Development of an HMO Cost Management System
Research in Healthcare Financial Management, Vol. 8, No. 1, 31-41.
Posted: 8 Nov 2016
Date Written: October 18, 2003
A large HMO's financial reporting system was geared solely to providing information needed for external regulatory reporting. The system was unable to provide the information needed to effectively manage the HMO's health centers and their constituent medical departments. This paper describes the development by the HMO of a new financial reporting system designed to provide the detailed information needed to manage its health center operations. Design of the system required consideration of appropriate ways to measure departmental revenues, resolve information system issues, and allocate expenses to departments. The new system provided health center administrators with a tool that enabled them to focus on improving the organization's decision making and its cost effectiveness.
Keywords: health care, HMO, activity based costing, performance management system
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