Chapter 15.docx - Chapter 15: Product Costing Three...

Chapter 15: Product Costing
 Three questions to answer before effective cost accounting can become reality
o What are we trying to cost?
o For what time period is the cost information of value?
o
How do our needs for cost information relate to existing costing
systems?
 A product = "unit of payment"
o
Individual service arrangements = each specific service provided is
paid separately
o Encounter level = payment is made for all services bundled into an
encounter, based on MS-DRG for inpatient; shifts risk to provider
o Episode level = payment made for all encounters associated with a
defined episode of care; shifts even more risk to providers
o
Capitation = risk is fully shifted to providers and could be limited to
one area of service such as hospital care, or may involve multiple areas
 Time period
o Historical, report what costs actually were in some prior time period
 Little to no value
o
Reflect what costs will likely be in some future period
 Also used to establish standards in budgeting for which