Functional Approach Health Cost Accounting is a management accounting method designed to provide health care organizations with more accurate and comprehensive financial information to better manage and control health costs. The method is accomplished primarily by allocating the cost of health services to various functional departments.
Specifically, the functional approach to health cost accounting divides a healthcare organization's costs into three categories: direct costs, indirect costs, and special costs. Direct costs are costs directly related to medical services, such as the salaries of doctors and nurses, and the purchase costs of medical equipment and drugs. Indirect costs are costs indirectly related to medical services, such as equipment maintenance and upkeep, rent and utilities. Special costs are costs associated with specific medical services, such as surgery costs and radiation therapy costs.
The method then allocates the costs of each function to the healthcare services they provide. For example, operating room costs would be assigned to the surgery department, while pharmacy costs would be assigned to the pharmacy department. In this way, each department can more accurately understand its own cost structure and thus better manage and control health costs.
The advantage of the functional approach to health cost accounting is that it provides more accurate and comprehensive financial information that can help healthcare organizations better manage health costs. In addition, the method promotes collaboration and communication between departments within the healthcare organization, thus improving the quality and efficiency of healthcare services.
However, the functional approach to health cost accounting also has some drawbacks. First, the implementation of the method requires a great deal of time and resources, including human, material and financial resources. Second, the method requires a high degree of specialized knowledge and skills, and therefore requires professional staff for implementation and management.
In conclusion, the functional approach to health cost accounting is an effective management accounting method that can help healthcare organizations better manage and control health costs. However, the implementation of this method takes a lot of time and resources, so it requires healthcare organizations to fully consider the feasibility and applicability of its implementation.