Make your paths more cost efficient
Base case model uses 6 steps
Case managers who want an accurate accounting analysis of a critical pathway must first design a base case, or basic plan-of-care model, of the pathway.
Designing a base case model is similar to developing a schematic or flowchart, but contains cost data, as well, says Jafar Asadi, director of management engineering at Northwestern Memorial Hospital, a 678-bed facility in Chicago. Asadi presented his hospital's accounting model at the Chicago-based Healthcare Information and Management Systems Society's 1996 annual conference and exhibition, held March 3-7 in Atlanta.
After the basic model is developed, team members then can analyze different plans of care by adding different scenarios, such as increased patient volume or more efficient documentation.
Learn the language
First, however, team members involved in a cost accounting project must become familiar with accounting language. The terminology categorizes activities, medications, supplies, equipment, and labor associated with providing patient care. Terms associated with ABC development include the following:
* demand -- the activities and resources necessary to meet patient care needs. In health care, demands are associated with the number of patient cases;
* output -- activity associated with completing a demand;
* factor -- a unit of measurement used to determine the amount of input needed to generate a particular output;
* resource -- items used to complete an output.
Base case models chart the process of care for a particular treatment or surgery, but all models incorporate six steps. They are:
1. List demands involved in the procedure.
Demands make up an activity within a critical path. With the myocardial infarction (MI) path, or with any path undergoing activity-based costing, a medical service or procedure is considered a demand. Asadi listed the intensive care unit (ICU) and emergency department (ED) as demands when developing the base case model for day one of the MI path.
2. List the activities needed to meet the demands.
Activities and processes are performed to meet the demands. Examples of activities performed in caring for MI patients include:
* lab tests;
* vital signs;
* IV administration;
* physician assessment.
3. List the results of the activities.
Results of activities, or outputs, measure activities by demand. For example, an output of the activity "draw and test blood" would be the number of tests performed. The output for medication preparation would be the number of medicines prepared. Outputs also are known as cost drivers.
4. List the resources needed to perform activities.
Resources are tools used to perform an activity. Nursing labor, medical equipment, and supplies are examples of resources. There are two types of resources: fixed and variable. Labor is an example of a fixed resource, but supplies are variable because prices can fluctuate, notes Asadi. Resources can have constraints, or maximum capacity levels. Labor, for example, can have a constraint even though it is a fixed resource, because staff can work regular or overtime hours.
5. List the resource inputs.
Inputs are items necessary to perform activities. Labor hours for nurses and laboratory technicians, equipment machine hours, and supplies are examples of inputs.
Like resources, inputs can have constraints. Nursing labor, for example, is limited to the hours a nurse works on a scheduled shift. Therefore, overtime would be an additional resource.
6. Input data and calculate appropriate factors.
Resources identified in step four have an associated cost. Examples of fixed costs might be nurse and laboratory technician labor hours, whereas supplies could be variable costs. Factors determine how much input is necessary to produce a given output.
Factors can be calculated by dividing resources by outputs. A factor for a blood test, for example, is 0.16 hours. This number is obtained by dividing the output, or blood test, by the input, or 10 phlebotomist labor minutes, for a factor of 0.16 hours.
Remain consistent in units of measurement when developing a base case model. "You don't want to measure a machine's input in days and a laboratory technician's input in hours," explains Asadi.
An added benefit of factors is that they measure both efficiency and consumption, says Asadi. That benefit makes base case models ideal tools for process improvement. *
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