Reference no: EM132834972

Assignment: 75 words as reply to this post if in-text cite use reference

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:

1. Direct costs/ operating budget

i. 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

2. Indirect Costs/ variable costs

i. 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.

ii. Variable costs

• Constantly change

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