The price setting in private healthcare organizations: the role of a (correct) cost information

The aim of this paper is to analyze the features that a cost accounting system must have in order to support price assessment in private healthcare organizations. In most OCED countries, including Italy, the National Health System (NHS) provides services through public organizations and private companies affiliated with the public system. Usually private companies provide services in both public and private systems. Along with collecting the amount charged to the patient, private companies are reimbursed by the NHS for services rendered. In this context, accurate cost information is extremely important because it helps managers to know which services are profitable and which are not. For the business segment in which companies do not have flexibility in setting prices, cost information enables managers to identify services, which may present profitability problems. For the business segment where price flexibility exists, cost information helps identify pricing errors so that charges can be better defined. A case study shows the analysis of the value of Activity Based Costing(ABC) among cost accounting systems. Results outline how the ABC system provides new opportunities for identification of the service mix offered as well as for price optimization.