The Path to Accurate Cost Accounting: A Rigorous but Critical Journey

Across healthcare, there is a pressing need to understand the true costs of delivering care. This report, developed for the American Hospital Association, discusses the limitations of commonly used cost-accounting methodologies that are based on charges. It describes alternative cost accounting methods used by many healthcare organizations that better reflect the complexities of healthcare costs, such as the HFMA-Strata L7 Cost Accounting Model. The L7 model defines seven levels organizations can advance through for greater clarity on the true costs of providing care.

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