HA499 Bachelors Capstone in Healthcare Administration

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 Justin Adams

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Finance in healthcare is the fundamental basis of how a practice manages its cashflow; a practice is essentially a business that is offering services, the healthcare from providers, to the goods, the patients. If there is no cashflow within a practice, weather it comes from self-pay or insurance companies, a practice will not be successful and unable to pay its employees, utilities and other general fees (Gapenski, L).  

Utilizing financial information can help determine how a business if functioning by monitoring the revenue (which can determine the ability to hire new staff, purchase new technology, renovations, etc.).

To put the second portion of this into laymans terms  (and a bit easier to understand myself) here is an outline of each operating budget vs a capital budget; these are also known as direct costs and indirect costs/ variable costs:

  • Direct costs/ operating budget

    Expenses that a company can directly connect to specific “cost object”

    These can be specified by department, product, or project.

    E.g. software for EMR’s, equipment ( MRI Machine/ Ultrasound machine), and raw materials

    These also can include labor costs

  • Indirect Costs/ variable costs

    Extend beyond the expenses you incur creating a product to include the costs involved with maintain and running a company

    Eg. Overhead costs

    Malpractice insurance

    Day-to- day supplies needed for company function

    Pen, printer paper, rental space costs, etc.

    Variable costs

    Constantly change

    Electric, gas, rent ( for the most part stays consistent)

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