Question

1. In your workplace, give a good example of a direct cost? An indirect cost? Please provide an explanation of why your example fits the definition.

2. Does your organization use responsibility centers? please explain .. I work for a hospital setting.

Answer 1

1.The quantifiable costs associated with human disease and illness are typically categorised into two unique components such as direct and indirect cost

Direct cost

Costs that can be attributed to a speecific course such as medications and treatment. These costs are clearly identifiable with goods or services

Costs associated with medical resource utilisation, which include the consumption of in-patient, out-patient and pharmaseutical services within the health care delivery system

For e.g: if the pediatic unit closes , the direct cost of nursing personnel and support staff is eliminated including supply cost (IVs) and cost of providing meals to patients

Indirect cost

Costs that cannot be attributed to a specific area . These are hidden costs and are usually spread among different departments. House keeping services can be an example of indirect cost

These costs are not directly related to the department. For eg: If a pediatric unit closes, there are still numerous indirect cost that remains in the hospital. A partial list of indirect hospital in the overhead department includes the following:

• Human resources
• Information services
• Executive teams
• medical records
• Legal
• Occupancy expenses
• Planning

2.Health care organisations are divided into responsibility centers, organisational units in which a manager is responsible for operations and evaluates the unit's performance:

Following are the examples of responsibility centers:

• A nurse manager may be responsible for an inpatient pediatric unit
• The manager of home-care program is responsible for all home-care services that are delivered
• Manager of house-keeping department is responsible for the cleanliness of the hospital/facility

Every program and department in a health care organisation can be classified as a responsibility center

Responsibility accounting provides the information necessary to assist a manager in opersting a responsibilty center. It is defined as the classification of financial and statistical data according to the organisational unit that produces the revenue and incurs the expense

Responsibility charting

When ambiguity results form unclear or new roles, it is often necessary to have the parties come together to delineate the function and responsibility of roles. If areas of joint responsibility exist, the manager must clearly define such areas as ultimate responsibility,approval mechanisms, support services and responsibility for informing. This is a useful technique for elementary jurisdictional conflicts.

For eg: a potential jurisdictional conflict may arise between house-supervisor and unit manager in staffing or between an in-service educator and unit manager in determining and planning unit educational needs or programs