Strategic Advantages of Variable Expense Departments in Health Care Networks

Within a health care network I would give preference to a variable expense department. This is because a variable budget gives the financial manager an opportunity to evaluate departments’ productivity, efficiency and performance. Within a variable budget one can use this information to identify costs and revenues in order to determine a department’s financial operating performance. The positive result of using a variable expense department is the ability it gives to improve efficiency and productivity with minimal government regulation and control.

Managing a variable expense department can result in the ability to adapt quickly. Along with knowing the health care organizations product line costs, and the competitive and profitable price of services.

The negative side of a variable expense department is that it must be managed daily. A fixed expense department can be successful only if the expenses are established. Fixed expenses can be positive, because they appropriate funds for specific departments. I would consider healthcare reform to be the biggest challenge within healthcare financial planning and budgeting.

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Medicare and Medicaid reimbursement have the greatest affect on hospital budgeting. This creates a challenge for a health care operations manager, because Medicare and Medicaid reimbursement health care reform has led to lower revenues.

It is a challenge for a health care operations manager to maintain a high quality service level while receiving lower revenues. This causes tough decisions to be made in financial planning and the health care system budget. This includes cutting department budgets and coming up with expense reduction plans.

Strategic budgeting can be used to address this challenge. Health care operations managers need to establish targets within their budgets. The key is to develop a budget that is able to support the overall plan of the health care organization. A health care operations manager should look at each department and line item in order to implement reductions within the budget. A successful financial plan will include productivity, efficiency and quality.