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Allocating the cost of fringe benefits.
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A standard time approach to pharmacist labor allocation for cost of dispensing determination.
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Cost-benefit analyses of California family practice residencies.
Several national commissions have recommended that family practice residency training be subsidized, but without stating how much support is needed. Financial studies of graduate medical education have used the methods of cost allocation or joint-products cost analysis. Previous cost-allocation studies indicate that one third of family practice residency costs are met by extramural subsidy. Cost reports of eight California public hospitals with a single family practice residency program were evaluated for the 1984-85 fiscal year. Discrepancies in the education costs reported to Medicare and those reported in state hospital disclosure reports demonstrate the arbitrary nature of the cost-allocation method. The Medicare medical education reimbursement was an average of $20,444 per resident. State and federal grants provided an average of $5,190 per resident. The Medicare payments and grants met an average of 35.7% of the education costs reported to Medicare. A joint-products cost analysis was used to estimate the pure cost of education in an 18-resident family practice residency. Replacing the residency with salaried physicians would have decreased the hospital's net return by $143,534. If neither grants nor Medicare education payments had been received, elimination of the program would have increased hospital net return by $428,083.
Improved allocation of costs through analysis of variation in data: planning of laboratory studies.
BACKGROUND: When developing a new laboratory test for study of human diseases, it is important to identify and control internal and external sources of variation that affect test results. It is also imperative that the precision of the test not only meets pre-established requirements and not exceed allowable total error, but also that these objectives are reached without undue expenditure of either time or financial resources. METHODS: This study applies statistical principles in designing a cost-effective experimental approach for determining the analytical precision of a new test. This approach applies the statistical concept of variance components to the problem of balancing a pre-established level of analytical precision against expenses incurred in achieving this precision. RESULTS: We demonstrated (1) estimation of variance components, (2) use of these estimates for improving allocation of costs within the experiment, and (3) use of these estimates for determining the optimal number of replicate measurements. CONCLUSIONS: Although elimination of all sources of variation that can affect laboratory test results is unlikely, the application of analysis of variance (ANOVA) statistical techniques can lead to a cost-effective allocation of resources for estimating the precision of a laboratory test.
The state of the art of costing health care for economic evaluation.
In this paper, the principles of costing health care for economic evaluation are outlined. Hypothetical and published examples are used to illustrate these principles. First, the economic concept of opportunity cost is defined. Secondly, the techniques of economic evaluation which follow from this definition are introduced: they are cost-benefit analysis, cost-effectiveness analysis and cost-utility analysis. Thirdly, a list of costs which should be considered for inclusion in either of these types of evaluation is provided, this listing being based on the concept of opportunity cost. Problems of measurement and valuation of costs are then outlined, focusing in particular on inflation, discounting, marginal costing, patient-based versus per diem costing, allocating overheads, costing capital and equipment and adjusting distorted market valuations. An example of sensitivity analysis is provided and also a checklist of questions to ask when setting up any costing exercise within an economic evaluation.
How hospitals allocate laundry utility costs.
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The influence of metal source uncertainty on cost-effective allocation of mine water pollution abatement in catchments.
In mine water pollution abatement, it is commonly assumed that known mine waste sites are the major pollution sources, thus neglecting the possibility of significant contribution from other old and diffuse sources within a catchment. We investigate the influence of different types of pollution source uncertainty on cost-effective allocation of abatement measures for mine water pollution. A catchment-scale cost-minimization model is developed and applied to the catchment of the river Dalälven, Sweden, in order to exemplify important effects of such source uncertainty. Results indicate that, if the pollution distribution between point and diffuse sources is partly unknown, downstream abatement measures, such as constructed wetlands, at given compliance boundaries are often cost-effective. If downstream abatement measures are not practically feasible, the pollution source distribution between point and diffuse mine water sources is critical for cost-effective solutions to abatement measure allocation in catchments. In contrast, cost-effective solutions are relatively insensitive to uncertainty in total pollutant discharge from mine water sources.
The economics of febrile neutropenia: implications for the use of colony-stimulating factors.
The occurrence of fever and neutropenia following cancer chemotherapy generally prompts hospitalisation for evaluation and treatment. Colony-stimulating factors (CSFs) have been shown to reduce the risk of febrile neutropenia (FN) and the need for hospitalisation in such patients. This study was undertaken to obtain estimates of the actual institutional costs associated with FN and the impact of these costs on threshold estimates for the appropriate use of CSFs. Total hospital expenditures for patients admitted with FN over a 2 year period were studied. A cost allocation function was utilised to allocate all direct costs for non-revenue-generating support centres to revenue-generating service centres as indirect costs. A cost accounting function was then utilised to allocate direct and indirect costs for each service centre to the charge code level. Two groups of patients were defined based on diagnostic codes to represent the spectrum of patients with FN. Total hospital costs were estimated and incorporated into a cost model for the use of CSFs. Variation in the total cost of hospitalisation for FN relates primarily to differences in the average length of stay. The daily cost of hospitalisation was comparable in the groups studied, averaging between US$1675 and US$1892. Incorporation of these cost estimates into the cost model yielded FN risk threshold projections for CSF use in the range of 20-25%. Preliminary studies suggest that incorporation of non-medical, indirect and intangible costs into the CSF decision models will further decrease FN risk threshold projections. Total hospitalisation cost estimates for managing patients with FN are greater than those previously reported, reducing projected FN risk thresholds for CSF use.
Transportation or CT scanners: a theory and method of health resources allocation.
Cost containment and access to appropriate care are the two most frequently discussed issues in contemporary health policy. Conceiving of the health services available in specific regions as "packages" of diverse items, the authors of this article consider the economic trade-offs among the various resources needed for appropriate care. In the discussion that follows, we examine the trade-offs between two divergent offering of the health care system: high technology medicine and support services. Specifically, we examine several strategies designed to achieve an optimal mix of investments in CT scanners and transportation resources in the South Chicago region. Using linear programming as a method for examining these options, the authors found that 1) the proper location of CT scanners is as important for cost containment as optimal number, and 2) excess capacity in the utilization of a single resource--CT scanners--need not imply inefficiency in the overall delivery of the service. These findings help demonstrate the importance of viewing health care as a package of interrelated services, both for achieving cost containment and for providing access to appropriate care.
Prospective analysis of global costs for maintenance of patients with ESRD.
BACKGROUND: The prevalence of end-stage renal disease (ESRD) has doubled in the past decade, with total costs projected to exceed 16.5 billion dollars by the end of 2002. METHODS: The purpose of this prospective study is to determine all costs related to inpatient and outpatient health care utilization incurred by 76 patients with ESRD in an outpatient hemodialysis setting for 1 year. Costs were derived from a computer-based cost-allocation process that distributed cost components and overhead to designated revenue-producing departments. RESULTS: During the 1-year study period, these patients had 1,459 total inpatient and outpatient hospital visits (mean, 19.2 visits/patient; range, 0 to 84 visits/patient). There were 149 general inpatient hospital admissions. Of 238 total emergency room visits, 89 visits resulted in admission to the hospital (37%). CONCLUSION: Total hospital costs for all patients for the year were 1,831,880 dollars (actual charges, 2,929,147 dollars). As expected, the greatest hospital cost expenditures were attributed to inpatient hospital admissions (1,419,022 dollars; 77.5% of total). Of total hospital costs, inpatient bed costs were the single highest expenditure. The cost for outpatient hemodialysis therapy was 33,784 dollars/patient-year, consisting of facility costs of 17,200 dollars, outpatient pharmacy costs of 14,100 dollars, and outpatient professional costs of 2,500 dollars/patient-year. Average costs for hospital facility and/or professional fees were 42,730 dollars/patient-year, whereas average costs for outpatient dialysis facility and/or professional fees were 33,784 dollars, for an estimated global cost of 76,515 dollars/patient-year. Our cost estimate for care of this unique inner-city population substantially exceeds those reported earlier by others.
Microcomputer software to facilitate costing in pathology laboratories.
A software program is described which will enable laboratory managers to calculate, for their laboratory over a 12 month period, the cost of each test or investigation and of components of that cost. These comprise the costs of direct labour, consumables, equipment maintenance and depreciation; allocated costs of intermediate operations--for example, specimen procurement, reception, and data processing; and apportioned indirect costs such as senior staff time as well as external overheads such as telephone charges, rent, and rates. Total annual expenditure on each type of test is also calculated. The principles on which the program is based are discussed. Considered in particular, are the problems of apportioning indirect costs (which are considerable in clinical laboratory work) over different test costs, and the merits of different ways of estimating the amount or fraction of staff members' time spent on each kind of test. The computer program is Crown copyright but is available under licence from one of us (JAS).
Application of activity-based costing (ABC) for a Peruvian NGO healthcare provider.
This article describes the application of activity-based costing (ABC) to calculate the unit costs of the services for a health care provider in Peru. While traditional costing allocates overhead and indirect costs in proportion to production volume or to direct costs, ABC assigns costs through activities within an organization. ABC uses personnel interviews to determine principal activities and the distribution of individual's time among these activities. Indirect costs are linked to services through time allocation and other tracing methods, and the result is a more accurate estimate of unit costs. The study concludes that applying ABC in a developing country setting is feasible, yielding results that are directly applicable to pricing and management. ABC determines costs for individual clinics, departments and services according to the activities that originate these costs, showing where an organization spends its money. With this information, it is possible to identify services that are generating extra revenue and those operating at a loss, and to calculate cross subsidies across services. ABC also highlights areas in the health care process where efficiency improvements are possible. Conclusions about the ultimate impact of the methodology are not drawn here, since the study was not repeated and changes in utilization patterns and the addition of new clinics affected applicability of the results. A potential constraint to implementing ABC is the availability and organization of cost information. Applying ABC efficiently requires information to be readily available, by cost category and department, since the greatest benefits of ABC come from frequent, systematic application of the methodology in order to monitor efficiency and provide feedback for management. The article concludes with a discussion of the potential applications of ABC in the health sector in developing countries.
Cost analysis of dialysis treatments for end-stage renal disease (ESRD).
The cost of alternative dialysis modalities for the treatment of end-stage renal disease (ESRD) was evaluated, using a societal viewpoint, in a regional nephrology program in south-western Ontario. The dialysis treatments compared were hospital hemodialysis, home hemodialysis, self-care hemodialysis, and continuous ambulatory peritoneal dialysis (CAPD). The participants were all patients treated by the same dialysis modality for the fiscal year April 1990 to March 1991. Fully allocated costs are expressed in 1993 Canadian dollars. The average costs per patient year were $88,585 for hospital hemodialysis, $55,593 for self-care hemodialysis, $44,790 for CAPD, and $32,570 for home hemodialysis. The dialysis treatment costs were $54,929 for hospital hemodialysis, $43,313 for self-care hemodialysis, $31,918 for CAPD, and $26,048 for home hemodialysis. These data quantify the magnitude of the differences between fully-allocated costs among the dialysis modalities in a regional nephrology program in Canada. The methodology used in this economic analysis can be applied to programs which differ in structure and scale. The breakdown of dialysis treatment costs into overhead, support department, personnel, supplies, and medication identifies potential areas for cost reduction strategies.
Applying activity-based costing in long-term care.
As greater numbers of the elderly use health services, and as health care costs climb, effective financial tracking is essential. Cost management in health care can benefit if costs are linked to the care activities where they are incurred. Activity-based costing (ABC) provides a useful approach. The framework aligns costs (inputs), through activities (process), to outputs and outcomes. It allocates costs based on client care needs rather than management structure. The ABC framework was tested in a residential care facility and in supportive housing apartments. The results demonstrate the feasibility and advantages of ABC for long term care agencies, including community-based care.
The cost of like surgical cases.
A system of costing services provided to patients undergoing surgical procedures was instigated in a private and a public Victorian hospital. The cost of managing the care of patients undergoing like surgical procedures was developed and compared. It is suggested that such a system of cost allocation would enable members of the medical profession to be more cost conscious.
Sperm allocation and cost of mating in a tropical tephritid fruit fly.
Males that copulate repeatedly may suffer from reduced sperm stores. However, few studies have addressed sperm depletion from both the female and male perspective. Here, we show that male Anastrepha obliqua (Diptera: Tephritidae) do not ejaculate all available sperm and are left with mature sperm in the seminal vesicles even after copulating as often as three times in half a day. Ejaculate size was not related to male mating history; time elapsed since the last mating, copulation duration, female thorax length or head width. Larval host origin did not affect the number of sperm stored by females. More sperm was found in the ventral receptacle compared to sperm stored in the three spermathecae. Males apparently do not suffer a cost of mating in terms of longevity, although we cannot rule out other fitness costs. Sperm production in this species may not be as costly as it is for other species. Results suggest that males strategically allocate similar numbers of sperm among successive mates without exhausting sperm reserves for future encounters. We discuss the role that differential sperm storage may have in mediating sperm competition and tie our results to the unique natural history of A. obliqua.
The private duty market: operational and staffing considerations.
Wouldn't it be nice to get away from Medicare home health regulations and into a business where the provider simply needs an understanding of the difference between a revenue and an expense? Cost reports, disallowances, allocations, cost shifts, and cost limits become a thing of the past. This article will help you plan and evaluate your approach to developing a private duty business. An overview of the market, operational considerations, and a discussion of various key staff positions and their functions allows you to explore this opportunity from many vantage points.