ABC Model Application in Ramsay Health Care
Discuss About The Optimization Portfolio Decision Model Life.
This report discusses the application of the ABC model in the Ramsay health care. RHC is an organization that operates and owns the facilities of the healthcare. Its facilities cover different needs of the healthcare from minor surgery to complex surgeries procedures. The model helps the healthcare to solve the problems that they are facing. The issues that the healthcare is facing include the rising costs of healthcare services and the increasing numbers of elderly who use the services of the healthcare. ABC provides the important approach to managing cost in the hospital. Cost management can benefit the healthcare if the activities of the care are linked to cost (Mahal and Hossain 2015). The framework aligns inputs through the process to outcomes and outputs. It assigns costs based on the patients to care requirements rather than the structure of the management. Ramsay health care needs to improve the way it delivers its services and work. Therefore, ABC model can improve the activities of the Ramsay healthcare. The paper is separated into different sections. The first section explains the meaning of Activity-based model and its characteristics. The next section is the explanation of how the approach supports goals and strategies of the institution. The third part of the paper discusses the recommendation about the actual implementation of the Activity-based model for the Ramsay healthcare. The last part explained in detail the alternative models that can be used by the organization.
ABC is a method of accounting that recognizes the activities being performed by the firm and then allocates indirect costs to commodities. ABC system identifies the correlation between activities, products, and cost, and through this; it then apportions indirect cost to commodities. It is difficult to apportion some of the costs by use of ABC approach of cost accounting. An example is the indirect cost i.e. office staff and management salaries are mostly hard to be a portion of a specific commodity produced (Javid, Hadian, Ghaderi, Ghaffari and Salehi, 2016).
Activity-based costing is an approach used by various institutions to accumulate the cost for a given cost object (such as products, customers, and services) that signifies the exact as well as the true amount of economic resources used or needed by the entity. The model occurs in different stages. The first phase is called Costa data; this is where a determination of the cost of essential activities takes place. The first phase can also be named as the ABPC (Activity based process costing). The amount indicated in costs pools are then being share out to products, services or another dissimilar cost object. The second phase is called ABC.
Meaning and Characteristics of Activity-Based Model
The aim of ABC is to establish the causal relationship among entities, resources, activities in allocating costs of overhead. The main beliefs that surround this model of the cost is that is being triggered and elements that affect both the services and products cost can be controlled by the institution (Etges, de Souza, Kliemann and Felix 2018).
The features of the ABC model include the following: Total costs are divided into two parts which include fixed and variable costs. The two type of cost is significant in the delivery of quality information that helps in designing suitable cost system. Another feature of the Active based costing approach is that suitable difference is established between the cost behavior patterns (Karaboga, Gorkemli, Ozturk and Karaboga 2014). The costs patterns are volume related, diversity-related, events related and time-related. The next characteristics are that a suitable cost drives must be identified for the allocation of expenses to a commodity. Lastly, cost drivers determine the pattern of cost behavior (Malmi 2016).
The mission of the Ramsay health care is to encourage and recognize the values of the teams and people. The organization looks for modern ways of performing their activities. They also have the mission of growing the business while preserving maintainable levels of profitability, giving a platform for the loyalty of the stakeholders (Dwivedi and Chakraborty 2014). The organization also builds positive correlation to help in achieving the positive result for all the people.
The objectives of the Ramsay health care includes: to increase the delivery of their services when there are opportunities required to satisfy the demand and need of the customers, on monetarily viable basis, provide a therapeutic and safe environment for the Staff, visitors and Patients, the organization also aim at increasing the rates of satisfaction of employees, visiting medical officers and patients. The healthcare also satisfies human and financial resources on the key indicators of performance. Finally, it maintains the indicators of clinical below the accumulated rate of the hospitals (peer hospitals).
A policy has changed and varied over the past years. Most of the policies of the health care aimed at avoiding completion. Days when the psychiatry undergoing difficulty of cost-cutting. The main objectives of the institution changed to diversification. Ramsay, in turn, acquires rural hospital where there exists unlimited competition. Ramsay health care bought in places where there are no competitors to avoid competition (Allain. and Laurin 2018).
Support of ABC Model in Achieving Institution’s Goals and Strategies
Management of Ramsay health care adopts the model to enhance the accuracy of costing. This, in turn, will enable the Institution to improve the delivery of their services and to determine the exact costs of products and services; they will also acquire important techniques of enhancing cost and return on project investment (Aithal and Kumar 2016).
The relationship between the process of care and costs are required in order for the organization to target the drivers of cost. Apportioning costs by ABC categories enable the linkage of the activities that use resources with the monetary valuation of resources. Activity-based costing will make sure that products are correctly assigned to categories. Accounting for the activities of care also allows the determination of comparison of cost between settings and among cost centers (Pieters 2017). With a suitable cost system, a firm administrator can easily recognize functional areas for the improvement of cost. The costing system has two main requirements for ensuring that it provides the exact assessment of the costs of care and to support the decisions of the management. Funding agencies and administrators need information that relates to the cost incurred in the process of using the care activities. Activity-based costing offers appropriate and reliable results for the above mentioned two requirements of costing system. Extensive use of reliable and consistent information of cost can be used as benchmarks as well as for management of best practices in medium and long-term care (Abu, Nor and Rahman 2018).
The next best tool that the management should use is the Total quality management (TQM). This is one of the management tools that help in integrating all the functions in different departments within the Institution (example are customer services, production, and marketing) with an aim of fulfilling the requirements of the customers. Total quality is useful since it provides a description of the organization, attitude, and attitude of the organization that tries to provide customers with products and services that satisfy the requirement of the customers. Ramsay health care should this type of management tools because it will increase the process of employee engagement and this will cause improvement of the organization products. Total quality management combines both the accounting tools and quality which reduces losses and increases business profits (Cannavacciuolo, Illario, Ippolito and Ponsiglione 2015).
Ramsay health care should apply the use of different type of costing system to help in improving their services. The use of different type of model will enable the organization to solve varieties of their problems (Yang 2018). This is due to the fact that ABC cannot solve all the problems that the organization is facing. ABC is just a single tool among different types of tools which improve and complement other tools within the management for example TQM. It represents a tool that helps the administrators to formulate and come up with the best decision on strategy. Management should ensure that the tools being used must complement and supplement each other to ensure maximization of the benefits of the tools being used (Namazi 2016).
Recommendations for Implementation of Activity-Based Model in Ramsay Healthcare
In implementing ABC to the organization to assist in achieving the set goals put in place by the organization, the management should come up with a practical mindset. ABC only performs as the machines being controlled by the human resources. Therefore, the organization should recruit knowledgeable, talented individuals to interpret and use the data from ABC to assist in decision making (Carnero 2018).
Conclusion
Accurate measurement, as well as important summary expenses, acts as the main necessity of cost system. The aim of the Activity-based costing is to ensure that the cost management is in line with the goal of the care being provided. There is a perfect benefit in putting in place cost summaries that are related to the outcomes of use of the health care (Oseifuah 2018).
Activity-based costing offers the best approach for apportioning of health costs. ABC can be used as reporting model and cost framework for community and facility-based care. It offers the required method of aligning costs to patient’s outcomes and care (Patel, Goyal and Agarwal 2018). The report indicates that performing accurate costing is essential for the smooth management of the activities of the healthcare services. Application of different costing system to the organization is quite important as it improves the performance of the institution. ABC helps to solve the various problems that the healthcares are facing. Examples of the healthcare problems that the ABC can solve include the following: the larger number of the elderly that uses the services of the healthcare and high costs of healthcare. Management should take into consideration the advantages and limitations the management tool that they are using in the organization.
References
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