The health care sector often face many resource challenges across the globe. Healthcare managers should therefore use the limited resources effectively and efficiently. The good use of resources needs both open and reliable information on how resources are flowing. The resource use should lead to the expected impact in regards to the perfomance and quality of service delivery.
Cost classification is the method of classifying costs according their similarity. The importance of costs classification to health managers is to relate the cost with cost units and centers .Cost are classified according to their specific. They can also be classified according to various means of costing with respect to the objective and necessity of a particular concern.
Health managers relate existing information on cost classification with how specific programs perform. An example is the coverage of a program to a certain group of people from which relevant assessments of efficiency in terms of both input and output can be deduced. An examination of what one gets out of the resources used helps in making of provisional judgments whether a health program is helping the people as well as the beneficiaries. This helps managers deduce the fairness of a particular heath scheme. Hence, the classification of costs is significant.
On the other hand, cost allocation focuses on the identification and assigning of costs of services needed for the day to day running of a business or any entity. It mainly concentrates on allocating costs to the right units in a given organization. It is important in tracking of costs relating to continuing operations such as individual costs which is linked to a given department in the organization.
The point of costs allocation is to assign cost within the organization or health centres accurately.This provides information on the type of costs that are incurred within departments.It also helps in budget preparation and can be refferenced to when calculating how much tax an organization will pay to tax agencies.
Secondly, cost allocation helps in internal planning as it keeps track of all expenses incurred. Proper assigning of costs has positive effects on how each department manages and uses its share of the budget. If it is found that one department gets a bigger share the necessary steps are taken to harmonize the provision without interfering with basic service delivery. Thus cost allocation information precedes good planning.
Costs information can be assembled in different ways. First it can be done through consultation with all the stakeholders. This method is mainly used when consensus has to be reached. It involves collection of information from both employers and employees so that the decision made is accepted by all the parties. Secondly, through Trustworthy Methods that involve an advisory board carries out the research and presents the recommendations. This method is mainly used when the data to be collected is sensitive and not for the public. Lastly information can be assembled through the use of independent teams within the organization. Information collected though this method is considered vital because it gives managers a glimpse into their competitors and what needs to be done.
Price is what is charged for a service/product, while cost is the expense incurred to produce a product. There should be no relationship between the two in healthcare. Price is dependent on demand and availability of supply unlike cost. Its only in commoditized markets that price can be determined by costs. This is because competing goods are interchangeable. Thus, decisions by customers are based on prices. Health care falls in non-commoditized business where variable costs should not affect the price and are sometimes given monopolies.
The irrational prices of healthcare witnessed in 2011 can be attributed to the increase in the number of the uninsured population. The rise in the number of uninsured is linked to rising costs in insurance where very few employers are giving health insurance while others choose to get higher contribution from their employees. The uninsured population is mainly composed of the unemployed or low-earning citizens.
To restore public confidence in healthcare that has been seen as outrageous, health institutions should develop programs to sensitize citizens on the importance of accessing healthcare services. Education should be provided to elderly and the non-educated ones to make them understand the importance of healthcare. The need to increase bed capacities in all public and private hospitals should be a priority to health providers. On the other hand employers who issue insurance to their employees should be given incentives like exemption from tax and the state should review its health care system so as to guarantee insurance to all irrespective of their age and social standings.
The health services market lacks strong systems to ensure an open market-based pricing. Healthcare service providers do not give briefs on prices before offering their services. Hence, consumers cannot compare providers for service on the basis of prices. Insurance programs also have a big impact in market pricing in the US. However, in a transparent pricing market like the automobile, prices for services are advertised to the public, hence, information is available before decision regarding a service provider is made. This is contrary to the medical industry where patients access pricing information after receiving the services. This sharp contrast only points out that their prices should be set out differently in the market.