Academic journal article Southern Journal of Business and Ethics

Medicaid Expansion and Activity Based Costing as a Means of Measuring Efficiency and Improvement in Healthcare

Academic journal article Southern Journal of Business and Ethics

Medicaid Expansion and Activity Based Costing as a Means of Measuring Efficiency and Improvement in Healthcare

Article excerpt

The ACA and the Medicaid Caper Issues with Medicaid

From inception, Medicaid has battled issues such as widespread fraud, budgeting and physician retention and recruiting. According to the U.S. States Attorney Office, the frauds can be as simple as intentional overbilling and as complicated as fabricating home hospice care. One fraudulent perpetration included fabricating billing to the D.C. and Maryland Medicaid program for more than $75 million (Attorney General, 2014). In response to these frauds, the Offices of Medicaid Inspector General (OMIG) have appeared across the nation (Wenik, 2010). To indicate the level of support for improving Medicaid billing and fraud prevention the offices were established at the state level and target Medicaid fraud and abuse with auditing and investigative resources (Wenik, 2010). If a state employs an OMIG, the state mitigates or eliminates the potential for a healthcare entity to commit fraud with auditing and investigative actions. The OMIG also mitigates criminal prosecution for unintentional misrepresentation, over-billing, or other Medicaid claim issues through self-reporting and self-disclosure (Wenik, 2010).

Budgeting for Medicaid on a state and federal level remains an ongoing issue. Funding for Medicaid is based on expected costs that incorporate unforeseen costs (Susswein, 2001). Because healthcare budgets on predictable numbers and unforeseen expenditures, with unforeseen expenditures being a number based on an assumption about potential costs, healthcare has regularly outpaced available funds (Susswein, 2001). It is difficult for any organization to budget for healthcare costs when considering the presence of unpredictable variations (Aaron, 2009). Unpredictable variations, coupled with a changing environment and the natural heterogeneous nature of healthcare, create a chaotic environment for budget creation and require a rolling forecast (Coulmas & Law, 2010). ABC will allow the measurement of the variations so that they can better controlled.

In order to increase the healthcare system's adaptability, not only does the healthcare system need to use a more efficient costing model, such as activity based costing for cost reductions and improved cost management, there should also be activity based budgeting to advance continuous improvements, facilitate cost and activity management, and increase efficiencies (Coulmas & Law, 2010). Activity based budgeting identifies and links operation's key activities with drivers and produces an integrated view of the business that allows management to focus on incremental improvements rather than budgeted targets. Financial performance is important, but managerial control over improvements is imperative for improving operations. ABC will help identify the variable costs to facilitate more accurate budgets.

Physician Payments

Medicaid's biggest issue is attracting and retaining quality physicians. Medicaid's low reimbursement amounts, administrative burdens and delayed payments discourage physician participation and leads to a shortage of quality, and available physicians (Cunningham & O'Malley, 2009). Despite attempts to increase reimbursement rates, Congress has been unable to offset the negative effects of delayed payments and administrative burdens in order to attract physicians (Cunningham & O'Malley, 2009). Implementing a sound accounting method will not only strengthen the healthcare system's financial position, but also attract physicians, and empower them. In the medical community, there is an absence of fundamental understanding about what it costs to deliver complete patient care. This lack of understanding specific costs leaves the providers unable to implement reliable cost reductions or effectively link cost to process improvements or outcomes (Kaplan & Porter, 2011). Activity based costing helps identify the costs which change by activity, such as individual patient treatment modalities, and this allows the assignment and control of new costs. …

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