There are many ways in which costs are classified. Costs may be classified by
accounting function, by management function, or by traceability. These costs may also be
classified by relevance which will work and contribute to management decision making.
For example, controllable costs such as actual labor of employees and uncontrollable
costs such as utilities are considered when allocating costs (Nowicki, 2022).
Healthcare managers allocate costs to ensure patients pay only for services and
products they have received. This can be done in several ways such as direct
apportionment which is the easiest way to allocate cost. There is also step-down
apportionment which takes the disadvantage of direct apportionment into consideration.
Double apportionment, which is the most practical method and multiple apportionment,
which is the most accurate however requires increased computer time and digital memory
(Nowicki, 2022).
Utilization rates are the number of services used over a length of time divided by
a population. Utilization helps with managing costs and delivery of services, as well as
decreasing revenue loss. By working with departments within an organization, utilization
can facilitate resources and services in a quality cost effective manner (Weiner, 2022).
Nowicki, M., (2022). Introduction to the Financial Management of Healthcare
Organizations, Eighth Edition: Vol. Eighth Edition. Gateway to Healthcare
Management.
Weiner, M., (2022). The importance of utilization management in healthcare [podcast].
Blog Revenue Cycle, The Hospital Finance Podcast.
