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Facing potential decreases in reimbursements from Medicare and Medicaid, the hospital recognizes that it must seek ways to control cost. As a result, you have suggested to the hospital administrator that it is important that the leadership team have a solid understanding of costs associated with business operations. Like most businesses, healthcare organizations have both fixed and variable costs. Provide exs of associated fixed costs and variable costs at the healthcare organization where you work, or choose a healthcare organization such as a solo/group practice, hospital, community health center, etc.

Recognize the kind of healthcare organization, and describe why the cost is classified as fixed or variable.

Describe why it is important for the healthcare organization to understand, classify, and control these costs.

Define the term break-even analysis and its relationship to managing costs.

Should healthcare organizations, especially nonprofits, consider "break-even" costs in establishing rates and fees? Why or why not?

describe the role of fixed and variable cost in setting rates or charges for services provided by the healthcare organization. Which do you think is the most important, and why?

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