Marginal Cost: The Role Of Full Costing In Healthcare

Traditional costing methods is the process of determining a unit cost by lumping indirect costs of manufacturing together and then parceling out by volume, number of units, machine hours or direct labor hours. Indirect costs

Controlling is ensuring the validity and accuracy of all financial information within the firm. Controlling will become very profound as the industry overall undergoes fundamental change in regards to operations. Legislation imposed by the federal government regulates, to a certain extent, how health care organizations operate. As such, management must be able to control costs and assess the validity of the financially information presented to them. If the organization fails to do so, the results could be devastating. First, loses will occur due to the excessive lack of control. The organization may be forced to lower spending in some areas of compensate for the aggressive spending in others. In addition, the reputation of the firm could be harmed. Patients and other vendors may be unlikely do business with the firm for fear of the company's lack of financial security. Therefore, in order to ensure the continuity of the business, the firm must have adequate methods by which to check the validity of its financial information. Third party audits, independent audits, check and balances and management oversight all will help ensure that the overall financial position of the firm is sound and credible.

When referring to health care economics, “cost” refers to the funds that are used to deliver health care to patients. Cost can also mean the amount of funds used to access health care or to deliver health care (Getzen, 2007). It is applied in many different ways such as, health care professionals applying economic principles like cost benefit analysis, or cost effect analysis to determine if the choice is good or bad. The principles help the government to provide the best intervention in health care (Getzen, 2007).

The first factor to consider while determining the price and service decisions within the organization is the welfare of the society. The organization builds on the well-being of the society hence it services must be welfare oriented. This indicates that the Einstein Medical Center would have to adopt affordable prices offering more opportunities to the society members to

The new social contract between the health care system and employers, patients, and the government has given everyone involved some breathing room. They have provided a clearer picture of the costs of health care; however, it is evident that there is still work to be done regarding the transparency of complete and exact costs. For example; all hospitals have a price list called the chargemaster that includes nearly 20,000 health care procedures. The prices on this list are the prices that patients will most likely see on their bills; however, the terms are not standardized and many are bundled services that make it difficult to compare them with other institutions. It is obvious

Managers who are managing health care organizations must be attentive to the accounting practices and must obey and practice the financial management procedures to be able to solve any issues if any should arise. With the continuation of the high costs of health care managers as well as consumers must know how to budget carefully. According to All Business. (2010), the cost of providing health care services, patients way of payment for these services and the environment in which those patients reside and receive those services are important elements that affect the care this is or may not be

Economic analysis in medical education total cost of ownership is a concept that enables buyers of products or services to find out the total cost of owning or running that product or service is a scenario the author mentioned in the

The primary objective of accounting is to provide information useful for decision-making (McNair, Olds & Milam, 2013). Financial stability, financial health, and financial performance were, is and will always be a primary focus in healthcare for years to come. In fact, understanding financial performance in any business requires some global or summary measure of economic success (Cleverley, Song and Cleverley, 2010). Therefore, a financially “healthy” organization is one that is producing an operating margin sufficient to finance the current and future capital for its business (Harrison & Montalvo, 2002). Although operating margin is critically important, a healthcare organization should not rely solely on this measure. Therefore, according to Cleverley et al. (2010), a financially successful organization is capable of generating the resources needed to meet its mission. However, in planning for financial stability and health, health care administrators and financial managers need to strategically plan how to address the needs of their organization. The level of resources required by a healthcare organization depends primarily on the range and quantity of health services envisioned in the mission statement (Cleverley et al., 2010). Therefore, financially successful organizations must be capable of generating the amount of funds needed for debt and/or equity to finance the required level of

Variable Costing: Only those costs of production that vary directly with activity (variable costs) are treated as product costs. Under variable costing, only the variable manufacturing costs are included as a part of the cost of the product manufactured. The fixed manufacturing costs are treated as an expense of the period in which they are incurred. Selling and administrative costs

Chapter five outlines the health care providers cost production process. The production functions are the relationship between the quantity the producer is willing to supply and the variables used to decide price and quantity for sale. The intention of the cost production is to convert input (i.e. labor, land, knowledge) into output/finished products or services. The variables used that influence the suppliers are input price, case mix, and technology. In the medical domain, the production function includes fixed input and variable input. In the short-term, the fixed input is restricted to a production cycle and duty, a fixed variable. Whereas, the variable input is an input whose quantity can change or adjust at any time.

Health services managers are essentially interested in how costs are affected by changes in volume. Cost behavior refers to a cost 's reactions to activity level. A cost may rise, fall, or remain constant as activity levels fluctuate. We can classify several types of costs on the basis of their relationship to the amount of services provided, often referred to as activity, utilization, or volume (Gapenski, 2012). When dealing with the future there is a level of uncertainty of volume with regard to inpatient days, number of emergency visits, number of unforeseen complications, number of additional unaccounted for testing procedures and so on. The many costs incurred by the healthcare organization can be classified as variable, fixed, or

After getting the views and suggestions all discuss this with hospital management and other stakeholders of the hospital to come with a reasonable prices which will make sure the health care provide by the hospital is affordable to everyone and is best quality. As much the patient may wish the prices to be reduced the quality of the health care cannot be compromised to the expenses of providing cheap health care. The prices being suggested should be in a position to support the normal functioning of the hospital.

In conclusion, a structure on lower cost is pertinent to providing the right model for the system. Achieving a prosperous medical outcome in the end requires a cost budget that will benefit not only the Health care organization but the patients as well. Another benefit for patients is to implement a low cost strategy that will allow patients to receive medical treatment and also pay out cost that meets the individual’s budget. Creating an income chart would also be a way to know what a patient can afford to pay.

Additional costs of being in the hospital, post-operative care, follow up visit, such as, child minding.

Cost accounting in healthcare has more important than ever before, however it is usually treated as being too complex, costly or requires numerous means for organizations in healthcare. Adding to the issue more vital programs to include electronic medical records, charting and billing systems have been the main target and cause for budget strains for several years. The healthcare industry is currently experiencing a symbolic change and concern from all the parties involved with a goal to lessen the cost of healthcare. These healthcare organizations that do not have a cost accounting system should make it a priority to develop one. “The driving force behind the development of cost accounting systems in health care organizations has been the