This case study demonstrates the use of the four different cost allocation methods: the Direct method, Step-down method, Double Apportionment method, and Reciprocal method. In the Direct method, all overhead costs are allocated to the patient services departments directly. The Direct method is the easiest and cheapest in application, however is the weakest.
The Step-down method, unlike the Direct method, recognizes some of the overhead services provided by each supporting department to one another. The supporting department that supplies the most services to the other supporting departments is allocated first, then the second supporting department that supplies the next most is allocated, and so on.
The Double Apportionment method is a …show more content…
According to Jiwani, Himmelstein, Woolhandler, and Kahn (2014) states ” United States multiple- payer health care system requires substantial effort and costs for administration”, because with billing and insurance related activities comprise a large but mostly incompletely considerable proportion. The study was reviewed across the healthcare sector for physician practices, hospitals, and insurers. The estimation of the billing and insurance- related activities using research and publicly reported data in re-calculating the standard and comprehensive definition; they found no data. Calsyn and Oshima-Lee (2012) reports “fee- for service payments drive up health care costs and potentially lower the value of care for two reasons”. First reason is encourage wasteful use of high- cost items and service. Second, align financial incentives between them are different providers. Patients receive care that they do not need or may not want. A simplified financing system in the United States could result in cost savings. The overhead for running the practice is higher than it should be and any savings can be fed into the profit stream. The obstetrics portion uses very little facility space, indicating the use of off-site resources. These might be explored to reduce costs in pediatrics, perhaps by grouping family visits and sharing time between
The Step-down method, unlike the Direct method, recognizes some of the overhead services provided by each supporting department to one another. The supporting department that supplies the most services to the other supporting departments is allocated first, then the second supporting department that supplies the next most is allocated, and so on.
The Double Apportionment method is a …show more content…
According to Jiwani, Himmelstein, Woolhandler, and Kahn (2014) states ” United States multiple- payer health care system requires substantial effort and costs for administration”, because with billing and insurance related activities comprise a large but mostly incompletely considerable proportion. The study was reviewed across the healthcare sector for physician practices, hospitals, and insurers. The estimation of the billing and insurance- related activities using research and publicly reported data in re-calculating the standard and comprehensive definition; they found no data. Calsyn and Oshima-Lee (2012) reports “fee- for service payments drive up health care costs and potentially lower the value of care for two reasons”. First reason is encourage wasteful use of high- cost items and service. Second, align financial incentives between them are different providers. Patients receive care that they do not need or may not want. A simplified financing system in the United States could result in cost savings. The overhead for running the practice is higher than it should be and any savings can be fed into the profit stream. The obstetrics portion uses very little facility space, indicating the use of off-site resources. These might be explored to reduce costs in pediatrics, perhaps by grouping family visits and sharing time between