Cost Accounting for Health Care Organizations: Concepts and Applications. - book reviews

Healthcare Financial Management, March, 1995 by David Lange

Cost Accounting for Health Care Organizations: Concepts and Applications is a text book designed to give graduate-level students a complete grounding in cost accounting principles from a healthcare perspective. The text contains no debits, credits, journal entries, or accounting jargon. Instead, it provides a clear, thorough explanation of cost accounting concepts as they apply to the healthcare field. This is an ideal book for readers interested in an overview of healthcare cost accounting.

The book's four sections address cost accounting foundations, cost accounting information for planning and control, decision-making tools, and the future of healthcare cost accounting. Each chapter is a self-contained topic discussion that starts with an outline of chapter goals and a list of key terminology. The body of the chapter's text is followed by a list of suggested readings and exercises that are well designed and reinforce the salient points of the text. The answers provided are brief and easy to understand. Each chapter concludes with two or more previously published articles, most of which were written by the book's author.

The text itself is technical but very clear, with accounting terms purposely kept to a minimum. The book is organized so that readers easily can skip from chapter to chapter to focus on the most relevant topics. For readers who already are trained in cost accounting, the articles listed at the end of each chapter may be of particular interest because they provide varied and in-depth presentations of each topic.

The text presents concepts without requiring that readers review a seemingly endless series of tedious "T" accounts - a real advantage to readers who are new to cost accounting. A chapter on inventory, for example, defines terms like specific identification, weighted average, and first in, first out (FIFO) without using a single journal entry. Yet the definitions also are detailed enough to show the effects over several years for the various systems.

Particularly impressive is the explanation of how a learning curve should work in a healthcare facility. This method explains that as volume increases, labor costs per unit should decrease because individual staff members - and the entire organization - learn better treatment methods. Administrators determining how to reduce costs to meet budget goals would be well served by reviewing this topic with their unit managers.

Cost Accounting for Health Care Organizations: Concepts and Applications may be a graduate student text book, but it also should appeal to everyone in the healthcare industry who needs to understand their facilities' costs.

David F. Lange, FHFMA, CPA, regional controller, United Psychiatric Group, Washington, D.C.