Unfortunately, these efforts will not be sufficient to create the kind of price competition that reduces hospital costs. Hospital efforts to provide patients with understandable, usable price information will go a long way towards establishing a more transparent market for hospital services. Ultimately, the hope is that value (price and quality) will become the basis of competition, and hospitals will be incentivized to reduce their prices by cutting their underlying costs ( Herzlinger, 2002). Hospitals’ efforts to prepare for price transparency have focused on developing systems and processes required to calculate patient and insurance-benefit-specific prices, communicating these prices to patients, and making arrangements to collect cost sharing due from patients (American Hospital Association, 2014). Policymakers and health care professionals have focused a great deal of attention on finding ways to present price and quality information to consumers in an accessible and comprehensible manner, so that the consumer can make better informed decisions. Recently, calls for hospitals to be more transparent in their pricing have increased. If these changes materialize, cost accounting information will become a much more important part of hospital management than it has been in the past. If these changes continue, hospitals’ patient volumes and revenues may increasingly be dictated by the decisions of individual patients shopping for low-cost services and as a result, providers could see increasing pressure to set prices at levels that reflect the costs of providing care. However, changes in insurance benefit design are creating incentives for patients to compare hospital prices. It goes on to suggest that hospitals have not adopted sophisticated cost accounting systems because characteristics of the hospital industry make the costs of doing so high and the benefits of service-level cost information relatively low. This article examines the literature on the relative costs and benefits of different accounting methods and the scant literature describing which of these methods are most commonly used by hospitals. However, little is known about which of these methods are most commonly used by hospitals. ![]() ![]() Management scholars have identified several cost accounting methods that provide organizations with accurate estimates of the costs they incur in producing output.
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