by Tom aka Rusty Rustbelt
Health Care: Reinhardt thinks about (health) accounting
Uwe Reinhardt (Princeton) is one of the world’s preeminent health care economists. In a NYT piece he makes an interesting attempt to define a new “health care accounting.” ( and see his earlier pieces mentioned in the article)
Reinhardt explains and critiques the evolution of financial accounting, and then draws parallels about how we might use some of the same tools and techniques to develop a new “health care accounting.”
Prof. Reinhardt oversimplifies and mischaracterizes financial accounting (space limitations the probable culprit) and some of the parallel fit and some do not (and health care accounting does not 100 years to evolve). Financial accounting is not without its problems.
I imagine Reinhardt knows something about the current efforts in benchmarking and cost analysis, so he is not completely in the realm of theory..
I would propose a slightly different parallel – not all accounting is financial accounting, managerial accounting has a much more diverse tool kit and may well offer a better framework for some aspects of a new health care accounting. Less public, more practical. This is actually the sort of analysis Reinhardt is promoting.
As I explained to students for many years, financial accounting is rule drive whereas managerial accounting is need driven, drawing from a big toolkit and utilizing both historical and prospective data and analysis, even economics. Cost accounting, a subcategory of managerial, is widely used already (e.g., provider cost reports) in health care.
Having read hundreds of pieces (journalism, opinion and scholarly) on health care in the past year, this piece is one of the most interesting. Economics marries managerial accounting and clinical benchmarking? Some potential here.