When you’re lost, use a map…

see also: TA(throughput accounting) and TDABC (time driven activity based costing)…the fabric, the ‘warp and woof’ of healthcare accounting?

I had a brief, but interesting conversation with a CMO of a large hospital recently.  To his credit, he’s trying to make a dysfunctional hospital run better.  We talked about the OR, and how the hospital is effectively paying the surgeons to show up 10 minutes early to start cases. I’ve already discussed the actual mechanics of surgeons not showing up early for cases in the paper OR Start Time Costs under the ‘scheduling’ tab of this blog (a bit dry, but if you understand it, it’s quite enlightening).

To me, paying surgeons to show up on time for cases is a strategic error.  It increases cost, will not work well for long, takes a lot of finagling to make it legal, and keeps the hospital from coming up with a real solution.  I diagrammed the ‘thought process’ below to try to show another solution.  Most of the premises I make are supported by documentation earlier in this blog.  I have not yet supported the premise that cost accounting is EVIL.

A quick rant…

Cash flow is where it’s at. Capital budgeting is done with cash flows, and once you’ve purchased something, it’s a sunk cost…Make the most of your purchase by looking forward and maximizing your cash flow from then on.  You already tried to guess what direct costs would be for your products, but chances are you weren’t correct (unless you have a crystal ball), and chances are that many other things will have changed as well.  From then on, you adapt, and maximize your cash flow with whatever you have.  There are multiple analogies to everyday life, and most people would do the ‘right’ thing if it weren’t for cost accountants, many who were trained to be CPAs who are trained to deal with the IRS which makes up complicated rules to get their cut of the take. The concept of ‘real options’ has helped financial decisions become realistic, and ‘real options’ deals with cash flow… not cost accounting.

rant is over…

Below is the ‘thought process’ map I made to show a strategic decision process in deciding how to decrease costs and increase surgeons’ cases in the OR.  If you don’t understand it, enjoy it as art. Click on the map to enlarge it.

About Brian D Gregory MD, MBA

Board Certified Anesthesiologist for 30 years. TOC design and implement for 30 years. MBA from U of Georgia '90: Finance, Data Management, Risk Management. Practiced in multiple US states and Saudi Arabia at KFSH&RC and KFMC Taught residents in two locations. Worked with CRNAs for 20 years.
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