Economics In The Hospital Context Question & Answer To Use For Practical Writing Help

Budgeting for capital replacements and upgrades per year in a healthcare setting: Approaches used to determine capital affordability - A capital budget refers to an approximation of expenditure to be incurred on items that are long lasting, usually six to ten years or more, and can be major or minor depending on the amount and the context of the budget. Capital budgeting is very important in any hospital as it covers construction, purchase of new equipment or repair of existing equipment, and new equipment in new locations. in a healthcare setting, several factors determine the amount and stretch of the budget capital and include: the type of the hospital whether a rural, referral or central hospital such that some equipment like imaging ones can be installed in a central or referral hospital instead of a rural hospital, financial affordability and feasibility of the desired equipment of building upgrade so as not to spend a lot of money on an equipment at the expense of current expenditures like drugs and salaries; and if the suggested expansion and /or equipment fits in the health service in the said country as this will ensure there is synergy in consultations and cooperation between the hospitals and cases may be referred from hospital to hospital without causing a technology or communication gap among them. The effect of the new technology on the staff also ought to be evaluated in terms of the skills of staff, resources, and attitudes.
The importance of payer mix in healthcare strategic financial planning – payer mix refers to the percentage of revenues obtained from private insurance compared to government insurance or self-paying individuals. it is a very important tool in financial planning in any hospital as it enables the hospital to evaluate how well its financial performance is in relation to other public and private healthcare providers, it facilitates comparison with the payer mix in the service area and this gives the hospital a glimpse of its market share or placement in the market and therefore a chance to research on the competition’s activities; it’s used to raise red flags concerning the hospital’s billing, collections or payer contracts by comparing the different areas and their performance; comparing the payer mix by the line of service can point out opportunities where revenue can be maximized by maximization of the payer mix across the whole organization. A possible significant change in payer mix in a year can be a shift in government policies affecting the funding by both the government and/or the private insurance companies. This effect, if positive, would result to patients moving towards better healthcare facilities since they are now within the affordable range. If on the other hand government insurance was slashed, patients are still likely to migrate but this time to a cheaper health care provider and thus affect the payer mix at the end of the financial period of the hospital.
Variable and fixed costs in the healthcare setting- fixed costs define the expenditures incurred by a hospital that is bound to remain constant throughout the financial year or the relevant time range allocated and are in most times independent of the output related to them. On the other hand, variable costs also are known in accounting as mixed costs refer to those expenditures that the hospital will incur that keep changing from time to time and are especially dependent on the output. The variable costs generally increase at steadfast rates in relation to the labor and capital being used in the hospital. They are called mixed costs because they are partly fixed and partly variable depending on the time of the year.
A good example of a fixed cost is the money spent in paying the salaried labor in the short term. While the number of patients coming into the hospital may dwindle with improved healthcare and nutrition, or with the establishment of a better healthcare provider in the nearby, the number of permanent and pensionable staff in the hospital does not go down correspondingly. The staff will; keep coming to work and be engaged in disguised unemployment as they await their paycheck at the end of the month. These costs are bound to remain constant for a considerable length of time before the management can decide to lay off some employees to reduce operating costs or cut the salaries of their staff, both of which will come with additional costs of paying off the retrenched staff or resignations due to salary cuts hence a new employee may be hired and will demand a higher salary or the resources spent in hiring still equal to the retaining of the former employee.
On the other hand, an example of a variable cost in the hospital would be the amount of money spent on supplies and medicines. If the number of patients went up, more drugs would be needed to cater for the increased demand for the drugs. On the downside, if the number of patients visiting a health facility went down, frequent expenditures on drugs and supplies would correspondingly go down so as not to purchase those substances not needed by the hospital.