In two different paragraph Give your personal opinion to and Amanda Maskell and Mary Harris
We all are aware of the constant increase in Healthcare Costs while representing more than 17% of the Growth (Pivot Technology Studies, n.d.) Domestic Product (GDP. Some experts say chronic illness and lower reimbursement is the reason for the growth, and the focus is placed on treatment and not enough placed on outcomes. What are your views about this?
Due to the lack of measurements related to healthcare costs makes it nearly impossible to implement cost-saving changes in areas such as administrative costs, personnel, salaries, and expensive (Pivot Technology Studies, n.d.) services. These are the areas that are designated for cuts. Some say Providers aren’t rewarded and therefore they are unable to be successful. This kind of behavior gives ineffective Providers little or no motivation to do better (uh?)
Activity-based costing (ABC) helps to overcome those challenges mentioned above by:
Identifying the correlation between specific activity and resources. This is where
The use of data to create more accurate cost and profit projections – this leads to more efficient processes without compromising the quality of care.
Healthcare organizations can use “Big Data Analytics (the process of gathering, integrating organizing and analyzing large sets of structured and unstructured data in order to discover valuable organizational insight) Tools” to crunch the numbers for ABC. This will offer more measurements and forecasting that are a bit more reliable regarding healthcare costs. When armed with solid data and insights that can support the organization stakeholders in making a data-driven decision, it can reduce cost and deliver better outcomes for patients.
ABC can be identified as an approach to costing that identifies individuals activities. With this method- the cost of individuals activities are assigned first, then the cost to the costs objects. it assigns overheads to each activity then allocates that cost to the individual’s product/service. In other words, all costs within an organization stem from activities (Gapenski and Reiter, 2016). Provide the service then aggregate the costs of the activities.
Traditional costing – pools the indirect costs to all products of different stages. It allocates overheads first to the individual’s departments, then reallocates the costs to the product. It is the top-down (Gapenski and Reitier, 2016) approach to costing.
Why Healthcare Must Embrace Activity-Based Costing? Retrieved from www.pivottechnologystudies.com
Gapenski and Reiter (2016). Sixth Edition: Service Line Costing and Pricing. Retrieved from https://healthcarefinance.anintroductiontoaccounting&financialmanagement.org
Activity-based costing better known as the ABC model is a superior approach. It used an upstream approach to cost allocation. This method is by far more superior to the traditional methods. In this approach you want to identify the activities that are conducted to provide a specific service and the allocate the cost that are associated with the service. The steps that needed to be taken in this method are; identifying the activities, estimating the direct and indirect cost of the activities, assign cost to each of the activities, collect al the data that is associated with the activities, and lastly calculating the final cost of service by collecting and combining all the data from the activities.
The difference between the ABC method compared to traditional methods is that in traditional methods they start from the top to bottom concept; where the ABC method does the opposite, they start from the bottom. This can be why the ABC method of cost allocation approach is more effective than traditional approaches. Unfortunately, the downfall to this the information and resources that are needed to establish the ABC method far exceeds the traditional cost allocation requirements of traditional methods, so currently traditional methods still exceed the runway of methods used in cost allocation.
Gapenski, L. C., & Reiter, K. L. (2016). Healthcare finance: An introduction to accounting and financial management. Chicago, IL: Health Administration Press.
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