Topic: Standard Costs Costs Versus Benefits

• Read and evaluate the scenario presented in CT11.8, then respond with your thoughts on how you would decide this situation.
• Provide justification for your decision.

CT11.8 - Do you think that standard costs are used only in making products like wheel bearings and hamburgers? Think again. Standards influence virtually every aspect of our lives. For example, the next time you call to schedule an appointment with your doctor, ask the receptionist how many minutes the appointment is scheduled for. Doctors are under increasing pressure to see more patients each day, which means the time spent with each patient is shorter. As insurance companies and employers push for reduced medical costs, every facet of medicine has been standardized and analyzed. Doctors, nurses, and other medical staff are evaluated in every part of their operations to ensure maximum efficiency. While keeping medical treatment affordable seems like a worthy goal, what are the potential implications for the quality of health care? Does a focus on the bottom line result in a reduction in the quality of health care?

A simmering debate has centered on a very basic question: To what extent should accountants, through financial measures, influence the type of medical care that you receive? Suppose that your local medical facility is in danger of closing because it has been losing money. Should the facility put in place incentives that provide bonuses to doctors if they meet certain standard-cost targets for the cost of treating specific ailments?