Accrual Basis of Accounting: An Introduction,” Pages 3-4. Payables/Accrued Expenditures.” Accessed Dec. “ Paydays, Pay Periods, and the Final Wages.” Accessed Dec. 20, 2021.Ĭalifornia Department of Industrial Relations. “ FDIC Law, Regulations, Related Acts,” See “§ 1026.16 Advertising,” Definitions: “Deferred Interest.” Accessed Dec. 20, 2021.įederal Deposit Insurance Corporation. “ FSA Expands Set-Aside Loan Provision for Customers Impacted by COVID-19.” Accessed Dec. “ Accounting Accruals-What Are They and Why Do We Do Them?” Accessed Dec. “ Accounting Principles and Standards Handbook,”. “ Prepaid and Accrued Expenses.” Accessed Dec. The patient care labor costs were underestimated, since all employee benefits were included in overhead costs.Princeton University Office of Finance and Treasury. The limitation of this study is that the costs were aggregated across all hospitals, and thus the analytical results are sensitive to the cost structure of large hospitals. Administrative and general costs, constituting more than one-fifth of the operating costs, could provide alternative opportunities for cost management efforts. When the reduction of non-capital-non-labor costs (e.g., medical supplies) was insufficient, many hospitals chose to cut the labor costs of these services, thus disrupting the compensation of the patient care labor force. The cancelation of elective surgery and the decline of hospital visits caused by COVID-19 have shrunk revenue from these services and motivated hospitals to reduce costs from these services. Operating room, laboratory, diagnostic radiology, general routine inpatient care, intensive care unit, outpatient clinic, and emergency room incurred approximately one-third of hospitals’ total operating costs. In 2018, labor and capital costs constituted 41.3% and 4.0% of hospital operating costs, respectively. Medical records & medical records LibraryĪdults and pediatrics (general routine care) Intern & research service salary & fringes The aggregated costs of the seven other patient care services accounted for 34.3% of all operating costs or 65.9% of patient care costs.Ĭapital related costs-buildings and fixtures Since the cost for drugs charged to patients contains primarily the inventory cost of drugs, we excluded it from the analysis. 5 The costs of eight patient care services-operating room (8.4%), laboratory (3.8%), diagnostic radiology (2.7%), general routine inpatient care (9.1%), intensive care unit (2.2%), outpatient clinic (4.2%), emergency room (3.9%), and drugs charged to patients (2.3%)-were greater than 2.0% of total operating costs. The single largest item is administrative and general costs (21.4% of all operating costs). Table Table1 1 presents the decomposition of each major cost item. In this study, we separately report capital costs due to its unique nature. If consumed over multiple periods, there may be a series of corresponding charges to expense. In Cost Reports, capital costs are included in overhead costs. A prepaid expense is an expenditure paid for in one accounting period, but for which the underlying asset will not be consumed until a future period.When the asset is eventually consumed, it is charged to expense. Notes: Capital costs include depreciation, lease, rental, interest, taxes, insurances, license, and royalty expenses for land, facilitates, fixtures, and moveable equipment. Lastly, we identified patient care services (i.e., ancillary, inpatient, and outpatient) that incurred relatively large costs (> 2.0% of total operating costs) and examined their weight in the cost structure.ĭecomposition of hospital cost, by cost function and type, 2018. Third, we analyzed the proportion of capital, labor, and non-capital-non-labor components in each major cost item that accounted for at least 0.5% of total operating costs. Second, we separated capital costs from other overhead costs, grouped all operating costs based on their type and function, and compared the relative magnitude across groupings. 4įirst, we aggregated the operating costs of all hospitals in the sample. The capital costs of building and equipment, such as depreciation, were reported in the overhead category. The amount of the labor component and the non-labor-non-capital component was reported for each cost item within these categories. The sample has 3501 hospitals: 2601 nonprofits and 900 for-profits.Ĭost Reports classify hospital operating costs into four categories based on function: overhead costs (not directly associated with patient care), ancillary costs, inpatient costs, and outpatient costs. We deleted 20 hospitals that reported missing net patient revenue. Using the hospital Cost Reports published by the Centers for Medicare and Medicaid Services, we obtained the cost information for 3521 private general acute care hospitals in 2018, the most recent year for which a complete national dataset is available.
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