Contents - Index

Inventory/Costing Overview

There are two types of costing MedFlex supports.  These are statistical and direct.  There are pros and cons to both approaches.  Statistical costing means a studied and standard cost is assigned to a deliverable without tracking the direct material and labor costs that actually occurred.  Direct costing means you are measuring and recording each material cost and each labor cost for a job.

Statistical costing is where you assign for a base procedure on the CPT definition screen (L-Code definition screen) a standard material and labor cost.  The L-Code length on this screen is 10 characters even though the L-Code when printed to 3rd parties is always 5 characters.  This difference lets you have varied versions of a particular base procedure.  For instance you can have an L1960-A or a L1960-B which each may have different descriptions and costing factors.

Direct costing in MedFlex is utilized by using the parts for a job screen in the inventory.  This is done as a normal part of creating PO's and pick ticket's so it might seem that to go the direct costing route is a no-brainer.  On the part definition screen you can also define 'labor parts' of which the sole purpose is for direct costing.  A labor part does not generate PO's or Pick tickets but you can still put it on the parts list on a job just like a part.  In this fashion you can have a complete itemized detail of all costs a job had and calculate profit by job.

The pro's and con's of the two approaches involve two factors many people fail to consider in these costing discussions.  The first is the cost of measurement.  The second is the need to include the labor cost for an O & P deliverable for any true profit calculation by job to have any meaning.  Labor is about 2/3rds of the cost an O & P deliverable.  Any cursory review of an O & P shops ledger comparing net sales to material vs labor costs show this to be the range.  Thus, it is vital if you are calculating net profit by job to trap in some fashion the labor cost for that job.  This creates the real life problem in O & P with a direct costing approach.  If you are determined to get labor accurately measured then you will add a significant 'cost of measurement' to your total labor cost as people struggle to accurately represent their labor and track it as they go about their day.  In addition, many types of labor go back and forth between multiple jobs and that efficiency can be lost if people feel they must only work and track labor on one job at a time.

In most cases people will consider the above and pick the statistical method as being the most accurate and cost effective costing implementation.  Even when you pick that method material by job is still being tracked as you use the Inventory and Purchasing in MedFlex.  Just material cost alone doesn't give you net profit.  If it did then there would have been no reason for MedFlex to also implement a statistical approach for these management needs.

There are a couple of costing reports in MedFlex under Billing and Collections/Reports/Costing reports.  But in most cases where costing is needed it is to drive bonus or incentive calculations for staff.  In these cases MedFlex custom creates a report to fit those needs.