COST EFFECTIVENESS AND

COST ACCOUNTING

PRESENTED BY
M.GOWERI M.Sc(N) II YEAR,
GCON, CUDDALORE.
 INTRODUCTION
• Cost-effectiveness analysis is a form of economic
analysis that compares the relative costs and outcomes
(effects) of two or more courses of action. Cost-
effectiveness analysis is distinct from cost-benefit
analysis, which assigns a monetary value to the measure
of effect. Cost-effectiveness analysis is often used in the
field of health services, where it may be inappropriate to
monetize health effect.
 INTRODUCTION cont…

• Typically the CEA is expressed in terms of a ratio where

the denominator is a gain in health from a measure (years
of life, premature births averted, sight-years gained) and
the numerator is the cost associated with the health gain.
 DEFINITION

• Cost effectiveness as the most effectiveness way to

achieve a set goal essentially, it express a balance
between attempts to keep cost to a minimum while
maximizing the outcomes/ outputs of an institution or
programme
HULSMAN
 AIMS & OBJECTIVE

AIMS :
 To maximize the level of benefit health effect relative
to the level of resources available
OBJECTIVE :
 To compare alternative programs with a common
health outcome To assess the consequences of
expending.
 PURPOSE
 To identify the most cost effective intervention from a
group of alternatives
 To provide empirical justification of an program.

 To identify and excluding program that is wasting

resources.
 To provide general information on the relative costs and
health benefits of different alternatives
 To evaluate the interventions in terms of efficacy, absolute
health gain and affordability.
 PRINCIPLES OF COST
EFFECTIVENESS
 The principles related to interpersonal relation
 The principles related to system in management
 THE PRINCIPLES RELATED TO
INTERPERSONAL RELATION

 Goals and ideas should be clear and well defined

 Change should be evaluated and management should

not ignore
 Competent counsel is essential

 Management can strengthen discipline or adherence the

rules
 Justice or equal enforcement on all
 THE PRINCIPLES RELATED TO
SYSTEMS MANAGEMENT
 Records , including adequate, reliable and immediate
information about the expences of equipment and
personal should be available as a basis for decision
 Dispatching or production scheduling is
recommended
 Standardized schedules
 THE PRINCIPLES RELATED TO
SYSTEMS MANAGEMENT cont…

 Standardized conditions
 Standardized operations can be facilitated through the
use of written instruction
 Efficiency rewards should be given for successful
completion of task.
STAGES OF COST EFFECTIVENESS
AWARNESS

CONTROL MONITORING

REDUCTION MANAGEMENT

INCENTIVES AVOIDANCE
LEVELS OF COST EFFECTIVENESS

Unit level Batch level

Enterprise Business
related cost level cost
 COST EFFECTIVE ANALYSIS

 Cost effectiveness is an economic study in which

consequences of different interventions are measured
using a single outcome, usually in natural units.
National Institute of Health and Clinical
Excellence, The cost effectiveness analysis is a type of
economic evaluation that examine both the costs and
health outcomes of alternative intervention strategies.
 PURPOSES OF COST EFFECTIVE
ANALYSIS
 To identify the most cost effective intervention from a group
of alternatives

 To provide empirical justification for a program

 To identify and exclude programs that is wasting resources

 To provide general information on the relative costs of health

benefits of different alternatives.

 To evaluate the interventions in terms of efficacy

 STEPS IN COST EFFECTIVENESS
ANALYSIS
Identify the programme goal or client outcome to be

achieved

Identify at least 2 alternative means of achieving the

desired outcomes

Collect baseline data of client

Determine the costs associated with each programme

activity
 STEPS IN COST EFFECTIVENESS
ANALYSIS cont…
Determine the costs associated with each programme
activity
Determine the activities each group of clients will receive
Determine the client charges after the activities are
completed; combine with the costs, the amount of
activity and outcome information
Compare cost outcome information for each goal to present
cost effective analysis
 COST BENEFITS ANALYSIS
 It is a tool with great potential for the decision maker
so long as he or she recognizes the difficulty in
determining the true costs and benefits of various
alternatives. This tool can be especially useful when
trying to decide between alternative expenditure of
money.
 COST BENEFIT RATIO

 A cost benefit ratio (Z) is defined as the ratio of the

value of benefits of an alternative to the value of
alternative cost.
 Z = Present Value of economic costs

Present Value of economic benefits

 Cost benefit ratio (Z)= PVB

1
 COST EFFECTIVENESS NURSING
CARE
 It means nurse achieves the intended health outcomes
at less cost, with quality as an underpinning element.
 It is used to determines the which intervention
achives a specific out come with less cost by
comparing two or more health care intervention.
 The interventions are compared in terms of their costs
of their health outcomes or health benefits.
 NURSING ACTIONS FOR COST
EFFECTIVENESS NURSING CARE
 Keeping well nourish of patients.

 Safety environment to the patients.

 Protection from acquired infections.

 Make right and priority choices when time comes

 Be fit and well to care.

 Promote health by preventive measures

 Ready to go-no delays

EFFECTIVE MANAGEMENT TRICKS
FORCOST EFFECTIVE CARE

 ➤ Team approach

 ➤ Effective communication.

 ➤ Learning together to work together for better health.

 ➤Pooling problems: sharing solutions

 ➤Efficient use of resources.

 ➤ Avoid medical errors.

 COST ACCOUNTING

 Cost accounting is a process of collecting,

recording,classifying,analyzing,summarizing
allocation and evaluation various alternative courses
of action & control of costs.
 Its goal is to advise the management on the most
appropriate course of action based on the cost
efficiency and capability.
 DEFINITION
 The process of accounting from the point at which
expenditure is incurred or committed to the
established of its ultimate relationship with cost
centre and cost units.
CIMA, London
 OBJECTIVES OF COST
ACCOUNTING

 Estimation of costs

 Ascertainment of costs

 Cost control cost by using various techniques such as

budgetary control, standard costing and inventory

control

 Cost reduction.
 OBJECTIVES OF COST
ACCOUNTING cont…
 To provide immediate information regarding stock of raw

material, semi finished and finished goods.

 Determining selling price

 To facilitating preparation of financial and other

statement

 Providing basis for operating policy.

 To help estimation of cost of future.

 CLASSIFICATION OF COST
ACCOUNTING
 By nature or elements: Material, labor, expenses

 Byfunction:Production,selling,distribution
administration, R&D development.
As direct and indirect
 By variable: fixed, variable, semi- variable.

 By controllability: Controllable, Uncontrollable

 By normality: Normal, abnormal.

ELEMENTS OF COST

Raw material

Labor

Indirect expenses
SCOPE OF COST ACCOUNTING
COST BOOK
KEEPING

COST COST
REPORT SYSTEM

COST COST
CONTROL ANALYSIS
 IMPORTANCE OF COST
ACCOUNTING
To management:

 Help in ascertainment (find out)of cost of process,

activity, by using different techniques such as job

costing and process costing.

 Aids in price fixation by using demand and supply,

activities of competitors, market condition to great

extend.
 IMPORTANCE OF COST
ACCOUNTING cont…
 The producer can take necessary help from costing record.

 Helps in cost reduction by applying cost reduction programme

and improved methods are tried to reduce cost.

 Elimination of wastages by checking the form of wast such as

time and expenses.

 Help in fixing selling process.

 Help in inventory control.

 Help in estimate.
 IMPORTANCE OF COST
ACCOUNTING cont…
To employees
 Employees have an interest in which they are
employed An efficient costing system benefits
employees through incentives plan in their
enterprises.
 COST ACCOUNTING METHODS/
APPROACHES
 Standard cost accounting
 Activity based costing
 Lean accounting marginal costing
 Throughput accounting
 MARGINAL COSTING
 This method is used particularly for short-term
decision-making. Its principal tenets are:
 Revenue (per product) - variable costs (per product)
contribution (per product)
 Total contribution-total fixed costs (total profit or
total loss)
 ADVANTAGES OF COST
ACCOUNTING
 Helpful to management.

 Important for employees.

 Important for consumers

 Helpful to creditors

 Helpful in formulating business policies

 Important for national development

 Budgeting

 Ensure best use of resources

 Cost audit
 LIMITATION

 Lacks uniform procedure.

 Discrepancy in results shown by financial accounts &
cost accounts
 Installation of a cost accounting system is expensive.
 Enhances control
CONCLUSION

 Nursing audit should be introduced in all the

hospitals, institutions by trained experts in order to
improve the quality of nursing care and better patient
outcome. Nurse managers in the hospital setting can
play an essential role in initiating and implementing
quality assurance, Standards and nursing audits and
can introduce in all clinical settings.
 JOURNAL REFERENCE
 The Cost-Effectiveness of Digital Health Interventions on the
Management of Cardiovascular Diseases: Systematic Review

 This study is the first systematic review of decision analytic

model–based cost-effectiveness analyses of DHIs in the
management of CVDs. Most of the identified studies were
published recently, and the majority of the studies were good
quality cost-effectiveness analyses with an adequate duration
of time frame. All the included studies found the DHIs to be
cost-effective.
THEORY APPLICATION