Increasingly, surgeons will need to master practice-management skills, and none of these skills is more important than the ability to manage expenses. Activity-based cost accounting (ABC) provides a method whereby a surgical practice can attribute practice expense to the three major types of patient encounters performed by surgeons: (1) evaluation and management office encounters, (2) office-based surgical procedures, and (3) institution- based surgical procedures. The process begins with the assessment of the scope of activities performed by office personnel and the volume of specific Current Procedural Terminology Manual(CPT) codes performed by the practice. Finally, a cost-driver analysis is completed, which relates the quantity of resources and activities required by each family of CPT codes. The ABC method is implemented in a three-step process: definition of a specific list of activities performed by office personnel; definition of specific cost objects, which for surgical practices are the specific families of CPT codes used (ie, charge office visits, surgical procedures, and so forth); and the assignment of expenses from the general ledger to the cost objects by allocating the amount of activities used for each service. The result of the ABC method is a direct assignment of a dollar cost for each family of CPT codes. This will allow a practice to understand the total cost for an office visit and the components of that cost. The implication for management is that a cost can be reduced by making value judgements regarding component costs. In addition, once a practice knows its cost for a particular service, the ability to negotiate and ultimately accept or reject a fee schedule becomes a simple process. Surgeons must begin to understand the cost structure of their practices and not simply accept the concept that doing more will translate into more net revenue. Copyright (C) 2000 by W.B. Saunders Company.
|Original language||English (US)|
|Number of pages||7|
|Journal||Seminars in Colon and Rectal Surgery|
|State||Published - Jan 1 2000|
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