1 If an evaluator wants to estimate unit costs within one agency with well developed financial information (e.g., a multipurpose CMHC in one physical plant, with one set of financial accounts and a single administrative structure) then the precise estimates are possible. For this type of cost-finding, we refer you to a monograph "Cost-Finding and Rate Setting for Community Mental Health Centers", by Sorensen and Phipps (1975), which provides a very complete and detailed guide to determining per unit costs of inpatient care, emergency treatment, outpatient and community support programs within one Community Mental Health Center (CMHC) or as the authors say, "under one roof." This monograph defines cost-finding as any method which attempts to charge all relevant CMHC expenditures -- both direct and indirect -- to final revenue producing functions or activities. The authors provide a method for determining, exactly, the per unit cost of delivering a particular unit of treatment, using accounting information from CMHC general ledgers. In order to use these methods, you need to have access to the accounts of the center. This approach, known as cost accounting, is the touchstone of all the work that follows, and we encourage the readers to be familiar with this work. Even if you do not intend to use this level of detail or if you think that you will never have access to the general ledgers of providers, the monograph will still provide a very clear explanation of general accounting principles, how general ledgers are set up, and how expenses which cannot be attributed directly to a treatment program are allocated between all the programs that share the expense. If you have absolutely no knowledge of how books are kept or what is meant by general accounting principles, we strongly suggest that you review "Cost-finding and Rate- Setting for Community Mental Health Centers" or other references on accounting.
2 Program refers to a group of services related by a common clinical goal and which share some level of administration. Service system refers to services and programs that serve a common target population and are linked in some clinical or administrative ways.
3 The CPT billing manual permits recording consistent and accurate information for insurance companies when claims are made for reimbursement for procedures covered by health plans. All treatment procedures are listed and briefly described. All patient-specific procedures and professional visits that occur during hospital admissions are billed separately using CPT codes to describe the specific nature of the procedure provided.
4 Wolff, Helminiak and Tebes discuss the reliability of the informant when the information has a stigmatizing influence (1997). She concludes that multiple informants should be used, but warns that the longer the recall period and the more stigmatizing the information, the less reliable are the data.
5 The costs provided in this and other examples are to illustrate the method of calculation and are not actual agency costs for this or any other treatment.
6 If the rent is subsidized, as in a Section 8 apartment, then that subsidy must be treated consistently with other transfer payments, such as Social Security Income (SSI) or Social Security Disability Income (SSDI). Typically, they are considered revenue, not expenditure.
7 Combining services with very different unit costs in a database is also possible, provided there is information to construct a weighted average cost that reflects both the differences in unit costs and the differences in relative frequencies of the services combined.
8 Not every country uses the same discount rate or expected facility life. In the UK (See Allen and Beecham, 1993), economists assume an expected rate of return for UK public sector investments is 6% and the building lifetime is 60 years, not 20.
9 The very low interest rates in 1998 suggest that a 5% discount rate may be too high.
10 PCV is the value in today's dollars.
