Measuring diagnosis and patient profitability in healthcare: economics vs ethics

Abstract

Abstract. Th is paper focuses on issues relating to gauging profi tability under circumstances in Czech healthcare organizations. At present, the trend in healthcare management is for more frequent utilization of advanced economic and cost accounting tools. Th ese qualitatively improve the decision-making process in healthcare establishments, as well as aiding provision of accurate data on the cost and revenue of the outputs of hospital organizations, such as the various diagnoses and types of patients. Herein the authors present analysis of the profi tability of such patient and diagnose-types (DRG) in selected hospital departments of Czech regional hospital. Revenue from insurance payments is compared with costs calculated via the Activity-Based Costing method so as to discern more accurately the proceeds of a given DRG and patient. Th e results of the study highlighted crucial diff erences between the income generated by individual cost objects (i.e. patients and DRGs). Utilizing such information could greatly benefi t decision-making and enhance cost eff ectiveness of the hospital services. However, any healthcare establishment worldwide is strictly curtailed in this by the ethical standards it must uphold when making decisions on potentially raising profi tability. Th e fi nal part of the study discusses the fi ndings of the profi tability analysis performed by the authors in the given context of general healthcare organizations management.

The Management Accounting Practices in Healthcare: The Case of Czech Public Hospitals

“…As Pizzini (2006) concludes in an empirical study examining the relation between the cost-system design, the managers´ evaluation of the relevance and usefulness of the cost data and performance, functional cost systems supply the managers with more relevant data which they in turn use to make performance-enhancing decisions. Studies examining the implementation of activity-based costing (ABC) in healthcare (Popesko et al, 2015;Jericó & Castilho, 2010) often promote informational supremacy of this costing practice over more conventional costing practices, such as absorption costing, especially in the area of inpatient care where the costs arise primarily in relation to activities and procedures. But the challenges associated with the implementation of ABC necessitated its modification resulting in the development of the time-driven ABC (Keel et al, 2017;Campanale et al, 2014;Kaplan & Anderson, 2003).…”

“…Additionally while the measure of activities related to the given patient may vary and thus accounts for the differences among patients, the reimbursement does not change, since the idea of the DRG system assumes that patients with similar diagnoses require a similar level of treatment. Studies dealing with this issue (Popesko et al, 2015;Jericó & Castilho, 2010) advise the use of ABC practice as being able to more accurately determine the cost of the patient case in comparison to absorption costing. However, to date there have not been created any official regulations or guidelines promoting the use of this practice in larger scale.…”

Health and limitations in health as the determinant of human capital effectiveness: perspective of the EU Member States

“…A wide approach to the problem of the infl uence of the lack of health on the value of the product lost by society constituted the grounds to formulate an overall defi nition of the so-called indirect disease costs understood as a loss of social well-being following from lost production as a result of temporary absence from work and premature mortality (WHO, 2009). At the same time, the management of society's health care funding began to be equated with the process of allocation of investment funds and with the tool of a stimulation of social and economic development (Suhrcke et al 2006;Popesko et al 2015).…”

Strategic Map for Hospital Management: Perspectives and Priorities

“…2) (Verzola et al, 2009). What is important in this modification, that financials are the resource, not en effect (see Popesko et al, 2015).…”