Overview
The
objective of this paper is to provide an overview of the general steps that are
taken to cost a given case in general and apply the knowledge to the case of
Ontario Case Costing in particular. Case Costing is defined as an accounting
procedure that involves all types of direct and indirect costs that are
involved in a particular care unit for providing service to a patient (Gray et al, 2004). It is also referred to as cost accounting, activity
based costing and patent-level costing. Case Costing is used at different
levels in health care system in Canada which includes individual, regional,
provincial and national level among others (Gray et al, 2004).
Breakup of the total cost involved
There
are many factors that work together when a service is provided at a hospital.
Some of the most basic examples include the actual treatment, specialised equipments
used for diagnosing the problem and addressing it, the things utilised by the
patient, meals taken, involved cost of the hospitality staff, cost of the drugs
that are used, building costs, laboratory costs to name a few (Frolich, 1998). Hence, the actual cost involves a number of smaller
units and factors which are to be considered while providing the actual cost to
the service user and which make up the actual cost (Yong et al, 2009).
Estimating the cost per user
The service provider provides costs to the individual
service users by defining the costs involved of their staff members, estimating
their own costs involved in the services. They also specific formulas using
which they can get close to determine the per head cost of an individual
service user (Genest, 2009). This also
means that more number of augmented services a service provider offers, more
would be the per cost unit for the individual user. The objective of using
these specialised tools in estimating the costs is to ensure that there is a
higher degree of transparency in the operations, there is a stringent control
over the expenditure involved and also for improving the overall health care
industry services (Yong et al, 2009).
How are costs determined? : Types of Costs involved
Costing systems differ in different organisations; the
most common method is to use micro costing (specific items used by a service
user) and allocating methods (allocation of general expenditures). The costing
also involved direct and indirect variables, direct costs from the part of
micro costing whereas indirect costs are a part of allocated costs (Frolich, 1998). Overhead expenses are generally the recurring
expenses of a business organisation and are a typical example of an indirect
cost. Apart from this, the costs can be distinguished as fixed and variable,
fixed costs do not change with the volume whereas variable costs changes as
volume changes (Yong et al, 2009).
The
next section of this paper describes the Ontario Case Costing Initiative
(OCCI). OCCI are standards that are followed by all the hospitals and health
care service providers to ensure that the costs that they are charging to the
end users are fair, justified and transparent. The standards also offer
dedicated and specialised software which eases the computation of different
kinds of costs involved and bring in a greater degree of efficiency at the operational
level. It further helps in improved decision making for the senior management
and helps tremendously in the planning processes as well (Gray et al, 2004).
The
standard is also utilised as a database for research purposes as huge amount of
data is stored in the system. It followed a set standard of methodologies and
procedures to help in exactly determining the actual costs for the organisation
as a whole and for the service user as an individual. OCCI has also faced
several challenges owing to different kinds of organisational culture which
utilises the generalised form of systems in their respective organisations (Genest, 2009).
References
Frolich, J. (1998). Rationale for
and Outline of the Recommendations of the Working Group
on Hypercholesterolemia and Other
Dyslipidemias: Interim Reprto. Dyslipidemia
Working Group of Health
Canada. Canadian Journal Cardiology , 17 A- 21 A.
Genest, J. (2009). 2009 Canadian
Cardiovascular Society/Canadian Guidelines for the
Diagnosis and Treatment of
Dyslipidemia and Prevention of Cardiovascular Disease i
n the Adult—2009
Recommendations. Canadia Journal of Cardiology , 567-579.
Gray, M. S. (2004). A Longitudinal
Study of the Effects of Age and Time to Death on
Hospital Costs. Journal of Health
Economics , 23 (2), 217-235.
Yong, A. P. (2009). Population Aging
and Its Implications on Aggregate Health Care
Demand: Empirical Evidence from 22
OECD Countries. International Joiurnal of
Health Care Finance
& Economics , 9 (4), 391-402.
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