Use Of Direct Costs Research Articles

Cost Adjustment in the Korean Defense Industry: Empirical Research on the Relation between Earnings Management and Sustainability

This article is a demonstrative research on the motivation and method for earnings management in the Korean defense industry and its connection with the cost of equity capital. The data for this article comes from the Korean DICS (Defense Integrated Cost System). The difference between the cost data submitted by defense corporations and those verified by DAPA (Defense Acquisition Program Administration) serves as an indicator of earnings management; such a direct measurement of earnings management distinguishes this research from previous studies focusing on indirect indicators of earnings management, such as discretionary accruals. This article purposefully names such a specific form of earnings management as ‘cost adjustment’ that takes advantage of the difference between the submitted cost and the verified cost. The result of the research shows that cost adjustment activities in the defense industry are proportional to the capital cost required by shareholders. It is also notable that the cost adjustment activities in the defense industry are mostly done by making use of direct costs, in contrast to other industries utilizing indirect costs, which are hardly traceable. As a result of cost adjustment to meet short-term target profit, the long-term sustainability of the company would get impaired from the inflated costs in direct cost adjustments.

Management of End-Stage Ankle Arthritis: Cost-Utility Analysis Using Direct and Indirect Costs.

Total ankle replacement and ankle fusion are costly but clinically effective treatments for ankle arthritis. Prior cost-effectiveness analyses for the management of ankle arthritis have been limited by a lack of consideration of indirect costs and nonoperative management. The purpose of this study was to compare the cost-effectiveness of operative and nonoperative treatments for ankle arthritis with inclusion of direct and indirect costs in the analysis. Markov model analysis was conducted from a health-systems perspective with use of direct costs and from a societal perspective with use of direct and indirect costs. Costs were derived from the 2012 Nationwide Inpatient Sample (NIS) and expressed in 2013 U.S. dollars; effectiveness was expressed in quality-adjusted life years (QALYs). Model transition probabilities were derived from the available literature. The principal outcome measure was the incremental cost-effectiveness ratio (ICER). In the direct-cost analysis for the base case, total ankle replacement was associated with an ICER of $14,500/QALY compared with nonoperative management. When indirect costs were included, total ankle replacement was both more effective and resulted in $5900 and $800 in lifetime cost savings compared with the lifetime costs following nonoperative management and ankle fusion, respectively. At a $100,000/QALY threshold, surgical management of ankle arthritis was preferred for patients younger than ninety-six years and total ankle replacement was increasingly more cost-effective in younger patients. Total ankle replacement, ankle fusion, and nonoperative management were the preferred strategy in 83%, 12%, and 5% of the analyses, respectively; however, our model was sensitive to patient age, the direct costs of total ankle replacement, the failure rate of total ankle replacement, and the probability of arthritis after ankle fusion. Compared with nonoperative treatment for the management of end-stage ankle arthritis, total ankle replacement is preferred over ankle fusion; total ankle replacement is cost-saving when indirect costs are considered and demonstrates increasing cost-effectiveness in younger patients. As indications for and utilization of total ankle replacement increase, continued research is needed to define appropriate subgroups of patients who would likely derive the greatest clinical benefit from that procedure. Economic and decision analysis Level II. See Instructions for Authors for a complete description of levels of evidence.

A Cost-Effectiveness Analysis of the Routine Use of Isoniazid Prophylaxis in Patients with a Positive Mantoux Skin Test

The role of isoniazid prophylaxis in low-risk patients with positive Mantoux skin tests has recently been questioned. In general, recent research has focused on the risk/benefit ratio. We, therefore, decided to extend these data and apply a cost-effectiveness analysis of the routine use of isoniazid prophylaxis from a societal perspective. Costs per case prevented were calculated for a 20-, 50-, and 70-yr-old low-risk patient who had a positive Mantoux test with base, high, and low costings. Rates were also calculated based on the use of direct costs alone and direct and indirect costs combined. Costs varied from Canadian $8,586.00 in a 20-yr-old patient to $40,102.00 in a 70-yr-old patient per case prevented based on direct costs with costs ranging from $3,236.00 to $11,320.00 with both direct and indirect costs included. These costs could be considered reasonable from a societal perspective but do not address the issue of any increased life expectancy resulting from chemoprophylaxis.