Healthcare finance managers are tasked to find ways to reduce costs in their
department for their whole facility. They use cost accounting to determine how
much services or supplies will cost, where these costs are coming from, and how
to pass costs along to patients. They must also find ways of generating revenue
from these costs. Indirect costs will be costs not directly related to patient care,
such as the cleaning services. Direct costs will be costs directly associated with
patient care, such as the use of the phlebotomy equipment and the techs running
the labs. The finance manager of a healthcare facility or department can allocate
charges from a department that does not generate revenue, such as the cleaning
staff to a department that does generate revenue, such as the phlebotomy lab.
Utilization rates will determine the patient volume in specific departments,
affecting the amount of revenue coming in. Take the Covid-19 pandemic for
example. Since the pandemic, elective surgeries that once filled operating rooms
and generated lots of revenue have been greatly reduced because of the number of
covid-19 patients being seen. Even though hospitals are being reimbursed for
Covid care given, the decrease in utilization of elective surgeries has hurt
physician practices and other healthcare facilities financially. According to a
report from HealthAffairs.org.
“Hospitals are also suffering economically from the loss of admissions and
outpatient procedures, though the CARES act provided significant support. Like
physician practices, they report significant economic hardship and are
furloughing some workers” (Chernew, 2020)
Revenue should increase when utilization of elective surgeries and more
outpatient services resume.
References
Michael Nowicki. (2022). Introduction to the Financial Management of Healthcare
Organizations, Eighth Edition: Vol. Eighth edition. Gateway to Healthcare Management.
Chernew, M. F. (2020, July 6). COVID-19 Effects On Care Volumes: What They Might
Mean And How We Might Respond. Retrieved from Health Affairs:
https://www.healthaffairs.org/do/10.1377/forefront.20200702.788062/full/
