LifePoint Health Improves Cost Accounting Data Accuracy and Efficiency

LifePoint Health is a community hospital provider operating 61 hospital campuses in 20 states with more than $3.7 billion in revenues, 32,000 employees and 3,400 physician partners. As costs rose and reimbursements continued to shrink, Brentwood, Tennessee-based LifePoint Health had important decisions to make to ensure profitable growth in both the short-term and long-term. However, its costing system was fraught with issues that wouldn’t support its growth strategy. Time intensive, manual processes prevented the health system from providing timely cost data for critical decisions. “We were doing costing but it was so time and labor intensive. Our analysts were only doing maintenance in the system but they weren’t analyzing anything,” says Aaron Frazier, Manager of Strategic Resource Group at LifePoint Health.

Reporting on the cost data required exporting to another system for cleansing, analyzing and reporting. But the largest issue was the lack of transparency into the costing data which left decision makers with little confidence in costing metrics. “The old system was a black box. We put data in but we didn’t know how costs were calculated,” Frazier says.

LifePoint Health chose Axiom™ Cost Accounting and Decision Support and implemented a more streamlined, automated process that involves taking a series of financial and clinical inputs, applying value-added processing to transform the data, and generating outputs that support strategic and tactical planning. The resulting data takes the form of a series of reports (some of them online and interactive, others off-line) that encompass service line and payer trends, population and physician analysis, strategic modeling, and workload projections.

Strategic impact

“We take a data-driven approach to everything at LifePoint,” says Frazier. “We have recently divested four hospitals and the costing data was very heavily utilized in that decision.”

LifePoint Health analyzed many scenarios of how to adjust services at several unprofitable hospitals to continue operations. After detailed modeling and analytics, it became clear that they could not support a viable path forward. The costing data was instrumental in this process.

Costing data, including contribution margin per service and per encounter, has played a critical role in determining market opportunity and investing in growing service lines. The organization also uses volume, costs, and contribution margin data to negotiate with payers at the service line level for reimbursement rates, which has helped them stay competitive and profitable.

Transparency and confidence

One of the goals of this new costing solution was to give hospital CFOs and service line leaders an intuitive model that showed clearly where their general ledger (GL), year-todate costs were coming from and how each cost should be allocated for each procedure.

“In the Axiom solution, costs and cost allocations are very transparent. Users have access to see what overhead is being allocated to their departments,” says Frazier.

Today, executive reports are tailored to show precisely how dollars map from indirect to direct departments, and to identify areas where costs could be allocated directly to patients. Hospital CFOs and service line managers understand how costs are allocated and trust the data for use in decision making. They can access interactive reports ongoing to answer their questions and inform decisions.

“The CFO can click three buttons and get 90% of his questions answered by service line, by physician, etc. with over 25 variables to choose from,” Frazier says.

Efficiency, Accuracy and Scalability

With the new solution in place, data processing and reconciliation now takes four days instead of four weeks. Rather than auditing cost allocations at 61 hospitals each month, LifePoint now conducts automated, scheduled audit checks that issue alerts to hospital CFOs and service line leaders when more than 2% variance exists in the data, ensuring that costs are fully allocated.

The scalability of the solution and the accompanying process is imperative as LifePoint frequently adds new hospitals to its network. Frazier adds, “We can get new hospitals up and running in two weeks.”

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