery
Support
Depts
Performance by “Cost Center”
(focus on Budget vs. Actual)
Management
Hierarchy
VP
NURSING
HOSPITAL
VP
DIAGNOSTIC
SERVICES
MANAGER
LAB
SERRVICES
VP
SURGICAL
SERVICES
VP
FINANCE
MANAGER
RADIOLOGY
SERVICES
“Cost Center” View
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Healthcare Organizational Structure - Service Lines
Traditional “GL” Reporting
Lab
Services
Radiology
Services
Nursing
Cost & Profit Metrics by Patient
Surgery
Support
Depts
Patient A
Patient B
Patient C
Performance by “Cost Center”
Performance by “Service Line”
(focus on Budget vs. Actual)
(focus on Volume, Cost, Profit trends)
Management
Hierarchy
HOSPITAL
VP
DIAGNOSTIC
SERVICES
VP
NURSING
MANAGER
LAB
SERRVICES
Service Line
Hierarchy
VP
SURGICAL
SERVICES
MANAGER
RADIOLOGY
SERVICES
“Cost Center” View
VP
FINANCE
Orthopedic
Services
HOSPITAL
Cardiac
Services
Stents
Women’s
Health
Pacemakers
“Profit Center” View
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General
Surgery
Case Study: University of Pittsburgh
Medical Centers
Company Overview
• UPMC is comprised of a network of 20 Hospitals,
International Specialty Hospitals and an Insurance division
with over $10B in revenue
Benefits & Value Achieved
• Improve assignment of costs based on the actual drivers of
expenses
• They are the #1 employer in Western PA with headquarters
in Pittsburgh
• Determine a better understanding of the profitability of
departments, patients and other relevant dimensions
(hospital, physician, etc)
• Need to perform analysis by hospital department and
service and to drill down to individual patient cost detail
• Automated generation of Customer and Product
Profitability data collection and reports
• Additionally, analysis needed to support standardized
hospital costing and provide underlying cost detail for other
payer-provider initiatives
• Support of standardized hospital costing
• Provided flexible model structure to allow for growth
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Case Study: The Medical Center
The Hague
Company Overview
 A top-class regional focused teaching hospital in the
west of the Netherlands with an annual budget of
300mn USD,153,000 outpatient contacts a year,
21,000 annual admissions and 19,000 day treatments

Innovative and customer focused in all direct and
supporting stages of patient care For example: a
centre of excellence in neurosurgery and Health
Control Systems. Best Practices:
European healthcare solutions (Oracle), most
innovative economics department, leader in
treasury/cost pricing/procurement
Benefits & Value Achieved
• Can recalculate costs of every Healthcare Product in
50% less time than before
• Improved data quality really allows the numbers to be
trusted and for important business decisions to be
taken based on them.
• Successfully building the competitive power of the
hospital in the Netherlands Healthcare Market.
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"Using Oracle Profitability Manager we
understand the actual costs of
delivering treatments and can therefore
make informed decisions to improve
treatment quality and reduce costs"
– Joep van Gorp - Planning and Control Manager, Medical Centre
Haaglanden
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Costing in Healthcare Successes
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Solution Overview
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Integrated system
For Profitability management, reporting and analytics
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Traditional Hospital Cost Model
With a Twist – System Wide
Facility
Facility
Department
Account
Direct/Indirect
Facility
Fixed/Variable Account Groups
Charge Codes
Encounter by Charge Code Transaction Records
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Maturity Model
Healthcare Provider Costing
Simple assignment
of indirect costs
(RCC)
Relative
assignment of
indirect costs
(RVU)
Activity Based
Costing
Micro Costing
Unused
Capacity
Awareness
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Demand
Driven
Planning
with
Capacity
Awareness
Oracle Hyperion Profitability and Cost Management
Solution
Common Reporting & Interaction
Implementing World
Class Profitability and
Cost Management
Cost &
Revenue
Allocation
Calculations
Cost and
Profitability
Reporting
Cost,
Revenue &
Profitability
Analytics
Cost &
Profitability
Simulation
Analytic Engine
Middleware
Database
Systems And Hardware
Allocate
Analyze
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Improve Performance
Key Features
• Designed for the Business User
– Visual interface easily understood by business users
– Business logic and data driven
– Leverages all the power of dimensionality
• Flexible Allocation Modeling Platform
– Methodology Independent!
– User defined
• Powerful Analytics and Reporting
– Multi Dimensional
• Examination of Each Stage
• Allocation Drill Back
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Start the Analysis - Financial Summaries
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Quality and Volume Metrics
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Net Margin by Service Line
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Cost Pool Analysis
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Stages of Cost Allocation
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Driver Selection
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Assignment
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Calculate
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Cost Models – Traceability Map
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Vertical Capabilities at Every Level of the Stack
$5 Billion per
year R&D Spend
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More Information
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http://twitter.com/OracleAnalytics
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Analytics
http://blogs.oracle.com/EPM
http://blogs.oracle.com/bi_pulse
http://www.youtube.com/evolvingBI
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