Comparing methodologies for the allocation of overhead and capital costs to hospital services.
BACKGROUND
Typically, little consideration is given to the allocation of indirect costs (overheads and capital) to hospital services, compared to the allocation of direct costs. Weighted service allocation is believed to provide the most accurate indirect cost estimation, but the method is time consuming.


OBJECTIVE
To determine whether hourly rate, inpatient day, and marginal mark-up allocation are reliable alternatives for weighted service allocation.


METHODS
The cost approaches were compared independently for appendectomy, hip replacement, cataract, and stroke in representative general hospitals in The Netherlands for 2005.


RESULTS
Hourly rate allocation and inpatient day allocation produce estimates that are not significantly different from weighted service allocation.


CONCLUSIONS
Hourly rate allocation may be a strong alternative to weighted service allocation for hospital services with a relatively short inpatient stay. The use of inpatient day allocation would likely most closely reflect the indirect cost estimates obtained by the weighted service method.
Tan
Siok Swan
SS
Institute for Medical Technology Assessment, Erasmus MC University Medical Center, Rotterdam, The Netherlands. s.s.tan@erasmusmc.nl
van Ineveld
Bastianus Martinus
BM
Redekop
William Ken
WK
Hakkaart-van Roijen
Leona
L
D001062:Appendectomy / Q000191:economics; D019644:Arthroplasty, Replacement, Hip / Q000191:economics; D003361:Cost Allocation / Q000191:economics; D003362:Cost-Benefit Analysis; D003661:Decision Support Techniques; D004469:Economics, Hospital; D006801:Humans; D007297:Inpatients; D018803:Models, Economic; D009426:Netherlands; D020521:Stroke / Q000191:economics