Healthcare financial managers utilize different methods, financial
resources, and cost classifications to allocate indirect cost to direct
costs when determining patient charges by dividing them into specific
categories. According to Nowicki (2022), cost accounting provides
necessary information needed to set charges, manage cost and
analyze profit. Some cost can be managed by traceability, such as
direct costs, indirect costs, full cost, and average cost. Direct costs
are traced back to department, products or services which includes
labor and supplies, while indirect cost is not traced back to a
department (Nowicki, 2022). Healthcare does not bill patients for
heating or ac, so to make sure patients are paying for services and
products received, the cost as to be allocated. The organization will
use a process called cost allocation to assign the cost of heating and
cooling to a department that generate patient bills, such as radiology
and lab (Nowicki, 2022).
Utilization rates determine the specific costs in each department and
determines what’s affecting the department. Decreasing utilization
within an organization can help decrease the facilities cost and in
return help the decrease the cost for patients. There are many tools
that can be used to help decrease utilization, such as Root Cause
Analysis (RCA). RCA is a lean tool that can be used to tackle
unnecessary utilization in healthcare by using a 5 step process to
determine the issue, collect data, recommend and implement
solutions (Colleage, 2022).
Colleaga. (2022). How Can Unnecessary Health Care Utilization be
Eliminated? Www.colleaga.org.
https://www.colleaga.org/article/how-can-unnecessary-health-care-
utilization-be-eliminated
Nowicki, Michael. (2022). Introduction to the financial management
of healthcare organizations (8th ed.). Chicago, IL: Health
Administration Press. ISBN: 978-1-64055-282-1
