From the Spring Issue 2019

To guide healthcare’s transformation to a value-based model and address financial challenges, leaders must be able to calculate the true cost of care and achieve price transparency. In their estimable efforts to determine the accurate cost of care, some hospitals and health systems have implemented various costing systems with questionable credibility. Unfortunately, lacking accurate data, efforts to reduce costs and provide prices are seeing limited success.

How can organizations make decisions to support transformation and improve quality if costs are not correctly computed? This question is important because organizational viability is contingent on assessing the true costs of care, including the cost of errors and inefficient processes and the money wasted on overtreatment and unnecessary supplies. True costs—identified with the right data and analytics—must be calculated before price transparency can be achieved.

As the articles and commentaries in this issue of Frontiers of Health Services Management point out, many factors make the task of determining the actual cost of care and services particularly difficult. Healthcare differs from other US business sectors in its extreme complexity, and consumers have not purchased healthcare in the same way they shop for other goods and services (even if they have been inclined to do so). However, skyrocketing deductibles and out-of-pocket costs are now prompting consumers to shop around and ask more questions about prices. And so, to function effectively in a value-based risk payment environment, hospitals and health systems must be able to provide accurate information to consumers, engage them in their care, negotiate favorable contracts with payers, and clearly identify resource utilization in caring for a defined population.

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