Revolutionizing Costing in Healthcare - Utilizing Supply Chain Master Data

Last month we discussed divorcing ourselves from the use of the charge master as a foundation for cost accounting and embracing the concept of a patient cost master to better track the cost driving activities from each department for each patient. We also discussed various concepts for assigning Labor cost utilizing time-stamp data.




In this issue, we will build on the cost master concept and focus on the integration of standardized and categorized detailed supply chain item data into the patient cost master to provide transparency into actual product costs by patient.





It is our experience that many hospitals and health systems perpetually struggle with the data integrity and interoperability of their supply chain “item master” data.


Although there are exceptions, most of the hospital industry operates its ERP, clinical, and data management platforms in very isolated and unique footprints. The deeper one digs into the data, the more nuances one finds in how hospitals categorize and manage expense and billing codes for supplies, as well as keeping track of the product GPO contract costs for those billable supplies.


Sprinkle in some game-time decisions by physicians on which trunk stock to use, factor in a trail of overworked, non-clinical staff manually filling missing information along the journey to a patient bill, and one starts to accept a 20-30% mystery categorization that is extremely difficult to identify and cost.


Given the disparate and disjointed nature of this data, it poses a rather lofty challenge to reconstruct transparent billable product costs to present an actionable analysis.





In a recently completed project, we had the opportunity to dive deep and engineer a process to populate our cost master with reconstructed transparent billable product costs at the patient level. There was a litany of compromised supply chain data that needed to be renovated as part of our process, however with the help of some algorithms and our Impensa® Master Data, we assembled and automated a successful process to identify and fix the data issues.


For this project, we received three months of various extracts from our clients’ intra-operative documentation system. The files were littered with a typical amount of imperfect, hand-typed lines of mystery data mixed with the usual, “tiny description” items found in the procedure system, and most were wired to the Supply Chain Item master through hidden techniques. As our pilot, we focused on just 41 different ICD-10s related to total-joint procedures for about 250 patient cases.


Rob, our supply chain expert, and Doug, our cost accounting expert, put their heads together to create some enhanced automation and found practically all the missing billable product part numbers (and incorrectly typed part numbers.)


Basic Steps we performed:


  1. Connected the different files from charge codes to clinical documentation to supply chain item master and GPO contracts.
  2. Lined up the billable items of each case and identified all the part numbers including the ones that were missing.
  3. Identified and enriched almost every catalog part number using CostCloud®, our 6-million+ item - standardized and categorized - Impensa® Master Data platform to provide:
  • Manufacturer parent company.
  • Correct Manufacturer Part Number.
  • Item Description.
  • Four-level i-FLEX™ categorization schema.
  • Clinical Noun and Term.
  • Primary Device Identifier and product barcode photo.
  • Brand/Platform/Line of Product.
  • Client’s Charge Code and Price and extended Price.


In the chart below, you can see a small sampling of the results of our project. Each diagram focuses on one ICD-10 Knee Replacement procedure for one patient and one doctor.


Utilizing the Cost Master concept discussed above, and our Impensa® Master Item ID, we were able to assign specific product item cost to the patient, identified by Impensa® curated master data elements:


  • Impensa® Primary Supplier
  • Impensa® Manufacturer Group and Brand
  • Impensa® i-FLEX™ Categorization
  • Impensa® Noun
  • Impensa® Clinical Term
  • Impensa® Bar-Coded Primary DI Code


This provided cost and utilization transparency into types of closure and sealer products, instruments, tool accessories, compression devices, and anesthesia products, by clinical procedure and physician.


CostCloud Patient Data Benchmarking


In Conclusion


This Cost Master was successfully populated with the above master item detail for each patient to provide exceptional true supply cost transparency. With the additional data elements provided by the master data, it allows for additional pivots and drill downs to better analyze and compare your resource consumption by doctor for any patient population. This enhanced accuracy of cost data provides for actionable insights and supports a higher confidence level of margin analytics.


Sustained efforts focused on certain data management areas and clinical documentation will be required to power this new generation of business intelligence. The visibility provided will enable real clinical cost reduction, margin management, monitoring capabilities, improved outcomes, and more.


About the Author - Doug


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