FINANCIAL EXERCISE 1
FINANCIAL E : C M AXERCISE OST ANAGEMENT SSIGNMENT
1. Basic cost concepts provide essential knowledge needed for nursing leaders. Discuss the cost
per service unit as it pertains to your area of responsibility. How does this impact the entire
organization? What is the impact of direct and indirect costs? Fixed and variable costs? Full
cost versus average costs? What is the relevant range?
When determining cost information, it is collected and measured using service units. A
service unit is a basic measure of the product or service being produced by the organization
(Jones et al., 2019). Some examples of service units include discharged patients, patient days,
home care visits, emergency department treatments, or hours of surgery. My area of
responsibility is a medical-surgical and stroke unit. Each unit or specialty may differ in their
service unit. The service unit that my unit uses is cost per patient days. By tracking the cost
per patient days, the unit can maintain financial stability. Typically, the cost of inpatient days
is what drives total treatment costs. If the number of patient day increases, then the cost per
treatment increases for the unit. According to the Agency for Healthcare Research and
Quality, in 2016, the average length of stay was 4.6 days costing around $11,700 per stay
(AHRQ, 2018). To improve patient and financial outcomes, the goal is to decrease the length
of stay. On my unit, the average length of stay is approximately six days. However, we have
some patients that their length of stay is almost two months. With our stroke population in
our specific demographic are, we tend to have patients that stay a little longer than normal
due to disposition such as lack of insurance. However, patient’s length of stay can also be
extended due to hospital acquired conditions such as CAUTI’s or HAPI’s. How does this
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FINANCIAL EXERCISE 1
impact my organization? A hospital’s length of stay is often an indicator for its efficiency.
When there are shorter stays, costs are reduced resulting in higher profits. A decrease in
patient days also will improve the quality of care, increase bed management efficiency, and
increase in functionality.
Both direct and indirect costs are important to the total cost for treatment and care. Direct
costs are costs for resources used in the direct care of patients or acquired costs within a unit
or organization (Jones et al., 2019). An example of direct costs on my unit would be the
medical supplies used to care for a patient. Indirect costs are costs that are acquired for
reasons other than patient care or costs obtained by the unit from somewhere else within the
