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Healthcare Finance

Student’s Name

Professor

Course No.

Institution

Date
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Healthcare Finance

Abstract

The essay presented forth analyses service delivery in healthcare institutions. It comprehensively

provides how national, regional, local, and international factors implicate healthcare

environments. It provides the merits of cost allocation methods. It suggests the best method of

cost allocation. It describes the production processes of a healthcare setting and offers means and

steps of the processes. It comprehensively analyzes the healthcare faction based on its financial

processes.

Keywords: Healthcare, services, environments, cost allocation, production, processes.

Introduction

Service delivery in an institution is implicated by various factors that range from local,

regional, national, and international. They may result in direct or indirect capitation of resources

used to offer services. Cost allocation is paramount should hostile environments be mitigated for

the best service delivery. Various methods are recommended over others based on their

effectiveness. Acquisition of resources and service delivery is vital to a healthcare institution in

appropriate functionality. Analysis of the environmental factors that cause hiccups in service

delivery in healthcare, its methods of cost allocation, and their importance and the means of

production need to be analyzed.

Discussion

External Environment of Healthcare Institutions

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An external environment of healthcare institutions incorporates the entities that affect the

quality and level of services the institution offers. It is a complex environment that is predicted

by a variety of factors that, in turn, implicate service delivery. Patient demographic and societal

variables are one such. Medication administration requires communication between the patient

and the physician (Fatima et al., 2018, p.1196). In a situation with a language barrier, service

delivery is affected, and therefore, medication administration is implicated. A patient's culture is

vital to effective service delivery, and understanding it ensures so, making it a complex factor in

service delivery as it varies. Also, patient cooperation is another complex external factor that

implicates the extent of service delivery. An autistic patient that is sensitive to touch, in most

cases, will not get the needed medication. A patient with no past medical records and who is

unwilling to be examined implicates service delivery. Patient involvement in terms of

medication, such as administering short-term medicines, affects service delivery. Another factor

of local environments that impacts service delivery includes the type of illness. A sensitive

illness will hiccup service delivery providing a complex environment.

Regional factors that affect service delivery include provider-related factors. Their

competency may not be appropriate to handle the needed services, such as where scanning

equipment has to be installed; they may need to be more efficient. Also, their own societal and

demographic factors, such as cultural alienation, may force them to implicate service delivery.

Such would include an abortion clinic in a Christian community. Also, their motivation and

satisfaction in terms of compensation implicate the service delivery (Fatima et al., 2018, p.1196).

In a hostile setting, security officers are paramount and needed. Some need more motivation to

ensure security which hiccups service delivery.

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National factors implicate service delivery and they include the healthcare system,

resources, facilities, management, and collaboration. In a given nation the health care system is

impaired due to the insecurity issues that erupt everywhere. Service delivery is implicated due to

such instabilities. The resources in such a country, such as human and financial, need to be

increased, which results in the unavailability of services to be offered. A healthcare institution

uses acquisition processes as part of its production services, and a lack of resources impacts it.

Facilities such as appropriate surgical rooms are unavailable in most institutions, offering a

complex environment to work in terms of service delivery (Fatima et al., 2018, p.1196). Also, the

management and collaboration the country allocates to the various institutions offer a difficult

environment to work on. Strict oversight of resource appropriation forces staff to need more

motivation to offer services. Weird collaborations with controversial countries may cause the

source of vital resources to be depleted. It implicates the environment of service delivery.

International factors such as sanctions, collaborations with controversial countries, and

conflicts between nations implicate service delivery in healthcare institutions. Sanctions are

impudent and make countries need more resources upon which service delivery is based.

Collaborations with countries that do not have the necessary resources for service delivery

implicate service delivery. Conflict hotspots lead to the destruction of hospitals and facilities,

which makes service delivery a nightmare. The factors discussed offer a complex environment

for service delivery in a healthcare institution.

Merits of Classifying Fixed, Variable, Semi Variable and Semi-Fixed Costs

In any given institution, financial statements are paramount in analyzing performance

health. Classifying costs into various domains enables institutions to attain the objective. Cost is

the aggregate normal of the non-financial revenue items in the statement. Cost accounting aims
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to methodically classify records and analyze expenses to ascertain the cost of a certain product

(Yatsenko, 2018). It enables the fixation of the selling price. Cost accounting is very key in the

segmentation of the cost of a product and hence its selling price. Individuals in the healthcare

faction tend to use it to diversify the price of services and products based on competition. It

allows one to determine the price of a healthcare product during a recession or depression. Also,

classifying costs as fixed or variable helps in cost control. Overtly, a hospital's expenses go way

over the top without justification for profits garnered. Cost accounting segregates the different

expenses allowing for better estimates and, ultimately, better control over the costs.

Institutions need budgets for better financial and overall management, and cost

accounting helps control budgetary concerns. By classifying expenses, the finance department

better understands how to allocate available financial resources. Budget flexibility is attained by

this classification which ultimately enables management to have a better view of the behavior of

costs (Yatsenko, 2018). Hospitals produce services to their customers through their various

treatment and medication services. To ensure this, the classification of costs is necessary. It

allows the management to understand the cost that can be saved if a unit of service is given up. It

allows for the analysis of the cost-benefit relationship.

Additionally, classifying costs helps in making management decisions. Trivial decisions

by the management revolve around finance. The management can decide whether to buy or

procure a certain product or service based on the estimated costs and expenses. The trivial

decision to give up a product or increase production of another service overtly depends on the

difference between the price and the marginal cost. Therefore, classifying costs into various

segregations is paramount to the functionality of a healthcare institution.

Problems Associated with Allocating Overhead Costs to Departments

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Healthcare institutions are paramount to a society and a community. They provide

services and products that enhance the community's and society's overall well-being. The diverse

range of needs of the community demands that various departments in a hospital be appropriated.

It demands that the necessary finances be allocated to facilitate the service and product delivery.

However, the over-allocation of financial resources can result in dire consequences. Overhead

allocation refers to the apportionment of indirect costs to produced goods (Hudakova Stasova,

2018, p.21). In an administrative environment such as a hospital, such costs are apportioned to

cover services such as front office sales as they are not inclusive of the production costs. One

disadvantage of such allocation is that its benefits do not carry on to the future; hence, it is a

period cost. Excessive allocation of funds will result in the wastage of financial resources, which

is not encouraged.

Overhead cost allocation to departments results in inefficient resource allocation. It limits

departments' productivity since miscalculation often occurs since the allocation is based on the

assumption of the needed overhead costs. Also, overhead allocation disputes are common when

such cost allocation is apportioned. It demands that analysis be made into the institution's

departmental needs, which in many cases may be less than needed. Progress in another

department and derails in another make progress halted and hiccupped due to departmental cost

allocation conflict. Thus, overhead allocation should be limited as the budget may only be able to

accommodate some departmental wishes.

The best method of cost allocation is direct cost allocation. It allocates all service

departmental costs to the production department without considering the services a department

may have to offer another department. It does not feature the office supplies faction as it allows

the production department to procure such and provide the necessary equipment. It eliminates the
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limitations and problems caused by overhead allocating costs to departments. It splits up the

overhead costs that would have otherwise become an expense and tucks them into a department

that brings in revenue, such as the production department. Thus, the direct cost allocation method

is the best, most efficient method that could be used in such a setting.

Production Phases in Healthcare

Departmental Acquisition of Resources and Consumption

Healthcare institutions require financial, human, and equipment resources to ensure full

functionality. It is ensured using a budget that houses all the departmental concerns and the

general hospital requirements. A hospital requires many personnel and staff for effective

functioning, and due to such a large scale, it is divided into different departments. Each

department requires personnel, staff, equipment, and other resources to offer top-tier services.

Management has allocated such responsibility and activities to the chief executive officer, who

ensures the full allocation of resources and service delivery to the needed quality. The

responsibilities of such an officer include resource allocation, recruitment, adaptation of

technology, expansion of services, and reimbursement. Thus, the chief executive officer heads

the production process involving the department's resource acquisition and allocation.

Acquisition of resources such as human relies on a detailed process. It involves the

analysis of the current supply of employees, predicting the future of the workforce, gaining an

equilibrium between labor supply and demand, and developing strategies and plans that are in

tandem with the institution’s vision (Mahapatro, 2022, p.13). Such an analysis allows the human

resource department to identify the needed improvements and make advertisements should any

openings be deemed lacking. Administrative approval of such is vital to ensure the appropriate
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allocation of financial resources. All through the processes of resource acquisition, it is

paramount to ensure that the resources acquired will aid the departments in achieving the goals

and visions. Since the market is dynamic, the resource acquisition department should ensure that

intangible resources are at the forefront, such as prioritizing experience in human resources and

reputation in equipment allocation. Thus, the responsibility of resource acquisition as a part of

production should be in tandem with the goals of the healthcare institution.

The allocation comes in handy after the acquisition, and proper allocation is paramount as

a sub-part of production. Using efficient cost allocation methods, such as direct cost allocation,

helps save the institution from departmental conflict. It allows it to focus on production, which

allows for revenue generation. Throughout the allocation process, several factors have to be

considered. They include basing the whole process on the current data and considering what

would increase or decrease costs, market demand, customer value, and competition (Yatsenko,

2018). Typically, a cost allocation process should involve the identification of the shared

facilities and services, costs to be apportioned, equitable allocation of costs, and finally, the

regular monitoring of data and methodology to ensure fair allocation. The profitability of

healthcare institutions depends on appropriate cost allocation, and the production process is

expedited with equitable and fair allocations.

Actual Consumption of Specific SUs in Patient Treatment

Patient consumption falls into two categories; outpatient and in-patient. The healthcare

institution generates revenue when patients are admitted as they charge for their services, such as

24-hour care and medicinal supplies (Osei-Frimpong et al., 2018, p.4). However, outpatient

programs generate additional revenue since medicinal appropriation varies per individual, and a

variety of customers may visit the institution in case of such. Administration of such services to
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customers typically involves a series of processes. It comprises hospital admissions, discharge

and billing, emergency department operations, patients transfer, and medication administration.

When a customer visits a hospital, they are examined to determine the extent of their illness and

admit them as in-patient or outpatient. For an outpatient, required medicines are prescribed and

discharged, after which they are billed as needed. Patients are examined, and depending on their

level of illness, they are admitted, transferred to the necessary department, medicated, and

discharged where upon billing is appropriated. Depending on the level of urgency, the admittance

of patients varies, and therefore, the services offered by healthcare institutions vary and,

therefore, varied revenue generation.

Conclusion

The healthcare faction is faced with varying factors that implicate its service delivery.

National, local, regional, and international factors contribute to delivering services. The various

types of cost allocation are paramount to such institutions should expenses be tracked. The direct

cost allocation method is the best in such a setting. In such an institution, acquiring resources and

service delivery is the major process. Healthcare institutions have to use their financial analysis

to provide the best way forward whenever a situation arises that needs intervention. Therefore

analysis of the healthcare institutions has been made based on the analysis of its financial sector.
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