ACTIVITY BASED COST ACCOUNTING for HEALTHCARE
Cost accounting in the healthcare industry is extremely labor-intensive to perform accurately without the precise data that activity-based cost accounting software for hospitals can provide. The same hospital trying to calculate costs for the same set of patient procedures could get noticeably different results depending on the costing methodology and the sophistication of the tools and methods it utilizes—a variance in cost accounting data accuracy that could negatively impact budgets and reported profits by millions of dollars over time. For a healthcare organization to effectively monitor and report profitability, it’s crucial to have the most accurate cost accounting data possible.
Most healthcare finance professionals consider activity-based costing to be the most precise cost accounting method for the unique nature of the healthcare business. Correctly implementing and maintaining a sophisticated approach to healthcare cost accounting requires significant staff effort compared to simply plugging in cost-to-charge ratios (RCCs), which are not dependable for close margin analysis. Our activity-based cost accounting software for hospitals delivers the highest level of cost data accuracy while being drastically simplified and largely automated through the CostFlex activity-based Procedure-Level Cost Accounting solution.
TESTIMONIALS
“Our region was up and running with accurate cost data in a few short months with CostFlex. The other regions in our organization made million dollar mistakes with a consultant staffed approaches to standard costing that were scrapped after two long/full years of work. I am pleased to endorse the CostFlex product methods.”
— Chief Financial Officer 600 Bed Organization, Midwest Region
“At my Critical Access facility, CostFlex provides the cost data accuracy I need with the least maintenance requirements of any system I have encountered.”
— Chief Financial Officer Critical Access Facility, Western Region
“In a few years since we started using CostFlex, we have averaged over $3 million a year in underpayment recoveries.”
— V.P. of Finance 4 Hospital System, Southeast Region
“Through the years, I have been a CFO with HCA and similar sized healthcare providers. I have never experienced the type of support I receive constantly from the CostFlex team. As a current CFO and CFO group member with my state’s hospital association, I endorse the tools and company constantly.”
— Chief Financial Officer Critical Access Facility, Western Region
“I appreciate the way the CostFlex team cares for my hospital. Their culture of customer service is first class. I have never worked with an outside vendor that has had such a proactive approach in finding ways to help me meet my hospital’s needs.”
— Chief Financial Officer 100 Bed Organization, Midwest Region
“CostFlex is quite simply the best software purchase decision I have made as CFO at the hospital.”
— Chief Financial Officer 600 Bed Organization, Midwest Region
“CostFlex is providing the information that supports our business plan.”
— V.P. of Finance 2300 Bed Hospital, Southeast Region
“As I always tell everybody, your firm is unique in the way you respond to customers. I am always happy to be a CostFlex client reference I want the world to know that CostFlex always delivers.”
— Chief Financial Officer Critical Access Facility, Western Region
“I created a variance report that identified over 5 million dollars in potential underpayments. Needless to say, this tool has been especially successful.”
— Director of Decision Support 500+ Bed Organization, Western Region
"I have been using CostFlex's Cost Accounting System for over three years and my organization for 22 years. It is an excellent costing system, and they continue to make meaningful enhancements to the system to meet the needs of the end user. Their customer service is awesome. The personal attention they give to the client is unmatched. I personally have not had a company take care of their clients like the people at CostFlex. Love working with their system and team. Keep up the great work CostFlex! Your clients appreciate all you do."
- Chad, Summa, Ohio
WHAT IS ACTIVITY-BASED COST ACCOUNTING (ABC)?
Hospital activity-based costing is a method of directing all known expenses to the cost components of the specific services that received benefit from the expense dollars. Unlike other costing methodologies that add the hospital’s average overhead expenses per procedure to each service after the fact, activity-based cost accounting in hospitals considers more service-specific factors beforehand, delivering more accurate results for better reporting and better decision-making. Having the ability to correctly align expenses with the work tasks unique to patient care, to consume 100% of known expenses into costs, and to devote greater attention to the individual costs associated with each procedure makes activity-based costing the best decision-support accounting method available for hospital financial management today.
Because the CostFlex proprietary solution is designed to align 100% of the monthly GL expenses with the work and procedures that were performed in the same fiscal month, the result is a fully burdened cost accounting data file at the procedure level where, through the use of patient detailed data collected, the costs will accurately and automatically roll up to the patient level to create dependable patient and service line costs. Through easy-to-navigate client interfaces to the CostFlex databases, patient demographics are used to create custom patient service lines for user-defined reporting of accurate cost accounting data at the patient/service line level. Understanding and trusting the total cost of each procedure helps healthcare facilities manage their budgets comfortably and generate KPIs for cost-reduction and control efforts.
THE COSTFLEX ACTIVITY-BASED COST ACCOUNTING SOLUTION
The idea of activity-based cost accounting isn’t unique to the healthcare industry, but generic software is unlikely to get the most accurate results for a healthcare provider facility. CostFlex’s activity-based cost accounting software for hospitals was designed specifically for healthcare, and as a result, we deliver the highest cost accounting data accuracy on the market today. Our solution automatically ties a healthcare provider organization’s costing data to its monthly financials, enabling convenient reporting and allowing administrators to monitor their profits and losses throughout the year rather than just once or twice annually.
Product maintenance for our Procedure-Level Cost Accounting solution has the lowest staffing requirement in the healthcare decision support software industry when comparing the sophisticated costing approaches available—our tools run efficiently with minimal input from your staff, reducing your organization’s labor expenses. Regular maintenance and customer support are available to you in perpetuity, and we’ll distribute the latest version of the software each quarter so you’ll always be up to date.
The sooner you have accurate hospital activity-based costing data, the sooner you can identify areas for improvement and start maximizing your profits. CostFlex helps our clients act quickly by completing turnkey software installations, including staff training, in eight weeks or less every time. You’ll be assigned a dedicated project manager that will keep installation moving on schedule and answer any questions that arise during the setup process.
CostFlex’s commitment to excellent customer service goes far beyond the initial installation period. You’ll have ongoing access to our all-star support staff, made up entirely of development programmers with firsthand knowledge of our software solutions (we don’t believe in third-party call centers). Most support issues can be resolved at the time of contact, but if anything needs extra attention, we guarantee a response within 48 hours.
FAQs
- What is Activity‑Based Cost Accounting software?
Activity‑Based Cost Accounting (ABC) software helps hospitals calculate the true cost of patient procedures by assigning expenses based on the activities and resources used to deliver care—so you can trust the numbers behind margin conversations. - Why is Activity‑Based Cost Accounting important for hospitals?
When margins are tight, small costing errors scale fast. Activity‑Based Cost Accounting gives hospitals more dependable cost accounting data for profitability reporting, budgeting, and financial decision‑making than simplified approaches, reducing the risk of making high‑stakes decisions on shaky cost assumptions. - How does Activity‑Based Cost Accounting differ from traditional cost accounting methods (RCCs)?
Traditional cost‑to‑charge ratios (RCCs) can be too blunt for close margin work because they rely on broad averages. Activity‑Based Cost Accounting allocates costs based on actual resource usage, which supports more credible margin analysis and service line decisions. - What does CostFlex Activity‑Based Cost Accounting software do?
CostFlex Activity‑Based Cost Accounting software simplifies the ABC approach so hospitals can produce consistent, procedure‑level cost accounting without turning costing into a never‑ending consulting project. The result is cost data you can use for routine leadership reporting and profitability reviews. - What level of cost detail does CostFlex provide?
CostFlex provides procedure‑level cost accounting, helping finance teams see cost and margin performance at a level that supports service line profitability work, payer review, and strategic planning—without relying on broad averages. - How long does it take to implement CostFlex Activity‑Based Cost Accounting?
Hospitals using CostFlex have reported getting to accurate cost data in a few short months, which is materially faster than many consultant‑staffed or manually maintained costing approaches that can take much longer to stabilize.
USE ACCURATE ACTIVITY-BASED COSTING IN YOUR HOSPITAL
CostFlex’s full suite of healthcare decision support solutions offers everything an organization needs to excel in its market. If you’d like to see our Procedure-Level Cost Accounting solution in operation before signing on with CostFlex, fill out our demo request form. If you aren’t satisfied with our software after making a purchase, you are entitled to a full, unconditional refund for up to three months after installation. Please contact us at your convenience with any questions about our software or services.