Should Healthcare Orgs Be Required to Do Zero Cost Accounting?

Posted on August 31, 2018 I Written By

John Lynn is the Founder of the blog network which currently consists of 10 blogs containing over 8000 articles with John having written over 4000 of the articles himself. These EMR and Healthcare IT related articles have been viewed over 16 million times. John also manages Healthcare IT Central and Healthcare IT Today, the leading career Health IT job board and blog. John is co-founder of and John is highly involved in social media, and in addition to his blogs can also be found on Twitter: @techguy and @ehrandhit and LinkedIn.

During today’s #HITsm chat, Jeremy Coleman made a strong statement about what he believed every healthcare organization should have to do:

What do you think of Jeremy’s idea? Should every healthcare organization be required to do zero cost accounting? Should every hospital know what their trust costs is for someone to spend a night in their inpatient bed?

These are complicated questions, so let’s start the discussion and see if we can share and learn from each other. At the core of these questions to me is a larger question of whether the price of the services we receive in healthcare should be related to their costs. We all know this isn’t the case when we think about the obscene $20 aspirin you get in the hospital. They charge that price for services they offer because they can. Ok, that’s oversimplifying it, but not too much.

Given that costs aren’t associated with the price healthcare organizations charge for things, I wonder how valuable it is to know how much something costs a healthcare organization. Would knowing this information really change how a healthcare organization operates?

What I think we might find if we do this analysis is that the way things are priced in healthcare really makes no sense at all. However, I think it will also illustrate that there’s no easy path to change the way things are priced in healthcare either. It’s going to take a series of incremental changes that in aggregate will equal a dramatic change. I’m just not sure who in healthcare is patient enough to make these types of incremental changes. Plus, many vested interests will fight against these changes.

I wish I remembered who said this, but I recently read someone who said that insurance companies have hidden behind complexity for years. It’s in their best interest to have things so complex that they don’t make sense so that they don’t have to justify the costs. It’s not just insurance companies that have hidden behind complexity in healthcare either.

As Dan Munro, author of Casino Healthcare, often says, “No one group is to blame for the US Healthcare cost crisis because each segment of the industry is complicit.” Said another way, no one wants to mention that the Emperor has No Clothes. I’m afraid this is why we don’t want to do zero cost accounting and really know how much something costs us in healthcare.