cost allocation -- it's the biggest fairy tale

i see. this all goes to say that "costs" as computed by accountants are meaningless. we are best off to ignore accounting numbers because they don't correspond to real costs.

since real money changes hands, wouldn't it make more sense to everyone if they just track the cash that changes hands? just tell me how much cash the hospital used to buy that aspirin tablet, tack on a fair profit percentage, like 25%, and I'll pay that. fergggitaboutit!

"mrs. eliza humperdink" wrote

Many years ago I did some consulting work for the doctors group that supplied the ER doctors for a local hospital. About one third of their procedures (about $1 million out of $3 million in charges) had to be written off due to the patient not being insured. Those same people stiffed the hospital charges as well. Total up all the costs of the hospital and allocate them accordingly to all revenue sources, and you get a $35 charge for an aspirin tablet......hand delivered to your bed side by a professional.

Or, you could wheel your self over to the nearest pharmacy and choke down all the aspirin you like - several bottles in fact - for the same $35. Then you can have an ambulance take you back to the hospital ($185 ride) so they can pump your guts in the ER ($2867.50), and give you an aspirin ($35) for the pain.

i see now. cost allocation is a way for the hospital to quietly shuffle their losses from treating deadbeats onto the bills of hard working, honest paying customers. Isn't this dishonest? Why should Congress permit hospitals to make paying customers pay for costs that deadbeat patients rack up? At the very least, the hospital should be required to disclose the following on every bill: 1) our cash cost for the aspirin you ate: $0.07 2) what we pay the nurse to feed you the aspirin: $10 3) your share of deadbeat patients we treated: $24.95

----------------------- 3) what we are billing you for your aspirin tablet: $35.00

Cost allocation is dishonest! Congress should pass legistlation to outlaw it ASAP!

"mrs. eliza humperdink" wrote

I hate to break it to you, but every business has what's called "shrinkage", sometimes it's theft through the front entrance, other times it's theft through the employee entrance. So those pair of pants you buy have the cost of all the store's theft loss built into the price you pay. Resturants and grocery stores build the cost of spoilage and breakage into their prices too. This is nothing new, and shouldn't be *shocking* to you.

It's business.

LMAO

For the hospitals, it's just ~because~ Congress requires the hospital to treat those "deadbeats". There's a law that requires them not to turn away a patient due to inability to pay.

It's a backdoor way that Congress provides medical care to the indigent and uninsured without having to tax anyone directly.

In no other industry is this requirement made. Restaurants aren't forced to feed those without the ability to pay, and if someone stiffs them on the bill, they can call the cops. The hospital HAS to treat them the next time they come in, and the tenth time they come in, and the 44th time they come in.

That's why so many hospital ER's are clogged with folks who use the ER as their primary care doctor.

This can't possibly be news to you.

I see now, mr. cpa. the accounrting "business" is a dirty one. it's all about hoodwinking the unsuspecting public by sneaking cost allocation to make the poor souls unsuspectingly pay for stuff they didn't buy. And don't say this is "shrinkage". Nobody's shrinkage is

"mrs. eliza humperdink" wrote

It can be very interesting.

It's all about making the shareholders (owners) of the business wealthy.

OK, we are in full agreement. Accounting is a tool to maximize profits for the wealthy owners at the expense of poor consumers, laborers, and hoodwinked investors. Accountants are apologists -- peon soilders doing the dirty work for rich people.

"mrs. eliza humperdink" wrote

Yes. But not all owners are "wealthy", at least not in the begining.

yes, so you agree that accounting is mainly a tool for OWNERS to mislead and gype consumers and workers. Only owners and shareholders benefit from accounting. The maid and blue collar workers don't benefit.

Owners and management, yes.

Investors and lenders do also.

accountants screw the working man and small time investors.

And, as we wait in rapt anticipation, your solution to this problem(s) is?

get ride of cost accounting. stick to the facts -- just give me the raw, un-manipulated cash flow statistics without the bookkeeping accruals.

Or, better yet, keep the accountants out of sight, out of mind -- in the back office where they belong.

"mrs. eliza humperdink" wrote

Cost accounting IS the facts.

Cash flow reports are useful, but they must include accruals for receivables (money yet to come in) and payables (money to be paid out. Otherwise management can't make good decisions.