DQ 7-1

1.

Variable cost is the total cost of variable inputs for any cost is the sum of the total cariable cost and total fixed cost (Hick 2016 Page 112).

Total cost is the sum of all costs incurred in producing a given level of output (Hicks 2016 Page 112).

Fixed cost is where to numerical value of a good or is constant with the production of the good or service (Hicks 2016 Page 111).

Marginal cost is costs is to examine the value of additional resources that must be committed to the production process to pro-duce an additional unit of output (Hicks 2016 Page 111).

Average total cost is the total cost per unit of output and is defined for any level of output (Hicks 2016 Page 113).

A clinical department is known to be areas where medical treatment or testing occurs such a hospital or an urgent care. A non-clinical department are areas where there is no medical treatment is conducted. The variable cost I believe would be the most challenging for a clinical department because it is difficult to predict the flow of patients that are going to be seen in department. With the flow of patients, the volume of supplies that are used and tests that are conducted affect the demand. If there is no flow of patients, then there is no demand and the supplies that have been purchased would be sitting around. Because the most difficult thing to consider when going into a department is variable cost and that is the easiest type of cost that is manipulated, it is important to keep up with the pattern for the department to ensure longevity.

Reference:

Hicks, L. (2014). Economics of Health and Medical Care. Retrieved from https://viewer.gcu.edu/7XPMWM

2.

The market is a powerful mechanism for allocating resources and determining prices. Theory posits that a competitive market with marginal cost pricing assures efficient production and optimization of mutually advantageous transactions between buyers and sellers. This mix of productive efficiency and allocative efficiency underpins the broader notion of economic efficiency. Yet America’s health care system stands apart. Stories about health care pricing have been widespread in recent years. In February 2013, Time magazine’s cover story provided detailed anecdotal evidence about the disparity between hospital pricing and actual costs of care. The Centers for Medicare and Medicaid Services (CMS) has made its extensive data sets public, and subsequent articles in the Washington Post and the New York Times began detailing prices of various procedures as well as price differences that exist between similar institutions. This upsurge in media attention reflects increased interest in the contribution of pricing to the growth of health care expenditures. A key driver behind disparately high spending in the United States is high prices rather than high utilization or quality. Prices often appear arbitrary, failing to represent costs and thereby failing to provide meaningful information. Calls for increased price transparency are proving difficult to address in an industry with organizations that remain rooted in antiquated billing and cost accounting systems. A sound and credible cost accounting system is necessary to more closely reach economic efficiency. Many organizations are currently unable to measure cost at the patient level in spite of the increasing importance of this capability. Moreover, improvement in accounting systems of health care organizations has never been a central focus of reform.(Fischer,2015) This article provides perspective on why this transition is proving particularly difficult.

(Fischer,2015) Price transparency and cost account challenges for healthcare organizations consumers driven era

https://journals.sagepub.com

3.

Explaining the difference between all the types of costs will help us to come out with a conclusion about what will be the most challenging for a clinical and nonclinical department.

Total cost is defined as "the total expense incurred for a product or service being sold by a company. The costs involved in manufacturing might include the raw materials used in making the product" (Murphy, 2019.) In other words, the variable cost and fix cost combined the Fixed costs are the cost that does not change in response to alterations in volume, influenced by time and not output (Cleverly & Cleverly, 2018.) On the other hand, Variable cost is those that change according to their output or volume and continuously changes in a proportional behavior (Cleverly & Cleverly, 2018.) Average total cost is known as the average cost per unit of output; to find the actual result is necessary to divide the total cost by the quantity produced. Finally, the marginal cost is "the change in total cost that comes from making or producing one additional item" (Kenton,2018.) The reason why is used is to measure when a company achieves better economic upgrades.

For clinical departments, the variable costs might be the most difficult to handle appropriately because all service and product values are changing due to high or low demand per consumers' need. Nonclinical departments are more affected by the variable because there is no chance to readjust and make it work, different from hospitals were overcharging for other items and procedures is their form to solve these issues.

Thanks

Reference

Cleverley, W. O., & Cleverley, J. O. (2018). Essentials of health care finance. Burlington, MA: Jones & Bartlett Learning.

Kenton, W. (2019, March 12). Marginal Cost Of Production. Retrieved from https://www.investopedia.com/terms/m/marginalcostofproduction.asp

Murphy, C. B. (2019, April 20). The Difference Between Cost vs. Price. Retrieved from https://www.investopedia.com/ask/answers/101314/what-difference-between-cost-and-price.asp

Ruffin, R., & Gregory, P. R. (2001). Principles of microeconomics. Boston: Addison-Wesley.