Practical capacity

Practical capacity is used to calculate a portion of the balance as the unutilized capacity of a finance dimension. In practical capacity, there is the volume dimension to which a practical capacity value is assigned to. See Creating practical capacity volume.

For allocations to the TrueCost utilization ledger, expenses are allocated to cost objects within patient-servicing departments to cost objects by fully absorbing the expenses using the actual volume of cost object activity, in this case, the volume dimension is the cost object. For allocations to the TrueCost capacity ledger, expenses are allocated based on the practical capacity of the department to perform cost object activities. For these capacity allocations, if capacity was not met, a percentage of the balance is allocated to represent the unutilized capacity.

For example, if a summary cost object is cardiac procedures and the driver is the number of procedures, a practical capacity value is created to represent the number of cardiac procedures for which there is capacity on an event date. Allocations calculated using the capacity ledger assign balances based on the practical capacity volume. If there were fewer procedures performed on the event date than the estimated capacity, the remaining balance is allocated to a cost object representing unutilized capacity for cardiac procedures. See .Capacity allocations.

Note: Allocations are calculated to the utilization ledger based on the actual driver value for an event period. Practical capacity configuration only affect balances allocated in the capacity ledger.

Unutilized Capacity

To calculate capacity allocations, you must associate a posting volume dimension to the summary volume dimension to which it applies. When an allocation rule is calculated for the summary volume dimension, the unused capacity is calculated and allocated to the associated posting volume dimension in the capacity ledger.

For example, if volume dimension is the cost object where in a summary cost object is cardiac procedures, and the driver is the number of procedures, a target posting cost object for cardiac procedures unutilized capacity is assigned to the cardiac procedures summary cost object. When an allocation rule is calculated for the cardiac procedures, each procedure is allocated a percentage of the expenses in the capacities ledger based on the practical capacity. If the practical capacity was not met, a percentage of the expenses that represents the unmet capacity is allocated to the unutilized capacity target posting cost object for cardiac procedures in the capacity ledger.

Unutilized capacity dimensions can be configured manually using the menu, automatically using the Unutilized Capacities interface, or when creating an allocation line. See Creating allocation lines.

Note: Target dimensions for unutilized capacity must be part of the dimension structure of the finance enterprise group prior to running the capacity-based allocation.

Practical Capacity Volumes

To calculate capacity allocations, you must specify the practical capacity volume effective for the summary volume dimension for the period of the allocation run. You can specify different practical capacity volume values for different periods.

For example, if volume dimension is the cost object where in a summary cost object is cardiac procedures and the driver is the number of procedures, a practical capacity value is created to represent the number of cardiac procedures for which there is capacity on an event date.

Practical capacity volumes can be specified manually using the menu, automatically using the Practical Capacity Volumes Interface, or when creating an allocation line. See Creating allocation lines.

Note: If the actual volume exceeds the practical capacity volume for a summary cost object on an event date, the actual driver value is used for calculations to the capacity ledger. You also have the option to update the practical capacity volume value for the next period. For example, if the number of procedures estimated for an event date is exceeded, the capacity for procedures is more than the estimate. In this case, you might want to increase the estimated capacity for future calculations. See Updating capacity volumes.