The primary purpose of an allocation is to distribute costs, but there are many additional benefits. Management may be better able to control losses, promote safety, and establish a new culture in the workplace. This approach could lead to lower self-insurance costs and lower excess and reinsurance premiums. The challenge for managers is in knowing where to begin to design such an allocation or in maintaining a process for routinely reviewing the existing allocation.

This article was published on hfma.org, the Healthcare Financial Management Association's website.