The implications for information system design of how health care costs are determined

As the costs of health care assume increasing importance in national health policy, information systems will be required to supply better information about how costs are generated and how resources are distributed. Costs, as determined by accounting systems, often are inadequate for policy analysis because they represent resources consumed (expenditures) to produce given outputs but do not measure forgone alternative uses of the resources (opportunity costs). To accommodate cost studies at the program level and the system level, relational information systems must be developed that allow costs to be summed across individuals to determine an organization's costs, across providers to determine an individual patient's costs, and across both to determine system and population costs. Program level studies require that cost variables be grouped into variable costs that are tied to changes in volume of output and fixed costs that are allocated rationally. Data sources for program-level analyses are organizational financial statements, cost center accounting records, Medicare cost reports, American Hospital Association surveys, and the Department of Veterans Affairs (VA) cost distribution files. System-level studies are performed to predict future costs and to compare costs of alternative modes of treatment. System-level analyses aggregate all costs associated with individuals to produce population-based costs. Data sources for system-level analyses include insurance claims;n Medicare files; hospital billing records; and VA inpatient, outpatient, and management databases. Future cost studies will require the assessment of costs from all providers, regardless of organizational membership status, for all individuals in defined populations.