Using the Volume Based Costing (VBC), which is a traditional costing system in hospitals especially if it used to accounting for surgical wards is not efficient and effective. However, prices for medical surgeries calculated using traditional costing system as VBC will not recover the costs incurred by the hospital for these surgeries, if the hospital uses VBC will suffer deficit because the revenues, represented by charged prices, collected for specific medical services will not recover the costs incurred. The reason is, however, the VBC is allocates all the costs into one cost driver, this would give all costs objects unfair share of incurred costs not according to real usage of these costs.
To solve that problem, and to set fair prices for patients and hospitals, a hospital should use an advanced costing system as Activity Based Costing (ABC), which is uses more than one costs driver and incur costs objects according to usage.
For ArabCare Hospital, Palestine, the prices currently charged which is supposed to be calculated by used ABC is more accurate and fair for both the hospital and patients. However, if the hospital used the volume based costing (VBC) will not recover its costs and expenses. Then, prices charged currently in the operation prices code of ArabCare hospital is able to recover costs but it is needed to be updated periodically because the changes of market prices of medical supplies.
Table of Contents
1. Introduction
2. Background
3. General Framework
3.1 Research Problem
3.2 Research Objectives
3.3 Research Importance
3.4 Methodology
3.5 Research hypothesis
3.6 Keyword Definitions
4. Literature Review
4.1 Foreign Studies
4.2 Arab and Palestinian Studies
4.3 What Distinguishing this Study of Others
5. Hospitals and Costing Systems
5.1 Cost Accounting
5.2 Traditional Costing System
6. Implementing the VBC on Arab Care Hospital, Palestine
6.1 Research Results
6.2 Recommendations
7. References
8. Annexes
8.1 Annex 1; Partial Income Statement of ArabCare Hospitals for 2012
8.2 Annex 2; Number of patients entered the hospitals Wards during 2012
8.3 Annex 3; Code of Hospital Prices of all Wards- all Operations
Objectives and Research Themes
This research aims to analyze the cost accounting and pricing systems within the private healthcare sector in Palestine, specifically focusing on ArabCare Hospital. The primary goal is to evaluate the effectiveness of the Volume Based Costing (VBC) method currently in use and to determine whether it provides a fair and accurate cost allocation for medical services compared to the more advanced Activity Based Costing (ABC) system.
- Analysis of current indirect cost allocation methods in private hospitals.
- Evaluation of the financial sustainability of pricing surgical services via VBC.
- Investigation into the variance between actual costs and charged patient fees.
- Development of insights for hospital management to improve financial accountability.
Excerpt from the Book
3.1 Research Problem
Generally, there is especially need to account for private hospitals in Palestine, to know whether price charged by private hospitals is fair for patient and to answer the usual patient’s question “why they charged me too much for that surgery of that medical services?!”.
The problem of pricing system for medical services is the way of allocation of indirect costs using the current method of cost allocation which is not resulting in clear price charged against the medical services.
The research problems are divided into two main problems:
1. Is the applying of the traditional costing system on the hospital in Palestine effective? Or do we need another costing system which is more effective and accurate?
2. To what extent the current pricing system is closed to real cost-based system? In other words, does the current pricing system of various medical services is closed to real prices which should be charged against them.
Chapter Summaries
1. Introduction: Discusses the importance of hospital management and cost analysis in the Palestinian private health sector, highlighting the need for transparent pricing.
2. Background: Provides the institutional history of ArabCare Hospital in Ramallah, detailing its development into a competitive private medical facility.
3. General Framework: Defines the research problem, objectives, methodology (exploratory and analytical), and key theoretical hypotheses regarding costing systems.
4. Literature Review: Surveys foreign and local studies on hospital cost analysis, comparing traditional costing approaches with Activity Based Costing (ABC).
5. Hospitals and Costing Systems: Explains the foundations of cost accounting in hospitals, differentiating between direct/indirect costs and evaluating VBC versus ABC systems.
6. Implementing the VBC on Arab Care Hospital, Palestine: Presents the case study results, applying VBC to surgical data to calculate costs and providing specific recommendations for the hospital.
Keywords
Cost Analysis, Private Hospitals, Palestine, ArabCare Hospital, Volume Based Costing, VBC, Activity Based Costing, ABC, Cost Accounting, Indirect Costs, Pricing Systems, Medical Services, Hospital Management, Cost Allocation, Financial Sustainability.
Frequently Asked Questions
What is the primary focus of this research?
This research focuses on the cost accounting and pricing mechanisms of private hospitals in Palestine, using ArabCare Hospital as a case study to evaluate the fairness and accuracy of their service pricing.
What are the core thematic areas?
The core themes include hospital cost accounting principles, the comparison between Volume Based Costing (VBC) and Activity Based Costing (ABC), and the financial transparency of medical service fees.
What is the main objective of the study?
The main objective is to determine if the traditional costing system currently applied is effective and to identify whether the prices charged to patients accurately reflect the costs of medical services.
Which methodology is employed in this study?
The study uses an exploratory and analytical approach, utilizing both secondary data from literature and primary data collected through interviews with hospital officials and accountants, alongside calculations based on 2012 financial records.
What is covered in the main body of the work?
The main body examines existing costing theories, details the structure of ArabCare Hospital, explains the calculation of costs per patient using VBC, and analyzes the resulting variances between these costs and the actual hospital fees.
Which keywords best characterize the paper?
The paper is characterized by terms such as Cost Analysis, VBC, ABC, Cost Allocation, and Private Hospital Management in Palestine.
Why is the "Volume Based Costing" (VBC) system considered ineffective for hospitals?
VBC is considered ineffective because it typically relies on a single cost driver to allocate all indirect costs, which results in an unfair distribution of costs to different services that do not actually consume resources at the same volume.
What is the main finding regarding ArabCare Hospital's current pricing?
The study finds that while current prices are generally able to recover costs, they need periodic updates to remain fair and accurate in response to shifting market prices for medical supplies.
- Citar trabajo
- Qais Sbaih (Autor), 2013, Cost analysis for private hospitals in palestine, Múnich, GRIN Verlag, https://www.grin.com/document/269403
