In Praise of ABC Accounting

Richard S. Helsper

At Duke University Hospital, internal benchmarks have been used to continuously measure performance against departmental standards for more than 6 years. Using data from an outside source is better than having none, but improving against internal benchmarks is one of the most efficient methods of measuring department status and determining goals for the future.

Best practices can be helpful, but they may leave questions unanswered. If one hospital does more pediatric cases, less geriatric, and higher more oncology (with contrast), then it can have the exact same volume as another facility, but very different requirements. Benchmarking can identify best practice; however, it does not always demonstrate similar practice. Radiologist preferences, referral demands, and local market competition can all have dramatic impact on throughput and productivity. One hospital in a community with no outpatient imaging centers can run a practice with mild delays and a specific turnaround time on reports. How does one compare this facility to a hospital surrounded by competitors, three imaging centers, and the only thing that keeps the patients coming through the door is superior service and faster turnaround times. This does not suggest that the first hospital provides poorer service, only that it has different market pressures, and this permits a level of flexibility not enjoyed by others. Few health care organizations today, though, enjoy semimonopolistic powers.

What follows is a list of benchmark criteria that should be carefully monitored for accurate, true relative comparisons. If unmonitored, inconsistencies between the entities being compared can result in errors that can sway the numbers significantly.

1. Who funds nursing staff (department, pool, and floors)?
2. Which department’s budget picks up transcription (none due to voice recognition, department, radiologist, medical records)?
3. Transport services (centralized, department, section). There is nothing worse than leaving an MR open because there is no one to do the transport, and as a result, one less study is performed that shift, day after day x 2 shifts.
4. Scheduling (Is it done within radiology? Centralized? By the technicians in some sections and by the doctors’ secretary in others?).
5. Front desk responsibilities. Who registers patients? Are they registered centrally, at point of service, in the doctor’s office?
6. Patient breakdown. What is your procedure mix? Identify the percentages of interventional CT vs routine brain without contrast, as well as the percentage of contrasted examinations in MRI, CT, pediatric, geriatric, walkie- talkie, outpatient vs inpatient, vascular, neurological interventional, and catheterization laboratory. Identify who staffs, who controls the room(s), and who provides nursing and sedation.
7. Type of institution (academic, tertiary, pediatric, and community).
8. Hours of operation (Monday through Friday, first shift plus call, 24 hours/365 days, light weekends, full weekends).
9. Staffing availability (Is the community large so that part-time people are available, such as in metropolitan areas, or is it a small town? Does every specialized technician in the city already work for you, so that if you want to expand, you have to look great distances to hire?).
10. Workload peaks (Is the organization in a seasonal community such as Palm Springs or Wilmington Beach?).
11. What do the technologist responsibilities include (transport, scheduling, starting IVs, pushing contrast, front desk work such as calls from floor for next patient, arranging stats, or simply doing CT or taking radiographs)?
12. Payroll (centralized office, or is responsibility pushed down in larger organizations to the department manager).
13. Secretarial staff (Is it servicing everyone from physician to managerial staff? Is it split, separately funded, shared with other departments, nonexistent?).
14. Administrative duties (Who negotiates for supplies and capital equipment? Department, physicians, purchasing?).
15. Union (Who is represented? Is staffing addressed?).

Figure 1. Example of X-ray data collection tool. Courtesy of Joseph G. Cesari, Jr., management engineer, Duke University Medical Center, Durham, NC.

This is only a partial list. The purpose of this article is not to suggest that benchmarking is bad. However, it is important that the above criteria be accounted for when comparing practices from a global perspective. If sufficient volume exists, it is less expensive to have others provide some of these services while the RTs do their job (see number 11 above). There is such a national shortage of technologists, it may be easier to hire for other positions (except maybe nursing) and let the skilled radiographers do their job, while support people paid at a lower wage do the less technical work. This, of course, may not be appropriate in a smaller organization; economies of scale come into play. But what made sense even 5 years ago may be shortsighted today.

Procedure Cost Accounting

Another approach, and one that was taken at Duke, is to look at costs at a procedure level. Productivity standards and knowing true costs as a concept are possible in health care, and radiology specifically lends itself well to this approach. Three years ago, an estimated 5-10% of hospitals nationally used activity-based costing standards. The number has grown since that time, and will grow exponentially with any increase in cost pressure. There is always the issue of how much activity-based cost (ABC) accounting costs (more detail equals more cost), and what value is derived from the data. In health care, and specifically radiology, this requires knowing the labor component at a procedural basis. If we do not know our costs, how can we make good strategic decisions? How can we add CT, expand into an outpatient imaging center, open a nuclear cardiology or positron emission tomography service, or even close a clinic if we cannot know or estimate costs?

Figure 2. Example of X-ray data collection tool. Courtesy of Joseph G. Cesari, Jr., management engineer, Duke University Medical Center, Durham, NC.

The Basics

The basic components of ABC accounting include the time per procedure by employee type, which allows a department to determine its labor costs at a procedure level. It is also necessary to know what the worked target is (unit X time required/ time worked) since very few areas work at 100%. This is required for each cost type category (RT, RN, reception, file room, courier). When completed, it will offer an accurate picture of where excess manpower exists, and where it needs to be Special Projectsed. With the movement away from traditional radiography, and toward an explosive growth in the more complex areas of CT, MRI, and ultrasound, the standards that were researched and determined years ago for any organization are inevitably no longer valid today.

Assessing the specific nature of a practice is critically important. If most of a department’s patients are conscious and ambulatory and the department at the neighboring hospital has a large percentage of pediatric patients and high acuity adults requiring conscious sedation, it is impossible to compare the two departments when it comes to work load standards. The reimbursement may be the same, but the reality is that the services of one department are more expensive to provide than for the other.

There has been a lot of discussion about measuring productivity. If radiology administrators do not know how to do it, it very well may be done for them by those who do not understand the difference between a chest radiograph and a CT chest scan. This requires that standards be engineered or, at the very least, understanding the process. It can be done accurately, completely, and with the agreement of the supervisors who then are subject to its results. (Time of study, who does what work, rates of pay, hours worked vs paid, supplies, maintenance costs, depreciation if appropriate are all subject to this process.)

Figure 3. Variable labor procedure standard calculation for the radiologic technologist. Courtesy of Joseph G. Cesari, Jr., management engineer, Duke University Medical Center, Durham, NC.

Educating the Administration

Is a chest radiograph equivalent to a CT from a cost standpoint and staffing perspective? Of course not, but senior administration is looking to the radiology directors to educate them in an executive summary fashion so that they understand the implications. When senior administration sees data, how they interpret the information is critical to their decisions. This is where the radiology director’s role comes into play. Radiology management must work with the financial people to develop an accurate method of describing performance. It is important to speak the same language, or data (which may or may not be accurate) may be misunderstood and poor decisions result. It can take years to recover from a poor decision made with the best of intentions.

Everyone has seen models where the overall volume remains flat, but case mix changes from routine diagnostic to specialized imaging (CT, MR, ultrasound, and interventional). In this manner, it is possible to actually increase the expense budget and yet still reduce the cost per procedure. This is what the chief executive officer needs to see and understand. Historical data showing past improvements and case mix changes along with current data help to make the case, when appropriate, that perhaps the department already provided an appropriate return on investment (or confess the opposite occurred, being equally important). Having data at a procedure level allows you to make suggestions supported by data when both consultants and administrators, looking for a quick fix, recommend, “Volumes are flat, cut 10% in expenses.” This scenario truly can kill a thriving practice and is less likely to happen if there is an in-house expert on productivity in the department.

All in all, activity-based cost accounting (procedural costing) is here to stay. Many managers may not believe in it; however, the CEO, chief financial officer, and many others do. When done properly, it can work. In many places, it has been a powerful and useful tool. In the end, it is prudent to be involved with the process.

Richard S. Helsper is administrative manager, Department of Radiology, Duke University Medical Center, Durham, NC.