Cost Accounting in the Healthcare System

21. What is cost accounting in the healthcare system?
How are costs classified by accounting function and management function?
Describe one cost classified by traceability and one cost classified by behavior.
What are the four methods of cost allocation used in healthcare organizations?

Cost accounting is used by healthcare facilities to estimate the entire cost of care for patients which includes the cost of all the supplies and services. Materials, labor as well as depreciation and overhead all play a role in the total cost of an X-ray for instance (Loft 2020). If all the information from the patient’s transaction records (including charges, payments and medical information) is examined together to reveal the full picture of the medical visit can be uncovered. Costs can be compared to payer rates to determine if they are appropriate for the anticipated reimbursement prior to making any pricing decision. To compare the performance of one company against that of its competitors The same data is analyzed in various ways, such as by the company. Apart from aiding in hiring, capital request as well as identifying new services, information on costs can be useful in different ways too (Loft 2020). Fixed and variable costs costs as well as blended cost (based on behaviour) and product costs as well as direct costs (for External reporting) Direct costs and ancillary expenditures (based on the traceability) as well as sunk expenses and potential costs. incremental costs are the main cost categories in management accounting (for making decisions). Cont…

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