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Cost containment is what a facility or company does to control the expenses that are needed to operate a company or complete a company’s project. And to do so while remaining within a budget that has been pre-determined for that facility. The intention is to keep the overall costs down to only what is necessary and required in order to maintain the desired budget. This can result in companies or facilities “cutting costs” in areas that may not need to be overlooked. This causes frustration and embarrassment of the company or facility’s employees, lower productivity and quality of service, and the possibility of spending more money than they intended to save. It is understood that the goal of containing costs is to maximize the profit of the facility, but at what cost to the general presentation and reputation of the facility?
In the healthcare field, with nurses in particular, cost containment has become a significant source of frustration. This is because financial managers sometimes go overboard with the cutting of costs. These managers may cut the budget that the facility has for supplies that they assume are unnecessary expenses. Say, hypothetically, that a manager decided
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to lower the amount of times that they have nutritional supplements and miscellaneous supplies delivered per month from 4 times to only twice. This may save thousands of dollars for the facility, but imagine how embarrassed the nurses may feel when they have to explain to their diabetic client that they ran out of glycemic supplements until the next shipment arrives. Think of how frustrated the nurses would become when they run out of something like incontinence pads, or size large gloves. Now, if the facility runs out of necessary items like that, they are left to either compromise, or improvise. A young nurse at a busy Houston hospital stated that her facility actually cut out the number of bedside commodes that are available in their facility. She stated that before they had one bedside commode per room, now they only have four commodes for the entire floor. She went on to express her frustration when she had a client that required one of the bedside commodes, but they did not have enough of the buckets that attach to the commode. They first spent quite a bit of time searching the other rooms and floors for another bucket, which caused half of the staff on that floor to be unavailable had anyone needed any assistance. They ultimately had to improvise by tying a trash bag to the commode, which not only embarrassed the nurse, but infuriated the client who stated that he would never return to a facility of this condition. Not only does the facility lose money from clients that no longer want to come to this facility, but at the end of the day they may actually be spending more money than they are saving.
Say this facility was to cut down the number of self-adhesive polyurethane dressings that they purchase each month and this saves the facility significantly. As a result, the nurses have to use twice as much alternative dressing material that equals up to more than they saved by cutting down in the first place. Instead of saving a certain amount of money in a month the facility actually spends an additional amount of money. Aside from it costing the facility more money, this also costs the client more money as well, because they are the ones being charged for whatever materials and services are being
utilized. Although cost containment has some issues, there is an upside to the concept. In some cases, those extra supplies that the facility is no longer ordering leads to less unnecessary wasting of supplies. Nurses tend to grab a handful of this or a few of that and many times the extra either get discarded or just stuck somewhere to be forgotten. Once people begin to notice that they only have a certain amount of this or that, they tend to be a little less wasteful. And when the facility is able to actually remain inside of the budget that they have established, there is money available to invest into other programs (i.e. tuition reimbursement for continuing education; community outreach programs). Although cost containment has the potential to be completely counterproductive, it also has the possibility to work out very well for a facility. It is a tightrope walk between whether this system is effective or ineffective.
Cost management plays a major role when maintaining profit margins. Management must be able to find in which areas of a business costs must be reduced and the consequences that such reductions have in the overall company. In some situations management must change the way the work is being done in order to decrease costs while in other cases changing one supplier for another might be enough, in both situations a tradeoff will occur and the consequences will impact the company as a whole.
In the planning process, the health care organization’s first step should be to identify alternative expense reduction measures that can be implemented. Marshall and Broas (2009) and McConnell (2006) state that measures such as hiring freezes, reduced work hours, reduced salaries or bonuses, early retirement, limited use of temporary workers and discrepancy spending should be explored first before resorting to mass reduction in the workforce. Given the numerous legal cases in which employees have accused companies of lavish spending during layoff processes, a company should consider taking expense reduction measures. This would show that the company had explored another alternative before resorting to a RIF, and it would also help employers dismiss employees claims that the RIF was not necessary or discriminatory ( Marshall & Broas,2009) .Whatever alternative expense reduction measures were taken by the company along with the reasons for doing so should also be documented( Marshall & Broas,2009).Documenting the reason for the RIF, should be the next step.
While most countries around the world have some form of universal national health care system, the United States, one of the wealthiest countries in the world, does not. There are much more benefits to the U.S. adopting a dorm of national health care system than to keep its current system, which has proved to be unnecessarily expensive, complicated, and overall inefficient.
In order to make ones’ health care coverage more affordable, the nation needs to address the continually increasing medical care costs. Approximately more than one-sixth of the United States economy is devoted to health care spending, such as: soaring prices for medical services, costly prescription drugs, newly advanced medical technology, and even unhealthy lifestyles. Our system is spending approximately $2.7 trillion annually on health care. According to experts, it is estimated that approximately 20%-30% of that spending (approx. $800 billion a year) appears to go towards wasteful, redundant, or even inefficient care.
With the federal sequester that added a 2% cut to Medicare reimbursement and the healthcare reform leading to a decrease in hospital admissions for some organizations, the bottom line has become ever more important. Some organizations have used layoffs as one means of cost-cutting but even more are streamlining by outsourcing those services that can be better done by organizations devoted to that one activity (Punke, 2013) The driver of this is the cut to reimbursement.
There are a couple of problems affecting the surgical services department. One of them is that the unit /hospital pays a lot of money for surgical supplies and equipment. The second problem is labor and productivity. The two problems are included in the operational and personnel budget. These types of budgets are the highest cost to the department; personnel budget being the highest then the operational budget (Marquis & Huston, 2012).
There is no doubt that healthcare cost are rising out of control. No one likes the
2. The twin problems of the health care industry as viewed by society are cost and access. First of all, the cost of getting health care is very high and it is getting higher each day. This has been mostly caused by the combination of high cost and an increase in quantity of services provided to the communities. The other problem involves access to health care. American enjoy limited or no access to health care. Many efforts have been done to reform this, but still but still many people are left without access to the care. These two problems are related due to the fact that if the health care industry gets to high off course people no longer will be able to have any access to it. The higher prices are, the lower access people have to it.
...staff would not be required to put in the overtime to compensate for the lack of workers. Patients would no longer have to suffer the neglect of the staff because he or she was too busy. Making sure the patient gets the best quality care reduces the time spent for recovery. Reducing the time spent for recovery increases the organization’s finances. Providing a safe facility also reduces the expenses on the private hospital’s budget. Ensuring a patient is safe can reduce potential use of ongoing treatment and services. Hiring the appropriate nursing staff needed can save the organization money. Instead of cutting back on staff, more staff needs to be hired to fulfil the needs of the patient. In the economy today, private hospitals need to focus on the overall long term effects of each action opposed to quick reactions resulting in financial strain for the facility.
Rising medical costs are a worldwide problem, but nowhere are they higher than in the U.S. Although Americans with good health insurance coverage may get the best medical treatment in the world, the health of the average American, as measured by life expectancy and infant mortality, is below the average of other major industrial countries. Inefficiency, fraud and the expense of malpractice suits are often blamed for high U.S. costs, but the major reason is overinvestment in technology and personnel.
A company's budget serves as a guideline in planning and committing costs in order to meet tactical and strategic goals. Tactical goals such as providing budgetary costs for daily operations, and strategic objectives that include R&D, production, marketing, and distribution are all part of the budgeting process. Serving as a guideline rather than being set in stone, the budget is a snapshot of manager's "best thinking at the time it is prepared." (Marshall, 2003, p.496) The budget is a method in which to reign-in discretionary spending, and will likely show variances between what costs have been anticipated and what costs are actually incurred.
Organizational changes that reduce cost. The M&S reduced its management levels to reduce the cost.
The new president believes that the key to the new strategy is to be able to understand the true nature (i.e. costs of customers and orders. He feels that if the company is able to tie costs to customers in an accurate manner, it will enable the company to better focus on higher profitability. Major Issues: What is the ' Understand the cost structure of the company. Allocate costs on a per customer and per order basis. Implement a new cost system that will support the new cost allocation methodology.
Coming back to the point of utilization, the certificate of need act stopped the under utilization of hospitals. The closure of hospitals if it happens, will bring in the over utilization of hospitals leading to the reduction in costing. However in Turkey, when they felt that there was an under utilization of hospitals, they invited medical tourism to fill the gaps(though I feel that it is too late for the United States)
Therefore, it is important for managers to plan a proper budget for items that fall under these categories, otherwise this will cause the company to overpay on certain purchases, or spend money on unplanned projects. According to the article “Fired manager claims PNM padded San Juan expenses,” by Kevin Robinson-Avila (Robinson-Avila, 2015), after plant manager Gregory Smith was fired, he filed a complaint against Public Service Co. of New Mexico. One of his allegations was that Public Service Co cut the operating and maintenance budget at its coal-fired power plant to “boost profits, causing outages that led to PNM to purchase more expensive electricity from other sources and pass the cost on to ratepayers” (Robinson-Avila, 2015). PNM wanted to implement the budget decrease because they planned on having less revenue due to the expected cooler summer. In addition, PNM wanted to keep their capital expenditure budget the same, even though this particular budget is budgeted based on planned maintenance outages, and they had fewer outages due to the decrease in planned shutdowns.