Logistics business practice changes for the managed care environment: inpatient consumable supply cost capture by patient, provider, and DRG

Abstract

The Department of Defense has implemented a new strategy called managed care to control costs, to improve access to care, and to optimize the size of the Military Health Services System. Capitation based resource allocation has significantly changed the incentives of hospital commanders, because they are now possible for the cost of all care provided to beneficiaries within their catchment area. This includes care provided both in-house and care that was previously provided under CHAMPUS. Thus the previous practice of demand shifting will not alleviate potential budget problems. This study recommends business practice changes that are required in order for Navy Medicine to compete in this new environment. The changes include pursuit of a product-line type accounting system, and an integrated Materials Management Information System capable of supply cost capture by patient, provider, and diagnosis. Current cost accounting and logistics practices only provide aggregate supply assumption data segregated by work-center. In order for the Department of Defense and the Services to provide quality care in the most cost effective manner, actual cost data must be captured by patient provider, and diagnosis.