Cost Utilization Analytics

Utilization can be measured as the number of services provided to a patient, such as the number of X rays. More often, however, a variety of procedures and services are of interest, and some measure of “cost” is assigned to each service so that resource intensity can be summed over all provided services. Here we use the word “cost” for simplicity; however, our examples are based on billed charges, which differ from the amount paid because of discounts, deductibles, copayments, and coinsurance. Billed charges do not represent all of a person's costs, because patients may have other coverage and typically pay for many costs out of pocket.

Billed charges rarely represent the cost to the provider of providing a particular service, because the actual cost of a procedure is difficult to define and calculate. Some providers use step-down accounting systems that allocate fixed overhead expenses to particular services. The cost estimate for, say, a mammogram, which results from such a detailed accounting process is appropriate from the accounting perspective, but it may vary substantially in a short period of time, owing to changes in the volume of mammograms performed or to shortfalls in seemingly unrelated parts of the system. Such data must be used with care in research.