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Hospital Administration Costs Analysis Essay

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Hospital administration costs can be mercifully expensive costing $361 billion per year in the USA alone, three times what is spent on cancer. Therefore, finding a costing system that gets the most efficient results from administration is crucial, so that more can be spent on hospital's core duties of providing health care. However, despite the rather costliness it serves a central purpose of effectively overseeing the hospitals activities and making sure care quality and safety standards are kept intact. Going into further detail this may involve making sure national/state rules and procedures are adequately followed and managing financials of the hospital, be it setting budgets, providing extra funds to a department or cutting expenses.
In order to apply ABC to hospital administration we have to first split costs into cost pools, some of which are stated below:
Cost Pool Cost Driver
Staffing Number of employees
Registration Number of patients
Education and Training Number of new employees
Receptionist Hours worked

ABC costing in administration is usually applied in much the same way as in other hospital departments or even as in other industries, however as seen in its application at the “Shahid Faghihi” Hospital there can be two major variations when used to find costs of administrative activities.
The first of these is that the interpretation of the word “activity centres” is different in administration to other sectors. Unlike other departmental services, “administ...


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...ivity based costing to a surgical unit is identifying activities. This requires great insight into the treatments of specific diseases. The next step, which is the most important one, is to establish cause-effect relationships between resources consumed and physical activities and allocate costs to the chosen cost drivers accordingly. At last, some refinements should be taken into account, such as risks, overtime, charge for early starts and over runs etc.
If A&E Department and Surgical Unit are compared, we see the cost pools and the cost drivers are usually the same. The difference lies in the nature of each department, for example, A&E is a medical treatment facility specialising in taking care of patients who present themselves without a prior appointment, whereas the patients in the surgical unit are constant and are treated as per their given appointments.



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