Question

As policymakers and healthcare managers consider various ways to contain the rising costs of health care, it is useful to examine the patterns and elements of health care costs that are needed to run the United States delivery system.

Explain the difference between fixed and variable costs in healthcare. Give an example of each from a healthcare setting.

Answer 1

Fixed costs are ones that do not change and are generally part of long term agreements. For instance, rent and malpractice premiums are common examples of fixed costs in medical practices.

The example of fixed cost is staffing capital expenditures, building maintenance, and utilities.

Variable costs are ones such as labor or materials which change with sales volume. Generally, companies save money by reducing variable costs.

The Examples of variable costs in medical practices include hourly laborers or the cost of supplies that vary based on the number of patients seen or procedures performed.