Introduction
Providing the healthcare system with the necessary financial resources to provide the population with high-quality and affordable medical care remains a key problem in the state’s policy in the field of public health protection. The ratio of paid and free medical care volumes characterizes society’s socio-economic development level (Cleverley et al., 2011). One of the major developing branches in medicine now is radiology, which relates to using X-rays. It is an area that demands massive spending as it incorporates modern technologies (Cleverley et al., 2011).
This paper will examine the radiology-related budget based on actual experience. The department’s output is measured by procedures performed, and a static budget was set at the year’s start. Using the data in Table 1 (Appendix), the manager cites a favorable $120,000 cost variance. The validity of this claim will be assessed through the budgetary variance model. A well-managed business has high profit figures and low expenses: get more and spend less. Even though some expenses may be unjustified, the result is pleasing for several reasons, which will be discussed below.
Analysis
In accounting, the term expenses refers to a decrease in an organization’s economic benefits due to the loss of assets and the appearance of liabilities that reduce the company’s capital, except for reducing deposits by the decision of its participants. When speaking about medicine, it is vital to consider the field, as some are extremely costly. For instance, it needs to be clarified that radiology-associated costs are high due to the area’s complexity. It signifies that costly equipment, trained professionals, and constant development are needed to sustain the technology’s efficiency.
A properly conducted examination involves the proper preparation of the patient and the maintenance of radiological equipment. The image obtained during the examination must be described and interpreted; only then will it be possible to make a diagnosis. Therefore, radiology departments spend millions to sustain every aspect to ensure better health outcomes.
The primary indicator for procedures demonstrated $20,000 of unfavorable expenses. Initially, $100,000 was allocated to conduct the procedures with radiology. Nonetheless, the extra amount could have been predicted, as radiology treatment is costly and demands a lot of financial resources, primarily for equipment.
Only an MRI machine costs a minimum of $200,000; thus, the money spent was the minimum a department could have used for equipment maintenance. In addition, the price of the procedures used for treating oncological diseases ranges from $500 to $10,000, making radiology one of the most financially consuming areas. Hence, the mentioned loss did not induce much worry in the radiology department.
Other indicators of fixed costs—those that remain constant regardless of the dynamics of sales volume—include executive salaries, interest costs, rent, depreciation, and insurance. These expenses are primarily allocated to purchasing and maintaining equipment and staff wages in healthcare. The original and actual budgets do not differ, which is a positive sign since it ensures stability in the medical facility.
Firstly, it regards the quality of the equipment – the better it is, the longer it will stay in use (Cleverley et al., 2011). Secondly, the indicator’s steady stance reflects staff retention. Generally, fixed costs rarely fluctuate, so they are often calculated in advance. On the other hand, variable costs tend to change depending on the amount of work done. Such costs include raw materials and materials for the production of goods, costs associated with the delivery of products to the warehouse or the buyer, services of other firms necessary for production, and the piece-rate part of the workers’ salaries.
In the radiology department, they fix X-ray and MRI machines, collaborate with laboratories to conduct tests, and do other things. Thanks to the visualization method of organs, the radiologist can identify the alarming changes occurring in them. The legislation clearly sets standards for personnel performing X-ray examinations.
X-ray specialists work with the equipment, for example, to obtain an X-ray or mammographic image (Cleverley et al., 2011). The budget was lower than the original, indicating a favorable financial forecast. The difference between the planned and real sums is $120,000. The department spent less than expected, meaning the rest can be allocated to the procedures’ coverage.
As a result, the total costs were favorable, at $120,000, making the radiology department financially wise. This result presumes the department established the budget based on careful decisions regarding radiology-related manipulations. It further means that all members have managed to retain personnel, boost performance, and sustain the existing equipment, producing positive outcomes affecting the department’s financial efficiency.
Conclusion
In conclusion, management highly evaluated financial performance for several reasons. Primarily, the fixed costs were assigned properly, causing no losses. In addition, the variable costs did not exceed the planned amount, but did not meet it. The total costs were favorable, at $120,000, which makes the department efficient in financial allocation. It also points to the high level of performance, which is vital in modern medicine.
Reference
Cleverley, W. O., Song, P. H., & Cleverley, J. O. (2011). Essentials of health care finance (7th Ed.). Jones & Bartlett Learning.
Appendix
Table 1 – Radiology Department Data