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Using transfer pricing in decision making. (Nuts and Bolts of Business).

Publication: Physician Executive
Publication Date: 01-MAR-03 		Format: Online - approximately 991 words
Delivery: Immediate Online Access

Article Excerpt
Imagine this problem. A clinical specialty within an academic, multi-specialty group practice is going to leave the group and join a new department created for its specialty. This specialty provides the largest billings and collections to the group.

The school of medicine has agreed to the formation of the new department. While there is no argument that the departure will have significant financial impact to the multi-specialty group, there is disagreement about what the financial impact will be.

The question is how to fairly compensate the group for the departure of this specialty. How do we solve the dilemma?

One way to approach the problem is to use the concepts of transfer pricing. Traditionally, transfer pricing is used when one division of a company provides goods or services to another division of the same company. It is a means of preventing the division that sells the final...

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