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Cost Accounting For A healthcare Organization Essay

Cost Accounting For A healthcare Organization Essay

You are the manager in a health care organization, and you have been directed to come up with a plan to cut your budget by 5%. Discuss the following:

What expenses will you cut? Justify the cuts you choose.
Describe how these cuts will affect patient-centered care.
Include both positive and negative effects.
Provide at least 1 reference for this discussion.Cost Accounting For A healthcare Organization Essay


The process of budgeting is a significant element of management systems control since it facilitates a manner in which planning, coordination and management control takes place. Despite the fact that every essential item is given consideration during the budgeting process in every organization, attention ought to be given for the justification of each cost and that which is considered exaggerated has to be cut off in order to create a sustainable profit margin in terms of organizational revenue and expenses(Young, 2008). The aspect of increasing revenue minus overloading this healthcare organization employees or sacrificing the quality of services provided is a challenging task. However, minimizing the expenses is straightforward as this will directly impact the margins of the profit made through budget cost-cutting.
A key focus in cost-cutting will be in terms of operational and administrative costs so as to ensure a cost-cutting plan with lesser risks to the healthcare organization. Coming up with a variety of actions will be safer in comparison to a single idea. Operational and Administrative costs will be cut through adopting and embracing the use of virtual technology in the budget. The use of technology to have virtual meetings will help to reduce expenses on travel and hiring physical space (Young, 2008). Individual contact for organizational employees will only be necessary when considered most beneficial.
The healthcare organization has previously been documenting patient and general information manually with pen and paper. To cut on more operational costs, technology shall be embraced (Finkler & Ward, 2012). The use of Google docs will be highly considered to centralize patient information, organization documents and every other detail as compared to paperwork and physical documentation done in meetings.Cost Accounting For A healthcare Organization Essay
Marketing costs shall have to be cut since the new strategy will embrace the use of technology on digital platforms. The world has been reduced to a global village where everyone looks for information from the Internet. Since the previous marketing strategy has a number of marketing specialists in various parts of the region, the current marketing design to use technology will call for only a few experts well acquitted to technology and digital marketing (Finkler & Ward, 2012).
How these cuts will affect Patient-centered care- Positive Effects
Operational cost cuts to have more reliable, efficient and consistent ways of storing and backing up patient information through technology is an assurance of full-time availability of patient medical history and treatment. This effect comes regardless of time and date.
In addition, this operational cost cut enhances the determination of the healthcare organization to safeguard patient information to ensure up to date treatment history with more effective outcomes (Finkler & Ward, 2012).
Administrative cost cuts come with the positive effect of availing a particular employee of the healthcare organization to attend to patients whether on follow-up or routine medical care in cases he would be a way to join a medical seminar or other official duties. This ensures quality effective outcomes for patients.
Negative Effects
The negative effects of the issue of cutting operational costs to replace its costs with technology for storage of patient information and overall organizations’ documents are based on the issue of protecting patient information. In medical ethics, patient confidentiality is mandatory (Young, 2008). Security threats to use of technology exist. Therefore, the likelihood to lose patient information to second and third parties exists, which negatively impacts patient care through loss of trust and integrity to the organization.Cost Accounting For A healthcare Organization Essay

Cost Behavior, Driver and Health Management

In the competitive time of today no one can escape the financial complications that encircle a business irrespective of the fact whether it is health business or even laboratory operations. Much of the expenses that are included in the accounts of a hospital are generated from laboratory sessions and experiments that are conducted. Every hospital therefore allocates special budget for the laboratory and its associated expenses which include expenses related with the cafeteria, administrative disbursements and admissions.
Such a practice is often acknowledged as acceptable but a major drawback linked to it is that it makes the entire laboratory program uncompetitive. In addition this it is also worth mentioning here that most of the laboratory staff while handing the expenses assumes that the costs are fixed, but most of the costs involved are calculated to be 50% variable. If the degree of variability involved is around 50% then it is important that further decisions regarding the costs are taken in accordance while keeping these substantiated facts in mind. Any hospital and its health care management would have to slash its expenses if there is an imbalance in the expenses that are taking place in comparison to the revenues that are being generated. (Langabeer 2008)
Despite of the fact that hospitals are normally categorized as non-profit organizations in accounting terminology, it is still important to have a check and balance system through which the difference in expenses and revenues can be effectively monitored. It is a general assessment that the hospital will move for less expensive and cheaper cost drivers and motivators  Cost Accounting For A healthcare Organization Essay

Simulation Review Paper By Johnna HCS/405 Health Care Financial Accounting Instructor: Donna Pearson

“Concern about the growth of healthcare a cost is widespread and continuing increases in hospital cost per day are a significant component of this concern” (2009). In this paper it shows an example of how healthcare cost is constantly increasing and what the hospitals have to do to keep up with the increase of costs. This paper is a simulation paper that analyzes financial indicators for decision making. In this simulation the financial accounting from a Cardiac Care Hospital’s Perspective had to bridge a working capital shortage, evaluate funding options for acquiring medical…show more content…
In phase two, I was to decide the best strategy to acquire new equipment for the hospital. The new equipment that needed to be purchased was a High Speed CT Scanner, X-Ray machine, and an Ultrasound system. I had to decide if the facility needed to apply for a loan to buy new equipment or refurbished equipment. If the new equipment or refurbished equipment was not feasible for EHC, then I had to decide if an Operating lease or a Capital lease was better. The choices that I decided were to Buy Refurbished Equipment for High-Speed CT Scanner, Equipment Capital Lease for X-Ray Machine and Equipment Operating Lease for Ultrasound System. The reason I chose these options was because buying the Refurbished Equipment was a better choice for the facility. A CT scanner becomes obsolescent in five years or less and their life span is 10 years so it would be better to buy a refurbished CT scanner and use that one until it is at its life span, and then upgrade. I chose a Capital lease for the X-Ray machine because “buying the equipment at a bargain price will be a good option because the equipment will last for a very long time” (University of Phoenix. (n.d). This was a good deal because an X-Ray machine lifespan is only 15 years. I chose Operating lease because there was a lower upfront payment and a lower monthly payment. Also an Ultrasound system has a lifespan of five years, so with the operating lease there Cost Accounting For A healthcare Organization Essay

Capital Budgeting in Healthcare

Diana Berrios


Capital budgeting is a technique often used by businesses to rank and evaluate investments or potential expenditures that are significant in amount. In healthcare organizations, it is usually managed by inexperienced health care professionals or managers. This proposal seeks to discuss the opportunities provided by an efficient capital budgeting and suggest areas of budget improvement in Cryo-Cell International.


A proper capital budgeting will provide future financial planning for Cryo-Cell. It will enable the finance manager to plan strategically their financial future (Young, 2008, p. 28). It will also enable hospital facility managers to validate and account for budgetary needs, and adequate funding within the budgetary requirement. Also, it will improve communication with Cry-Cell departments. An effective communication plays a significant role in the success of a capital spend plan (Finkler & Ward, 1999, p. 14). The idea is to encourage alignment, collaboration, engagement, and integration when communicating. There is an opportunity for standardization, which increases efficiency especially when budgeting process is often riddled with inefficient manually intensive processes.Cost Accounting For A healthcare Organization Essay


The key areas that Cryo-Cell needs to improve in its budgeting process include;

Operating Margins –the operating margins may portray different information, for example; large margins could mean money is not properly used to improve patient care and services (Finkler & Ward, 1999, p. 18). This proposal recommends that margins should be analyzed by comparing past budgets and expenditures.

Technology –since most hospitals invest in new technology and medical equipment, this can translate to significance expense on a budget. Therefore, it will be advisable to create a separate budget for equipment and medical supplies (Young, 2008, p. 33).

Patients – looking at Cryo-Cell pricing strategy, it does not charge any upfront fees for their patients. It will be vital to note the number of patients still affects expense, costs, and budget needs. Cost Accounting For A healthcare Organization Essay

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