Robert Kaplan: Management accountants are crucial to the future of healthcare


By Rebecca McCaffry

Management accountants are the fundamental lever for transformation in the healthcare system, said Harvard Business School Professor Robert Kaplan at a CGMA lecture in London earlier this month.

Historically, issues with healthcare costing revolve around a failure to measure outcomes, combined with poor understanding of the costs themselves. As Kaplan stated, “we can’t manage what we can’t measure.”

Kaplan’s time-driven activity-based costing method, detailed in the Harvard Business Review article “The Big Idea: How to Solve the Cost Crisis in Health Care” makes patients and their conditions, rather than departmental units, procedures, or services, the fundamental unit of analysis for measuring costs and outcomes.

Of course, such an approach requires an in-depth knowledge of individual conditions, meaning that specialist hospitals are at distinct advantage. Here in the UK, the Liverpool Heart and Chest Hospital finance team worked closely with clinicians to develop a costing system using risks and outcomes as measures; while Moorfields Eye Hospital’s outcomes-based system, still in its infancy, has already identified significant savings. This is not to say that a general hospital cannot adopt Kaplan’s method; a successful pilot scheme in one department could trailblaze the way.

The UK successes reflect Kaplan’s advice; work with clinical staff to establish process maps for each condition, based on the patient’s ‘journey’, before identifying the relevant resources and the cost of each. In many cases, Kaplan found that resources were used inefficiently; ultrasound clinics, for example, being used as meeting rooms for doctors and patients; senior surgeons carrying out routine operations.

Focus on the patient care cycle, rather than line item expenses, is particularly relevant when considering the cost of a drug. Restricting the use of more expensive drugs is frequently seen as an easy way to control costs, but this is false economy if cheaper drugs are less effective, resulting in a longer and costlier care cycle.

Overheads, in particular, need to be re-examined closely; as Kaplan says, “There are no fixed costs, only inattentive managers”. Clinical and administrator buy-in is essential; cross-functional working is the only way to avoid the ‘them and us’ mentality that is often witnessed between finance and medical departments.

A challenge, indeed - but well within the established arena of the management accountant. The fact that we are all potential stakeholders in the healthcare system provides us with extra impetus.