Healthcare management has become a critical component in ensuring efficiency in patient’s service in healthcare organizations(D’Andreamatteo, Ianni, Lega&Sargiacomo, 2015). It includes overseeing the management of personnel resources, financial resources and facilities involved in the deliverance of quality services. Managers in these healthcare organizations utilize cost classifications methods to reduce costs while improving the quality of patient care. These methods are used together with cost accounting system to determine cost drivers, identify opportunities for cost reduction and enforce a flexible budgeting system(Langfield-Smith, Smith, Andon, Hilton & Thorne, 2017). The function of a cost accounting system is to ensure proper recording, analysis and in the allocation of service costs such as test costs, medication costs and room costs.
The implication of this accounting system requires teamwork where experts pull knowledge together in giving technical estimates of the amount of resource consumption(Childers &Maggard-Gibbons, 2018). Clinical managers allocate expenses and their accurate costs used to perform each unit patient service using a numerical scale. The most comprehensive and credible approach that has emerged with the current technology is the hybrid approach. This method utilizes the description master and the charge as the activity driver. Relative value units are also used primarily in cost allocation making this an incredible advanced method. Additionally, indirect and direct costs are integrated with time-based values and other non-chargeable activities to provide a generally suitable approach.
Utilization rates are directly related to volumes and revenue generation. Several strategies are used to streamline the implementation of the accounting methods to ensure cost credibility(Cleverley & Cleverley, 2017). To obtain this cost data, healthcare organizations utilize specific strategies such as executive sponsorship, RVU manager, cost accounting training and CDM familiarity. The effectiveness of these strategies highly depends on the knowledgeability of the departmental staff and the size and complexity of the organization.
Childers, C. P., &Maggard-Gibbons, M. (2018). Understanding costs of care in the operating room. JAMA surgery, 153(4), e176233-e176233.
Cleverley, W. O., & Cleverley, J. O. (2017). Essentials of health care finance. Jones & Bartlett Learning.
D’Andreamatteo, A., Ianni, L., Lega, F., &Sargiacomo, M. (2015). Lean in healthcare: a comprehensive review. Health policy, 119(9), 1197-1209.
Langfield-Smith, K., Smith, D., Andon, P., Hilton, R., & Thorne, H. (2017). Management accounting: Information for creating and managing value. McGraw-Hill Education Australia.
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