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Cost allocation in the operating toom department: the consumer pays

Meijboom, Robin (2009) Cost allocation in the operating toom department: the consumer pays.

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Abstract:As a result of ageing populations and medical facilities becoming more expensive every day, the total health care expenses of western countries are increasing year after year. This is the reason for governments to take measures and gain control of the health care costs. The government measures require hospitals to work more efficiently and effectively. Isala klinieken is a large Dutch hospital faced with this need to improve efficiency. Isala klinieken has a divisional structure, with an Operating Room & Intensive Care division providing Operating Room (OR) capacity to other primary divisions. The primary divisions pay an hourly rate for demanded OR time, and a fixed (differentiated per specialty) tariff per session. As cost allocation dictates incentives, and incentives in uence decisions, the cost allocation model is a tool to promote efficient and effective medical and managerial decisions. Isala klinieken initiated this research to evaluate the current cost allocation model, and to design alternative conceptual approaches that lead to better cost allocation and accountability that promotes cost reduction by more efficient and effective decisions. We found that a cost allocation model should satisfy two main needs: It should give incentives that promote efficient and effective decisions, and it should be practical. We define criteria -along these two needs- to score the current cost allocation model and possible alternatives. Our criteria are information efficiencies, evaluation of divisions, behavior congruence, communual resource pooling, effort, complexity, and infrastructural change. The scores for 'evaluation of divisions' and 'behavior congruence' are based on financial estimates.
Item Type:Essay (Master)
Isala klinieken
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:Industrial Engineering and Management MSc (60029)
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