Income and Expenses in Healthcare

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Analysis of income and expenses is one of the essential points in planning a financial strategy, as it allows redirecting resources to increase the organization’s effectiveness. However, to effectively implement this procedure, it is necessary to identify the main cost driver correctly. In the context of medical institutions, two such drivers are often distinguished: patient services revenue and the number of generated bills. From my point of view, the second factor is much more indicative and allows a better analysis of the state of the organization. First of all, the income from patient care relates to only one side of the activity of the medical institution. While serving people is their priority, the overall patient income factor alone cannot capture all the elements involved in generating that income. In addition, an identical revenue figure can be obtained by providing different services, which further demonstrates the weak relationship of this potential driver with actual prices.

On the other hand, the number of invoices issued demonstrates the amount of work done. In this case, the quantitative factor allows more effective analyzing the pricing policy. In addition, the number of bills issued may reflect not only the procedures associated with patients but also various administrative and organizational activities. This approach will more clearly describe the situation with the balance of income and expenses. In addition, statistics show that the healthcare sector’s administrative costs of issuing bills are incredibly high (Shinkman, 2018). At the same time, the price and number of invoices increase immensely with the complexity of the procedures provided to patients. Finally, researchers note that, at the moment, the introduction of electronic accounting systems only complicates and makes the administrative process more expensive (Tseng et al., 2018). Consequently, the number of bills issued has a significantly more substantial impact on prices, making them a more critical and practical price driver that should be taken into account by the Financial Services Department.