Question

Considering Your Costs and Benefits

Do you think that standard costs are used only in making products like wheel bearings and hamburgers? Think again. Standards influence virtually every aspect of our lives. For example, the next time you call to schedule an appointment with your doctor, ask the receptionist how many minutes the appointment is scheduled for. Doctors are under increasing pressure to see more patients each day, which means the time spent with each patient is shorter. As insurance companies and employers push for reduced medical costs, every facet of medicine has been standardized and analyzed. Doctors, nurses, and other medical staff are evaluated in every part of their operations to ensure maximum efficiency. While keeping medical treatment affordable seems like a worthy goal, what are the potential implications for the quality of health care? Does a focus on the bottom line result in a reduction in the quality of health care?

A simmering debate has centered on a very basic question: To what extent should accountants, through financial measures, influence the type of medical care that you receive? Suppose that your local medical facility is in danger of closing because it has been losing money. Should the facility put in place incentives that provide bonuses to doctors if they meet certain standard-cost targets for the cost of treating specific ailments?

YES: If the facility is in danger of closing, then someone should take steps to change the medical practices to reduce costs. A closed medical facility is of no use to me, my family, or the community.

NO: I don't want an accountant deciding the right medical treatment for me. My family and I deserve the best medical care.

Instructions

Write a response indicating your position regarding this situation. Provide support for your view.

1 Assume that all materials purchased during the period are used in production and that no units remain in inventory at the end of the period.

Answer 1

As per the information provided in the question do you think that standard costs are used only-

 

Discussion Guide:

The practice of medicine holds an unusual price in society on the one hand, it provide a critical, life-sustaining service, we expect and demand the highest quality service. We measure its success in terms of health improvement and lives saved. On the other hand, it is a business. And like other businesses, it most operate profitably. Some healthcare providers characterize this delicate balance as "The Business of Caring": How should we balance providing quality health care and reducing costs? In recent years, managerial accounting has played an important, although not always successful, role in this issue. In the 1990' health care providers made extensive use of managerial accounting techniques to reduce costs by the end of that decade, a no of important. Studies suggested that the quality of health care had suffered as result of concentrating too much on cost controlling effects & not enough on maintaining quality.

 

Today many health care organizations are implementing balanced score cards in an effort to balance the dual goals of quality health cate and reduced costs. For example, by providing incentives for preventive medicine, health care providers can reduce costs and at the same time improve patient health. It is likely that, in order to provide health care more Americans, we will have to reduce costs. It is hoped that successful implementation of balanced score card programs will result in reduced costs through increased efficiency, while increasing quality of health care.