An example of organizations using allocated costs to justify prices is when a hospital negotiates rates with insurance companies and other payers.

Question

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Hospitals and other healthcare organizations use allocated costs, such as the cost of diagnostic tests or surgical procedures, to negotiate rates with insurance companies and justify their prices to patients and other payers. This helps ensure that the organization can cover its expenses and continue to provide high-quality care.

An Example of Organizations Using Allocated Costs to Justify Prices