Cost Allocation for Physical Therapy in a Teaching Hospital

In a general hospital whose primary responsibility is patient service, all costs associated with providing services in the Physical Therapy Department can be allocated to chargeable procedures on the basis of direct labor expended by the staff. This approach may not assume an adequate income to satisfy all expenses in a teaching environment. If this approach is used, the cost per procedure may be too large to be borne by the patient. A cost analysis in a physical therapy facility at a teaching hospital indicates that the income required for operation of a department must be derived not only from fees charged according to procedures but also from room charges to the patient.