Managerial Accounting in Healthcare Services Essay (Critical Writing)

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Modern companies have access to a variety of services with the help of which they can improve their work, achieve positive results, and meet the needs and expectations of employees and customers. Managerial accounting is a fast-developing field in which accounting information is gathered for planning and controlling organizational actions and promoting effective decisions (Mowen, Hansen, & Heitger, 2014). There are many types of costs that companies have to work with. This paper aims to discuss the characteristics of such concepts as variable costs, fixed costs, mixed costs, and job order costing as a part of healthcare services.

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Managerial Accounting and the Environment

Managerial accounting comprises the system through which managers as the main insiders can recognize their needs and gain control over the majority of organizational activities and decisions. Almost all the concepts in this field were developed for the manufacturing sector, and no formal criteria or generally accepted accounting principles (GAAP) are usually applied (Mowen et al., 2014). Management accountants have to apply rigorous analytical techniques and use internal and external sources to extract the necessary descriptive, predictive, and prescriptive data (Appelbaum, Kogan, Vasarhelyi, & Yan, 2017). In other words, each service has its cost for a company and the customer, and the task of a manager is to make sure that the service, its quality, and its price are compatible and beneficial.

The value of cost in the service industry is evident. However, it is important not to confuse financial and managerial accounting. The former is focused on financial data for potential and current users only, while the latter provides both financial and non-financial subjective facts for all internal users. Today’s companies need accurate and reliable information about products’ and services’ costs. They track resources that have already been used for performance or that can be used in the context of current prospects. To avoid unpredictable challenges, organizations should focus on different types of costs.

Managerial Accounting Concepts

In this paper, special attention will be paid to such managerial accounting concepts as variable costs, fixed costs, mixed costs, and job order costing. As a rule, accounting managers are sensitive to behavioral patterns and the ways costs may change output levels through managerial incentives, individual expectations, and specific adjustments (Holzhacker, Krishnan, & Mahlendorf, 2015). For example, variable costs change as soon as output changes. In services, this concept is regularly applied because of several changes in manufacturing and production. In contrast, fixed costs do not change along with output changes but directly depend on administrative or governmental decisions.

Mixed costs are also frequently present in the service industry. They include elements of both the above-mentioned costs and depend on how managers define upcoming or currently occurring changes. Companies are obliged to control their variable and fixed costs to prevent mistakes and plan effectively (Lee, 2016). Job order costing cannot be ignored as this system improves modern services and provide companies with a chance to discover the costs that may consume various amounts of resources. Detailed information about products and costs should be gathered. This method is usually effective for a small number of people.

Managerial Accounting in Healthcare Services

During the last several years, the healthcare industry has undergone several changes and improvements. Some organizations were successfully able to recognize and analyze various types of costs, as well as to provide patients with the required services and help. Other organizations, however, failed to demonstrate the same results. The investigations of Hilsenrath, Eakin, and Fischer (2015) show that healthcare reforms and accountable organization models can be developed to improve access and quality and contain costs. Each type requires a special approach and investigation.

Cost accounting systems in the healthcare service industry may be developed in different ways. For example, job order costing helps to identify the costs that patients must receive information about because of the services or medications they need for treatment. Variable costs in healthcare include such things as medications and supplies, which may change due to the number of patients and the type of injuries or diseases they have. A considerable fraction of the costs in healthcare is fixed, including the improvement of buildings, equipment, and also salaries for employees. These costs are unchanged because, despite the number of patients and the level of care offered, costs are incurred regularly depending on administrative codes, governmental reports, and other local rules. Mixed costs are also applied to healthcare facilities because employees have to supervise internal and external changes at all times.

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Conclusion

The use of managerial accounting concepts by healthcare service providers and employees continues to draw serious attention in the 21st century. Implementation of cost planning and analysis promotes effective decision-making and prospective payment systems. Medical and healthcare costs may be variable, fixed, and mixed. Job order costing makes it easier to understand why resources have to be used to cover expenses at different levels of organizational management.

References

Appelbaum, D., Kogan, A., Vasarhelyi, M., & Yan, Z. (2017). Impact of business analytics and enterprise systems on managerial accounting. International Journal of Accounting Information Systems, 25, 29-44. Web.

Hilsenrath, P., Eakin, C., & Fischer, K. (2015). Price-transparency and cost accounting: Challenges for health care organizations in the consumer-driven era. Inquiry, 52. Web.

Holzhacker, M., Krishnan, R., & Mahlendorf, M. D. (2015). The impact of changes in regulation on cost behavior. Contemporary Accounting Research, 32(2), 534-566. Web.

Lee, R. T. (2016). Fixed and variable costs: When accounting is the opposite of cash flow reality. Journal of Corporate Accounting & Finance, 27(4), 31-35. Web.

Mowen, M. M., Hansen, D. R., & Heitger, D. L. (2014). Cornerstones of managerial accounting (5th ed.). Mason, OH: South-Western Cengage Learning.

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IvyPanda. (2021) 'Managerial Accounting in Healthcare Services'. 30 June.

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IvyPanda. 2021. "Managerial Accounting in Healthcare Services." June 30, 2021. https://ivypanda.com/essays/managerial-accounting-in-healthcare-services/.

1. IvyPanda. "Managerial Accounting in Healthcare Services." June 30, 2021. https://ivypanda.com/essays/managerial-accounting-in-healthcare-services/.


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