Examples of semi variable costs in healthcare

After completing this week’s readings, including, “Anticipating Utilization Trends in an Evolving Market ,” describe the ways in which healthcare financial managers use financial resources and cost classifications to allocate indirect costs to direct costs when determining patient charges. Also, explain how utilization rates are related to volumes and revenue generation.

Peer Response 1:

Paula Stroshine posted

Discussion 3: Cost Accounting

Health care financial managers use financial resources and cost classifications to allocate indirect cost to direct cost when determining patient charges. The first concept to be discussed is the operating cost which provides services to the patient that visits the emergency room (Nowicki, 2018). The emergency room will need equipment so that the financial manager would have to borrow money and this concept is called non operating cost (Nowicki, 2018). The concept of direct cost is directly traced to a department including supplies and labor. Indirect costs are the overhead costs (Nowicki, 2018). Here is an example of how indirect cost can be allocated to the direct cost.

In the vascular surgery area where cardiac catheterizations procedures are performed the direct cost would be the medications, machines to do the procedure, and the clinical staff to perform the surgery. The indirect cost includes the cleaning personal, the lighting, and the appropriate temperature for the machinery used in the procedure. The financial manager for the department would include the indirect cost for each procedure in the budget which includes the time that it takes to clean the operating room after the procedure and the time the electricity and the lighting was needed. This would be included in the budget. In the end the patient will go to the telemetry ward over night to be monitored for any complication.

The nurse manager on the ward accepts the patient from the cardiac catheterization unit for observation status. Patient volumes on the wards have decrease and observation status is just one-way utilization decreases the admission rates, but it has controversies (Feng, Wright & Mor, 2012). The observation status may not work for all patients that need hospitalization.

Nurse managers must be familiar with the budgeting process. This is difficult since you cannot count the quality of care in the ward or clinic budget. Hospitals and healthcare organizations must prepare for utilizations declines with the health care reforms. inpatient volumes have already declined, hospitals are merging, and outpatient utilization has increased (Samaris, 2013). The nurse manager must watch the census and staff the ward accordingly. Nurses may be asked to take low census days. Furthermore, nurse managers and financial manager work together to bring the budget together for that unit.

Feng, Z., Wright, B. & Mor, V. (2012). Sharp rise in medicare enrollees being held in hospitals for observation raises concerns about causes and consequences. NCBI, 31(6), 1251-1259. doi:10.1377hlthaff.2012.0129

Nowicki, M. (2018). Introduction to the financial management of healthcare organizations (7th ed.). Chicago: Health Administration Press.

Samaris, D. (2013). What's new on our blog anticipating utilization trends key adapting in an evolving market. Healthcare Financial Management, 26-27.

Peer Response 2:

Renata Jankowski posted

Healthcare financial managers utilize several methods of cost classification when performing accounting and management functions at their facility. Identifying costs can be done through their traceability (Nowicki, 2018). While direct costs can be traced directly to department, product, or service, indirect costs cannot be traced to one specific area or cause. These are considered overhead costs, such as the heating or cooling throughout a facility. Another way financial managers can classify costs is through behavior as it relates to the volume of products or services. This includes variable and fixed costs, semi-variable costs, and marginal costs (Nowicki, 2018).