UK HEALTH & ABC

UK Health-Sector Service - Activity Based Costing



UK Health-Sector Service - Activity Based Costing

Introduction

In the recent era, huge number of elderly people uses health care service due to the increase in number of disease. This has ultimately resulted in the cost of healthcare to rise and for this purpose effective and efficient financial tracking is very important activity. The benefit of cost management in health care can occur only if the care activities are linked to those activities in which they incurred.

ABC offers a useful approach to the health care system. The structure of Activity Based Costing line up the cost i.e. input through health care activities i.e. process which result in output. The bases of assign costs are on client care needs rather than the structure of management. Initially, the activity based costing was tested on the a residential care facility and in supporting housing apartments in United Kingdom, after the success of those costing, majority of the healthcares system wanted to implemented in their costing system. The fact was the demonstrate results which were feasible and advantageous in term of cost justification, appropriateness of cost allocation for the productiveness and services.

Discussion

Activity Based Costing (ABC) in small healthcare was implemented due to the reason of the development of ever-increasing overhead rates in the traditional cost accounting. As these small healthcares do not have so much of patients, it become very difficult for the healthcare hospitals to overcome the expenses and hence improve the facilities and services of their healthcare. The aim of the activity-based costing in UK small healthcare was thus the source-related apportionment of direct and indirect overhead costs to products. Hence, the Activity Based Costing (ABC) is a method of cost analysis of an industry or company that provides actual data and the impact of the costs associated with each product and each service sold by the company itself, no matter what its organizational structure (Baker J., 1995, pp.57).

Small healthcare hospital mostly offers the residential care facility that is an attributed to nonprofits care setting that offers both residential and extended care services and Supportive Housing (SH) which is the offering home patient services, personal support and care, and coordinates these with home care nursing. The ABC introduced a notion of transverse which is expected to contribute to the transparency of production mechanisms.

Method of Charges

The direct charges for goods which are the cost objects of the entire cost burden that may be still the rule in the Cost Benefit Analysis (CBA), against by the allocation of indirect costs will follow a different technique. The ABC in small healthcare considers the products consume activities and that is latter consume resources. Particular healthcare will be taken to identify those activities that play a central role in the mechanics of the Cost Benefit Analysis (CBA) (lirias.kuleuven.be).

The cost drivers are the other important component of the ABC. A cost driver is a factor which creates or influences the occurrence and the cost reflects the consumption of ...