Are Patient Care Costs Hurting Your Profitability?

Physicians and healthcare professionals focus on patient care because that is what their training emphasizes. However, running a healthcare organization also involves managing finances, complying with regulations, and meeting industry requirements. In other words, medicine is a profession, but healthcare is a business.

To succeed, organizations must balance quality care with operational and financial efficiency. This begins with understanding the true cost of patient care. It will help you make informed decisions that support your patients and the long-term financial stability of your organization. Yet many healthcare organizations find this challenging. Of 1,930 studies on healthcare management, only 215 examined costs in a value-based healthcare (VBHC) setting. Over half (51.2%) of these studies focused only on hospital costs, which leaves gaps in understanding the full picture of care costs. Many healthcare providers still don’t calculate total care costs, making it harder to manage costs effectively.

Understanding the True Cost of Patient Care

Healthcare organizations continue to face significant financial headwinds. Hospital performance settled into a “new normal” in 2025, with margins stronger than prior years but still under persistent pressure from rising expenses. Total hospital expenses grew 7.5% in 2025 — more than twice the rate of growth in hospital prices. Drug costs alone surged 13.6% and supply expenses climbed 9.9%, while hospitals absorbed more than $100 billion in Medicare underpayments. With many hospitals operating at breakeven or just above, the financial environment remains precarious.

Understanding true patient care costs becomes essential for survival in this challenging environment. When you know exactly how much you spend on each patient's care, you can take precise actions to control costs while maintaining quality. This knowledge helps your organization build financial resilience in two ways:

• Identify inefficiencies and improve financial health
• Make informed decisions and allocate resources efficiently

Identify Inefficiencies and Improve Financial Health

Your organization might be overspending and wasting resources on mistakes like over-diagnosing, over-treating, or administering incorrect treatments. Or you may be under-investing in areas that could improve patients’ experiences and increase your revenue. Tracking patient care costs can help identify inefficiencies and areas of underperformance within your organization.

Wasteful and low-value care, including unnecessary treatments, redundant procedures, and preventable complications, accounts for a significant share of healthcare spending. Diagnostic errors alone account for 17.5% of total healthcare expenditure across OECD countries; halving those error rates could free up as much as 8% of healthcare expenditure, equivalent to $676 billion per year. For individual organizations, this underscores why granular cost tracking matters: without visibility into what you are spending and where, it is nearly impossible to distinguish efficient care delivery from costly, avoidable waste.

If your patient care costs are high, it may signal inefficiencies that require attention. On the other hand, if costs are just right or low enough, it suggests efficient resource use, reduced waste, and optimized operations.

Make Informed Decisions and Allocate Resources Efficiently

Many clinicians and administrators lack clear information about the actual costs of treating specific conditions over the entire care cycle. This knowledge gap makes it difficult to compare costs with outcomes and evaluate the value of care provided. Without knowing which treatments deliver the best outcomes for their cost, organizations risk making arbitrary cuts or increasing spending in the wrong areas.

“There is also a near complete absence of data on the true costs of care for a patient with a particular condition over the full care cycle, crippling efforts to improve value,” says Michael E. Porter, professor at Harvard University and Thomas H. Lee, MD, chief medical officer at Press Ganey. “The lack of cost information starts with widespread confusion about the difference between costs and charges. Most clinicians also have no way of knowing what things actually cost or how much time care processes take. Without understanding the costs of the care for specific conditions or how costs compare to outcomes, efforts at cost reduction revert to power struggles and arbitrary cuts.”

Understanding the true cost of patient care provides critical insights for allocating resources effectively. It can help you identify treatments that deliver the best value, highlight areas where additional investment can improve care quality, and uncover opportunities to reduce waste without compromising outcomes. Instead of relying on guesswork, you can make data-driven decisions that improve care delivery and financial performance.

The True Cost of Patient Care Lies in Your Organization’s Financial Reports

Financial reports provide a detailed view of your organization’s operations and financial health, showing how much you spend per patient over time. They help identify areas of overspending or underperformance so you can target improvements effectively.

To gain these insights, your financial statements must be accurate. Errors may lead to poor decisions that can hurt your organization. Unfortunately, many healthcare organizations struggle to maintain accurate financial records due to ongoing accounting talent shortages. Sixty-one percent of finance and accounting hiring managers say it is significantly more challenging to find skilled professionals than it was a year ago — and the unemployment rate for accountants and auditors stood at just 2.0% in 2025, reflecting an extremely tight talent pool. The accounting pipeline shows little sign of recovery: the number of candidates sitting for the CPA exam has declined for several consecutive years, and an aging workforce means a large wave of retirements is already underway.

This lack of financial expertise affects decision making, as many healthcare organizations lack the support needed to produce reliable reports on time. To address this issue, healthcare providers are increasingly turning to outsourcing as a practical solution.

The Power of Outsourcing

Outsourcing your finance and accounting functions solves the problem of timely and accurate financial reporting. It ensures you can close your books on time each month. This timeliness lets you maintain an up-to-date view of your financial performance, enabling faster and better-informed decision making.

It also gives you access to expert support to help interpret financial data, identify trends, and pinpoint opportunities for improvement. This gives you a clearer picture of your organization’s strengths and weaknesses.

Finally, outsourcing offers flexibility. Instead of maintaining a full in-house accounting team, you can scale your accounting support up or down based on your needs. This is cost-effective and means you can always get just the amount of support you need at a particular time. To learn more about Citrin Cooperman’s Business Process Outsourcing Services or Healthcare Services, please contact Mike Zyborowicz or Kieran Higgins.