Anyone who has ever tried to find the cost of a medical procedure knows the frustration. Try calling a hospital and asking how much an appendix operation runs. Or how about delivering a baby? Medicine is complicated, so perhaps it isn’t surprising that it can’t be priced like lawn mowers at Home Depot.
But here’s the reality: Health care providers don’t know what the services cost themselves, so it’s no wonder their prices are mysterious.
University of Utah Health Sciences Senior Vice President Vivian Lee admits as much in a Tribune article about how the university’s health care system is trying to figure out its true costs. "The bill is just a made-up number," she said. "The true problem in health care is we don’t understand our costs. If you don’t know your costs, you can’t drive down health spending in this country."
Enter big data. The university has launched an effort called "Value-Driven Outcomes," which pulls together the university’s top thinkers in medicine, business and information technology to analyze information from thousands of hospital visits and procedures to calculate the true costs — and the true efficacy — of routine and not so routine health care. Looking at everything from time spent in X-ray to how many stitches are used, the team has identified 500 strategies for eliminating inefficiencies and saving an estimated $7.1 million in costs. And it’s not just dollars saved. Data analysis also identifies weaknesses in treatments, leading to better care.
It’s not a new thing. In fact, Utah’s Intermountain Healthcare has been a leader in medical informatics for more than 50 years, thanks to the pioneering work of Dr. Homer Warner, who began analyzing medical data on room-sized computers at LDS Hospital in the 1950s. But it is a big step for academic medicine, where top doctors have been more resistant to taking advice from crunched numbers.
Costing analysis is complicated, full of pitfalls in assessing both the variable costs of needles and gauze and the fixed costs of bricks, mortar and $2 million imaging gizmos. The cost assessment is then passed on to products and services in much the same method that produced $600 toilet seats on military jets. Costs must be covered somehow.
But good costing is essential, and it’s been missing in U.S. health care. Regardless of who pays the bills — and we all know the political struggle over that — we need to have bills that reflect reality. University Hospital is heading in that direction.
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