Minimizing Operation Costs In Healthcare Organizations

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Student’s Name

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Accounting in Healthcare Management

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MINIMIZING OPERATION COSTS IN HEALTHCARE ORGANIZATIONS

Healthcare organizations provide the public with medical services and medical

solution. In the past few decades, the health organizations had not been making any effort to see

that their operations were cost effectives. This was mainly because they would receive resources

from the governments for any expenses that they incurred. During the 19

century drastic

changes were experienced in the health sector. New and effective techniques for curing diseases

were invented. All these came with financial costs. It was then that financial institutions

developed an interest in the healthcare organization.

With the presence of financial institutions in the healthcare sector, there have been

attempts to minimize the operational cost and maximize profits made in the healthcare

organizations. There are several reasons as to why these cost reduction attempts are being made.

Firstly, for three decades, there has been a rise in the medical costs for services provided to the

public. Healthcare organizations have also been under pressure to provide evidence of efficiency

in their operations and of quality management. This essay will discuss different method that can

be employed to minimize operation costs in healthcare organizations.

The management of the healthcare supply chain has always been ineffective and

inefficient. A lot of cost is normally incurred in the process of receiving, handling and

distribution of healthcare products. The supply of healthcare products should majorly target the

consumers so as to make the process of product and service delivery to be cost effective. Several

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methods can be employed to reduce losses during the process of product deliver. One such

method is adoption of the Just-In-Time (JIT) system. The JIT technique has been successful in

the transportation, distribution, and manufacturing industries. The JIT technique reduces the

inventory costs through ordering raw materials for the production of that moment only.

Traditionally healthcare organizations have been ordering and stocking large amounts of

products. This has usually resulted to inventory costs. By application of the JIT technique,

healthcare organizations will cut on service production costs.

For efficient financial accountability, healthcare organizations should also invest in

technologies such as electronic data interchange and bar-coding. The Electronic Health Care

Requisition (EHCR) is an example of a way that has started to be implemented to ensure

financial accountability in the healthcare organizations. Some EHCR goals are 100% invoice

accuracy, reducing number material handling staff by 50%, and 95% electronic transactions,

80% inventory reduction, and 99% service levels. Through the EHCR there has been a $6.7

billion saving from the overall supply chain. So far, there has been a saving of $2.6 billion from

the application of bar-coding. These technologies if employed in every healthcare organization

will increase the savings and cut on costs.

Application of E-health will also improve financial accountability in the healthcare

organizations. Use of E-health minimizes one-on-one transactions. E-health includes services

such as booing medical appointments using the internet, telemedicine, e-prescription, and

enabling easier access of a patient’s medical history. These services will help cut down on costs

incurred by healthcare organizations.

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The method discussed here are just but a few. However it is crucial that the healthcare

organizations apply them in their management. The healthcare organizations should go to the

extent of outsourcing professional accountants if need be. This way, they will remain

competitive in the health sector by minimizing on costs and maximizing on profits realized. The

healthcare organization will also be in a position to offer quality services to their customers.

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Work Cited

Seetharaman, A., John Rudolph Raj, and A. S. Saravanan. "The changing role of accounting in

the health care industry." Reserch Journal of Business Management 4.2 (2010)

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Minimizing operation costs in healthcare organizations

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