Tvmama

No Comments Written by Atila on September 21, 2008 – 6:53 pm

Some costs about 50 percent of a health services organization’s cost structure are unique to the reporting sub-unit and hence usually can be identified with relative certainty. To illustrate, consider a hospital’s clinical laboratory. Certain costs are unique to the laboratory: for example, the salaries and benefits for the technicians who work there and the costs of the equipment and supplies used to conduct the tests. These costs, which would not occur if the laboratory were closed, are classified as the direct costs of the department.

Unfortunately, direct costs constitute only a portion of the laboratory’s entire cost structure. The remaining resources utilized by the laboratory are not unique to the laboratory; the laboratory utilizes many shared resources of the hospital as a whole. For example, the laboratory shares the organization’s physical space as well as its infrastructure, which includes information systems, utilities, housekeeping, maintenance, medical records, and general administration.

The costs that are not borne solely by the laboratory are called indirect, or overhead, costs. Indirect costs, in contrast to direct costs, are much more difficult to measure at the sub-unit level for the precise reason that they arise from shared resources that is, if the laboratory were closed, the indirect costs would not disappear. Perhaps some indirect costs could be reduced, but the hospital still requires a basic infrastructure to operate its remaining departments. Note that the direct/indirect classification has relevance only at the sub-unit level; if the unit of analysis is the entire organization, all costs are direct by definition.