The environment within which health care accounting is performed is in the midst of dramatic change.1 The accurate costing of delivered services is, within this dynamic environ ment, assuming an ever greater significance.2 This research examines one procedure which could be adapted for and intro duced into the hospital cost accounting process, which could, in turn, lead to improved costing of services delivered. This procedure is a two stage activity based cost accounting process developed for and applied in manufacturing.3
The findings of this examination are presented in three separate discussions. The first of these discussions considers existing cost models employed in health care and hospital administration, while the second discussion examines the two stage activity based cost accounting procedure, and the third
1D. W. Young, "Cost Accounting and Cost Comparisons: Methodological Issues and Their Policy and Management Implica tions," Accounting Horizons, v. 2, March 1988, pp. 68 69.
2S. Mendenhall, R. Shepherd, and E. Kabrinski, "Cost Accounting in Health Care Organizations: Who Needs It?" Health Care Financial Management, v. 4, January 1987, p. 40.
3R. Cooper, "The Two Stage Procedure in Cost Accounting: Part One," Jorunal of Cost Management for the Manufacturing Industry, v. 1, Summer 1987, pp. 43 51; R. Cooper, "The Two Stage Procedure in Cost Accounting Part Two," Jorunal of Cost Management for the Manufacturing Industry, v. 1, Fall 1987, pp. 39 45.
discussion assesses the probable impact on hospital administra tion of the application of the two stage activity based cost accounting procedure.
Health care accounting involves a wide variety of complex processes and concepts. Among the more significant require ments of a health care accounting process are that (1) patient status and treatment must be reflected in all revenue and work load data, because cost allocations, and revenue pricing typi cal...