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Profitable capitation requires accurate costing

D A West1, L L Hicks, E A Balas

  • 1College of Business and Public Administration, University of Missouri-Columbia, USA.

Nursing Economic$
|May 1, 1996
PubMed
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Accurate healthcare costing requires nurses to track all resources used, not just averages. Activity-based costing (ABC) improves financial viability by revealing true treatment expenses.

Area of Science:

  • Healthcare Management
  • Health Economics
  • Nursing Administration

Background:

  • Current healthcare costing often relies on average cost allocation for overhead and nursing salaries.
  • This method may not accurately reflect the resources consumed in specific patient treatments.
  • Accurate cost data is crucial for financial viability and strategic decision-making in healthcare settings.

Purpose of the Study:

  • To highlight the importance of accurate treatment costing in healthcare.
  • To advocate for the inclusion of all consumed resources, including nursing services and inventory, in cost analysis.
  • To compare aggregate costing with activity-based costing (ABC) for more precise financial insights.

Main Methods:

  • Comparison of the ratio-of-cost-to-treatment method (aggregate costing) with activity-based costing (ABC).

Related Experiment Videos

  • Emphasis on the necessity of nursing staff participation in inventory and resource tracking.
  • Analysis of resource consumption on a per-treatment basis.

    • Main Results:

    • Activity-based costing (ABC) provides more precise costing information than aggregate costing.
    • Accurate costing enables more profitable decision-making.
    • Nurse involvement is essential for capturing granular cost data.

    Conclusions:

    • Accurate treatment costing necessitates a shift from average-based allocation to detailed resource tracking.
    • Activity-based costing (ABC) offers a superior method for understanding the true cost of healthcare delivery.
    • Involving nurses in the costing process is vital for accurate financial assessments and competitive capitation bids.