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Cost Management for Contracts, Budgeting and Tracking

Cost of Service

Behavioral health providers are faced with a transforming healthcare industry that requires them to develop partnerships with Accountable Care and Managed Care Organizations responsible for managing the cost overall consumer care. This will require that behavioral health providers now must define their value in quantitative terms to obtain the necessary partnerships, manage the contracts on an ongoing basis to ensure they achieve the partnership goals, while maintaining a sufficient level of profitability to be able to continue as an ongoing concern in the new healthcare environment.

To support these goals, behavioral health providers will need better tools than currently exist in the industry - tools that allow them to:

  1. Calculate the cost per consumer for a given set of service types

  2. Establish rates to be negotiated with ACO/MCOs

  3. Set realistic budgets based on the actual cost of service delivery

  4. Manage services delivered to budget over time to ensure financial solvency.

iCentrix Analytics has created an platform that addresses the entire behavioral health life-cycle and calculates the impact of utilization and efficiency at every step of the life-cycle on revenue and cost.  This approach allows you to compare Revenue to Cost in real time while recognizing cost overruns as well as identifying opportunities for recovery. 


The key data model enabling characteristics include revenue per clinical service event, sourcing loaded cost per staff revenue per clinical service event and aggregation by any dimension.

• Cost of Service


• Determine cost per consumer


• Analyze relevant dimensions (program, episode, diagnosis, payer, geography, etc.)


• Establish contract budgeting baselines


• Automated distribution to stakeholders (cost of service dashboards)

Revenue Cost (1).jpg
Revenue vs. Cost  - VIEWS  Dashboard

Cost Model - Methodology

Measuring in hours provides a direct path for incorporating cost, including budgeted cost to analyze appropriate rates for services for a given contract, or actual cost to track contract performance.


The cost of most behavioral health services is driven by staff costs, their benefits, and assigned overhead. Cost accounting can provide a means for allocating overhead costs to the staff level.  Cost accounting algorithms for allocation of overhead are often quite involved, and can be tied to the specifics of the general ledger. However, experience has shown through past projects working on cost of service methods, that tying cost to service delivery can be accomplished with a focus on the input needed for the service delivery model, versus the details of the allocations. Cost per staff can be assigned as cost per staff work hour (including benefits and other staff specifics) and an overhead factor per program, since overhead is often appropriately characterized by program (i.e., different facilities or overhead structures associated with certain types of service.)


Allowing for staff changes in rate over time (i.e., effective dates for rates per staff), cost can be incorporated as a budgetary or actual input, and assigned to each unit of service to allow roll-ups by any of the dimensions including by agency, organization, program, staff, consumer, payer, demographic, etc.


Cost can then be compared to revenue to calculate profitability per any of the model dimensions.

Revenue and Cost Analytics

For a paper that discusses Revenue and Cost Analysis as it pertains to preparing your organization for Value-Based payment , please submit your request. 

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