Question

What are some of the common struggles healthcare financial managers have in providing financial statements to their stakeholders? How would you define the difference between expense and cost? What is an example of both in a healthcare setting?

Answer 1

The health care financial managers have to struggle in so many way in providing the financial statements to their stakeholders.

Few very common among them are enlisted below.

unpredictable cost and expense due to the epidemic outbreak.

inappropriate inventory management.

price forecasting

stoke for casting

product management

manpower and staffing.

most of the time credit debit check issues.

The variation in management occurs due to the inpatients and out patients visit flow rate.

nature and types of epidemic breakout.

Government health care schemes and plan.

drugs and medical devices price revise by the government body or NPPA (National Pharmaceutical Pricing Authority)

inclusion and exclusion of the drugs list in NLEM (National List of Essential Medicines).

Cost and expenses can be defined and differentiated in the following ways:

Cost:

Cost may be defined as the total property or amount invested in buying or owing a certain facilities services or goods.

it is equivalent to expenditure or more simply the total amount spend either for subscribing a facilities or maintaining a business or for running it. It includes the expenditure or investment in buying movable and standing assets.

Expense:

It is the total investment or amount which is consumed in an operation or sets of operation in a purpose or mission.

it includes everything what is consumed. hence, there will not be any assets remaining here and it is only movable and is consumed.

In a healthcare setting the best example will be.

Setup and opening of a pharmacy.

The total investment done in establishing pharmacy including buying of furniture (Fixed assets, electrical and electronic appliances) + buying of medicines and other medical and surgical instruments are the example of cost.

But, the total amount of medicines or surgical instruments consumed is the example of expenses.

another example will be health insurances: the total premium subscribed is referred as premium cost and total insurance consumed is referred as premium expenses.

another example is total drug prescribed by the doctor and bought by the patient is the cost of the drug and total drug consumed by the patient is expense by the patient.

best example is cost is something related to MRP and expense is something the net payable amount for that particular substances.

another example is if we are buying an ambulance the cost of the ambulance will be the cost price but the expense includes the fuel charge also.

Thank you