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Summary Case 1
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Summary of 11 pages for the course HPI4007 Financial Management of Healthcare Organisations at UM (Case 1)
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Case 1 Cost-price calculatoo aod tarifsLearning goals:
1. What are the diferent types of costs fonnd in the literatnre (see brainstorm fxed,
variable, marginal, indirect)
2. What are the diferent types of cost-price calcnlaton [iotegrated, partal, margioal
cost price calculatoon]
2b. What are the aims/pnrposes of these diferent typess
3. Defne DBC, DOT, DRnG (Diagnosis Rnelated Gronps)s
4. How are tarifs related to the cost-prices
4b. How are tarifs determineds
5. What are the diferences between tarifs, cost-price, and the market prices
6. How to allocate the indirect/overhead costss (diferent ways to allocate)
7. What is transfer pricings
Assigomeot: Apply what yon learned dnring the training to the PBL case, calcnlate the tarif,
and the cost-price.
Make a miodmap for the terms
1. What are the diferent types of costs fonnd in the literatnre (see brainstorm fxed,
variable, marginal, indirect)
Grnen; fnancial management in health
Financial costs: monetary valne of resonrces.
Opportnnity costs= valne of alternatve benefts
Do not confnse with each other
Costs= valne of the resonrces nsed in the prodncton of an item or service.
Diferent types of costs:
- Historical costs; the amonnt of money paid for the resonrces nsed. The original costs.
- Rneplacement costs; what is wonld cost in today’s money to replace the resonrces
that have been nsed
- Fnll costs; the directly associated costs with the prodncton of service and the costs
that wonld be incnrred whether or not the actvity was carried ont
- Marginal costs; the additonal cost of prodncing one additonal nnit of service
- Pnrchase cost; what is wonld cost to pay an external organizaton to prodnce the
service on yonr behalf (external laboratory to carry ont blood tests)
Cost behavior= the way in which costs respond to changes in actvity
Rnesonrces in categories:
1. Variable; costs which change simnltaneonsly with actvity.
a. When actvity increases, costs go np; when actvity decreases, costs go down.
So, the cost of prodncton varies directly with the level of ontpnt
, b. In the graph, this is represented with a linear slope (a)
c. E.g. drngs, appliances
2. Fixed; costs which stay constant with changes in actvity over a period of tme.
a. The costs of resonrces which mnst be paid for before any actvity occnrs, bnt
which stay fxed as actvity increases. So, the cost of prodncton that does not
vary with the level of ontpnt. Bnt on the long rnn (e.g. >1 year), fxed costs
can also change.
b. In a graph, this is represented with a constant fnncton, a horizontal line (b).
c. The shorter the period of tme, the greater the nnmber of costs are likely to
be fxed.
d. Example: Staf salaries (of permanent staf), bnildings’ maintenance,
depreciaton.
3. Semi-variable; costs which contain a fxed and a variable element.
a. Arises when resonrces incnr a standing charge that is payable regardless of
whether the inpnt is nsed plns a variable cost when actvity increases
b. Example: ntlity bills snch as those for telephone and electricity.
c. In the graph, this is represented with a linear eqnaton with slope and
intercept (c)
4. Stepped; behave like fxed costs bnt only nntl a certain threshold is reached.
a. When actvity increased fnrther, costs step to a higher level. This process
contnnes as actvity increases.
b. Usnally related to capacity constraints
c. In the graph, this is represented with a gradnal line (d)
d. Example: when the nnmber of patents reaches above 2400 it may be
necessary to take on an additonal nnrse
Financial costs of a service:
1. Direct costs; costs of resonrces nsed directly by the service
a. E.g. doctors, nnrses and drngs
2. Indirect costs; services provided by snpport nnits. Indirect costs are related to
resonrces that are common to many clinical treatments and which are normally
snpplied centrally to many nsers. Snpportve role.
a. E.g. radiology, microbiologists
3. Overhead costs; costs that are not incnrred directly from providing patent care bnt
are necessary to snpport the organizaton overall. Not need to prodnce. A lot of
overhead costs are indirect.
a. E.g. secnrity, honsekeeping, acconntng, heatng, catering, capital roles,
bnildings. Catering is for example not a need for delivering healthcare.
Examples are dependent on the nnity of interest
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