Managing Cost Centers

Topics: Health care, Cost accounting, Costs Pages: 3 (1031 words) Published: December 17, 2010
M2 Journal Article Review Paper
Emily Croushore
A.T. Still University

For purposes of planning and control, an organization may be divided into specific units all of which are assigned as the responsibility of the unit’s manager (Baker & Baker, 2011). These units are classified as cost centers and may be grouped into a larger category that all have something in common (Baker & Baker, 2011). For example the laboratory and radiology department can each be seen as a separate cost center that can be grouped together under the category of professional services. In the case of a cost center, a particular unit of the organization is given responsibility for controlling costs of the operations in which it holds authority (Baker & Baker, 2011). For planning and controlling purposes, being able to track all expenses to one particular cost center is crucial to management’s determination regarding the level of the cost center’s productivity and efficiency. I currently work as a front desk clerk for a multi-physician general medicine practice in Gilbert, AZ. The impressive state of the art facility is fully equipped with the latest technology and equipment in addition to its on-site laboratory and radiology department. Our organization can be classified as a service line. “In traditional cost accounting circles, a product line is a grouping of similar products. In the healthcare field, may organizations opt instead for “service line” terminology…or a grouping of similar services” (Baker & Baker, 2011, p. 37). With regards to the organization’s expenses, the facility is made up of different cost centers that are each allocated specific responsibilities relating to controlling the costs of the operation over which it holds authority. “Cost centers can then be grouped into larger groups that have something in common” (Baker & Baker, 2011, p. 42). Within our organization, three specific groups of cost centers include general services, support services,...

References: All Business. (August 1, 1994). Hospitals become cost centers in managed care scenario [data file]. Available December 10, 2010, from allbusiness.com Web site: http:/​/​www.allbusiness.com/​personal-finance/​health-care-health-plan/​452630-1.html
Baker, J., & Baker, R. (2011). Health care finance: basic tools for non-financial managers (3rd ed.). Sudbury, MA: Jones and Bartlett Publishers.
Scarlett, B. (2007). Management Accounting- Performance Evaluation. Financial Management, 41-43. Retrieved from Business Source Premier database. (14719185)
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