Working with markup groups

Markups are generally applied to supply items that have a variable cost to them based on the time and type of purchase. For example, all pacemakers may use the same cost item number, but the prices can vary by tens of thousands of dollars based on type and manufacturer as well as any purchasing agreements in place. Instead of a fixed charge, your organization uses a markup from the base cost to price the item in a way that ensures that they do not lose money on a consumable item.

The amount or percentage an item is marked up is determined using a markup group definition table in Axiom. You can apply markups by percentage or multiplier. Additionally, you can add a fixed amount on top of the markup, as needed. Refer to your organization to determine which one to use when defining markups.

There are two types of markups you can define:

  • Cost item markup - This type of definition allows you to apply markups to specific cost items, NDC codes, and/or supply codes. For example, you can create a markup definition at the NDC code level for all aspirin. For more information, see Adding or editing a cost item markup group definition.

  • Charge tier markup - This type of definition consists of multiple pricing tiers, with each tier encompassing a price range and a markup percentage or multiplier that the system uses to add to the items in that price range. For example, you could create a supply markup group that includes ten tiers that uses a percentage markup type, so items from $.01 to $100 are charged a 20% markup, $100.01 to $200 are charged a 30% markup and so on. For more information, see Adding or editing a charge tier markup group definition.

Reverse markup method and unit costs

When using the reverse markup method, unit costs are calculated by taking the price of an item and marking it down based on the original markup percentage or multiplier defined in the markup group in which the item falls. Basically, you are reverse engineering the current price to determine the unit cost.

To illustrate the math, consider the following example:

  • A $1,000 item falls into a tier that carries a 4.0 multiplier (some refer to this a 400% markup, please verify for your specific organization) from the base cost.
  • The markdown rate would be: 1 / 400% → 1 / 4.00 → 1/4 → .25
  • The original cost of the item would then be computed as: $1,000 * .25 = $250
  • You can check this by reapplying the markup rate: $250 * Multiplier → $250 * 4.0 = $1,000

NOTE: Please check with your Syntellis Implementation Consultant or with Syntellis Customer Success for any questions about the computation of markup percentages or the differences between a markup percentage and a markup multiplier.

The reverse markup assignment results in either a remainder or an overage of dollars (or negative dollars) that is applied during the next methods based on methods assigned to other cost items. If no other methods are assigned or no other cost items are remaining, the balance is left on the general ledger as a variance. Each cost category could have its own markup table, which you should assign to the corresponding departments and cost categories.

To maintain markup groups for departments, do the following:

  • Identify the cost items, cost pools, or entity/department combinations that you will assign to use the Reverse Markup costing method.
  • Determine with department leaders and the Supply/Materials Management department the most appropriate costing method for medical supplies, implants, and pharmaceuticals.
  • Obtain the markup tables from the CDM department. Departments that would commonly use a markup table would be Surgery, Cardiac Cath Lab, Ambulatory Surgery Centers, and the Pharmacy. Also consider Cost Items within departments that use large amounts of medical supplies, implants, or pharmaceuticals.