10 Questions
How are upstream and joint costs allocated to specific program services by proportion?
Based on the services provided
What method involves knowing the total level of effort in person-days or person-hours for allocating costs?
Allocating costs based on direct labor involved
Which approach can more accurately assign indirect costs in cases of economies of scale?
Proportionally allocating by identified activities with ABC approach
What requires an estimate of the good's replacement cost and useful life?
Annualizing Capital Costs
How is the replacement cost of capital assets used in cost allocation?
Annualizing Capital Costs
In what way are upstream and joint costs NOT allocated to specific program services?
According to the replacement cost of capital assets
Which method is used for allocating costs based on service delivery data?
Proportionally allocating to the services provided
What does the annualization of capital costs require?
Estimate of the good's replacement cost and useful life
Which method is used for allocating upstream costs appropriately?
Proportionally allocating to the services provided
What is important when allocating costs using the ABC approach?
Identified activities for cost allocation
Study Notes
Cost Analysis in Public Health
- Cost analysis examines the inputs of an intervention, involving the collection and categorization of costs related to a health program or intervention.
- The arithmetic underlying cost analysis is simple: determine the sum of the costs of an intervention, service, or program, and optionally, divide the total amount by service delivery or beneficiary information.
Importance of Perspective
- The perspective of the study (patient, provider, purchaser, sponsor, government, or societal) affects the research question, method, cost elements, and statistical analysis.
- Common perspectives used are provider, patient, and societal.
Cost Allocation
- Cost allocation involves assigning overhead, indirect, or joint costs to specific health services.
- Examples of overhead costs include administrative costs, provider's time not associated with a specific service, and the cost of general service personnel.
- Joint costs can include construction and/or rent for physical facilities and capital goods.
- Three main ways to allocate upstream and joint costs to specific program services are:
- Allocating proportionally to the services provided
- Allocating according to the proportion of direct service labor involved
- Using an Activity-Based Costing (ABC) approach to allocate proportionally by identified activities
Annualizing Capital Costs
- Capital costs, such as large expenditures on buildings, vehicles, or equipment, need to be spread out over more than one period.
- Annualization of capital costs requires estimates of the good's replacement cost and its useful life.
Test your knowledge on the key concepts of economic evaluation in public health, such as determining cost estimation activities, analyzing financial and economic costs, defining units of measurement, and setting data collection periods.
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