Evaluation of activity-based costing versus resource-based relative value costing

Area of Science:

• Healthcare Management
• Health Economics
• Cost Accounting

Background:

• Accurate cost determination is crucial for healthcare practices.
• Existing methods like Activity-Based Costing (ABC) and Relative Value Unit (RVU) costing have limitations.
• A need exists for refined costing methodologies in physician services.

Purpose of the Study:

• To compare cost estimates derived from ABC and RVU costing methods.
• To introduce and evaluate a hybrid costing technique (ABC-RVU).
• To analyze the distinctions and differentiations in cost estimates provided by each approach.

Main Methods:

• Calculating physician service costs using the traditional ABC method.
• Calculating physician service costs using the traditional RVU method.
• Developing and applying a hybrid ABC-RVU costing technique.

Main Results:

• Cost estimates varied significantly between ABC and RVU methods.
• The hybrid ABC-RVU approach provided distinct cost estimations.
• Comparative analysis revealed unique insights from each costing strategy.

Conclusions:

• The ABC-RVU hybrid model offers a potentially more comprehensive understanding of physician service costs.
• Different costing approaches yield different financial insights for practice managers.
• Further research is warranted to validate the ABC-RVU technique in diverse healthcare settings.