Cost Allocations
Apple Valley Family Practice
July 2013
Cost Allocation Methodologies
Prepared for Group Executive Committee
Nadine
Presented by
Apple Valley Family Practice
July 2013
Cost Allocation Methodologies
Prepared for Group Executive Committee
Nadine
Presented by
Introduction
Apple Valley Family Practice is a medical practice with four locations in the Minneapolis/St. Paul area. The clinical staff consists of 20 physicians, all of whom practice in one or more areas of family medicine, and 46 physician extenders and nurses.
The Group Organization
Three Support departments:
•Administration
•Facilities
•Finance
Three Support departments:
•Administration
•Facilities
•Finance
Three patient services departments:
•Adult Medicine
•Obstetrics
•Pediatrics
Three patient services departments:
•Adult Medicine
•Obstetrics
•Pediatrics
Purpose
The purpose of this executive summary is to choose the allocation method that will meet the Groups mission and budget goals.
What is Cost Allocation?
Cost Allocation is a method to identify and distribute indirect costs. Direct costs are costs assignable to a specific cost objective, whereas indirect costs are costs incurred for multiple cost objectives or not assignable to a specific cost objective without effort disproportionate to the benefit received.
Key points to remember: distribute cost to ensure fairness amongst the departments as well as keep it simple and straight forward.
There were four methods that were considered: Direct, step-down, double apportionment, and reciprocal. Additionally, consideration was given with regards to the cost involved in implementing each allocation method.
Review (Revenue/Cost Projects and Allocation Percentages)
Departmental Revenue and Cost Projections CY-2014
Revenues: | | Adult Medicine | $12,000,000. | Obstetrics | 6,000,000. | Pediatrics | 2,000,000. | Total
July 2013
Cost Allocation Methodologies
Prepared for Group Executive Committee
Nadine
Presented by
Apple Valley Family Practice
July 2013
Cost Allocation Methodologies
Prepared for Group Executive Committee
Nadine
Presented by
Introduction
Apple Valley Family Practice is a medical practice with four locations in the Minneapolis/St. Paul area. The clinical staff consists of 20 physicians, all of whom practice in one or more areas of family medicine, and 46 physician extenders and nurses.
The Group Organization
Three Support departments:
•Administration
•Facilities
•Finance
Three Support departments:
•Administration
•Facilities
•Finance
Three patient services departments:
•Adult Medicine
•Obstetrics
•Pediatrics
Three patient services departments:
•Adult Medicine
•Obstetrics
•Pediatrics
Purpose
The purpose of this executive summary is to choose the allocation method that will meet the Groups mission and budget goals.
What is Cost Allocation?
Cost Allocation is a method to identify and distribute indirect costs. Direct costs are costs assignable to a specific cost objective, whereas indirect costs are costs incurred for multiple cost objectives or not assignable to a specific cost objective without effort disproportionate to the benefit received.
Key points to remember: distribute cost to ensure fairness amongst the departments as well as keep it simple and straight forward.
There were four methods that were considered: Direct, step-down, double apportionment, and reciprocal. Additionally, consideration was given with regards to the cost involved in implementing each allocation method.
Review (Revenue/Cost Projects and Allocation Percentages)
Departmental Revenue and Cost Projections CY-2014
Revenues: | | Adult Medicine | $12,000,000. | Obstetrics | 6,000,000. | Pediatrics | 2,000,000. | Total