The transformations witnessed in the healthcare sector have altered operations as healthcare administrators seek to generate more revenues to support the operations and improve services offered to their clients. Across the healthcare sectors, many health departments have been operating at minimal profits. However, section heads are constantly reviewing their operations with the intention of changing cost centers to profit centers. Today, departments are heavily scrutinized, and section heads do not want their department to be burdensome, since the troublesome departments are usually the first to suffer budgets cut during radical reform processes. In essence, shifting from cost to profit center requires reducing expenses and generating more revenue. Healthcare departments are transforming to profit centers to enhance interactions with customers and improve medical services.
Cost and profit centers are both activity units of any organization and responsible for cost estimation and profit projection. A cost center is a unit within a healthcare organization that ascertains and controls cost. Conversely, in a profit center, departmental head evaluate the performance of staff based on income and revenue generated. Per Slutzman (2017), ascertaining cost is essential in doing regular cost comparison and recommending how to control costs that tend to escalate. On the other hand, a profit center evaluates both the costs and profits generated. As such, transforming cost into profit centers is meant to ascertain the profitability of a medical unit. Additionally, it helps to evaluate the performance and contributions of members in the department. The scripture says, “and let us not grow weary of doing good, for in due season we will reap, if we do not give up” (Galatians 6:9, The New King James Version). In this scripture Paul urges Galatians to never abandon going good. Transforming healthcare services to generate revenue to help the underserved population access medical services. Eventually, many people will be able to access healthcare services and in the process improve quality of life.
Healthcare sectors across the globe have to contend with reduced funding from government. In essence, units within healthcare settings have to decide whether to implement operation under a decentralized or centralized structure. In a centralized model, major decision-making concerning organizational transition, change in operations, and cost/profit determination are made at the head office. Singer et al. (2017) posit that departments intending to transform their operations have to make formal requests and wait for approvals from bureaucratic high-level managers. Conversely, a decentralized model allows a department or unit to make independent decision and initiate change procedures without the input of other departments. As a result, Healy et al. (2016) claims that prompt decisions regarding cost and profits can be made in line with activities within the department. The strategic managers are only informed of the intention to shift operation. As such, the shift from cost to profit centers is consistent with the decentralized model of operations and decision-making.
Healthcare departments can stick to their historical missions of providing care to the uninsured and under-served members of the population by acting as the insurer of last resort. Therefore, the idea of shifting to profit centers is encouraged to balance hospital budgets and design healthcare programs targeting the less privileged members of the population. Per Melissa & Kyle (2017), if government is incapable of supporting health insurance for the less-privileged, hospitals must effectively provide instead. Notably, decisions on providing care to the insured and uninsured need to be decentralized within relevant departments, and health professionals prevented from billing. It implies that healthcare professionals are reduced to service providers and cannot deny services to the uninsured and under-served population since the decisions are made by departmental heads.
Healthcare departments are moving from cost to profit centers to enhance interactions and improve services offered to clients. Accordingly, departments need to understand their revenue cycles by adequately identifying opportunities and threats. Shifting from cost to profit center is a good move creating a clear understanding how revenue is generated and used. Surplus revenue can then be used to offer services to uninsured and underserved population. In serving the less-privileged people, healthcare organizations are sticking to their original mission of increasing access to healthcare services.
Healy, M., Mullard, A., Campbell, D. & Dimick, J. (2016). Hospital and payer costs associated with surgical complications. JAMA Surg, 151(9), 823-830. Doi:10.1001/jamasurg.2016.0773.
Melissa, E. & Kyle, K. (2017). The U.S. spends more on healthcare than any other country- but not with better health outcomes. Los Angeles Times. Retrieved from https://www.latimes.com/nation/la-na-healthcare-comparison-20170715-htmlstory.html.
Singer, P., Nelson, D. & Tipirneni, R. (2017). Consumer-directed health care for Medicaid patients: Past and future reforms. American Journal of Public Health, 107(10), 1592-1594.
Slutzman, J. (2017). Patient Encounter Costing (PEC): A better cost accounting system for healthcare systems. European Journal of Public Health, 27(3). https://doi.org/10.1093/eurpub/ckx187.359