Healthcare Finance & Economics Flashcards

Which cost category represents the majority of hospital operating expenses?

Answer: Labor costs (salaries, benefits, and overtime)

Labor costs typically represent 50-60% of hospital operating budgets, making workforce management the single largest driver of hospital expenses.

A CNL notes that a particular supply item is frequently ordered but often discarded unused. This represents which type of waste?

Answer: Inventory waste (overproduction)

Ordering and stocking supplies that are not used represents inventory waste — a category of Lean waste that ties up capital and creates disposal costs.

Which financial document shows a hospital's assets, liabilities, and net assets at a specific point in time?

Answer: Balance sheet

A balance sheet provides a snapshot of an organization's financial position — what it owns (assets), owes (liabilities), and retains (net assets) at a specific date.

A CNL is evaluating whether to implement a falls prevention program costing $50,000 per year. If the program prevents 10 falls with injuries (average cost $35,000 each), what is the net financial benefit?

Answer: $300,000 net benefit ($350,000 savings minus $50,000 cost)

10 prevented falls × $35,000 = $350,000 in avoided costs, minus $50,000 program cost = $300,000 net financial benefit.

In healthcare finance, what is a 'variable cost'?

Answer: A cost that changes in proportion to the volume of patients or services provided

Variable costs fluctuate with patient volume — examples include supply costs, medications, and per diem staff, which increase as more patients are served.

Which financial metric measures the percentage of revenue remaining after subtracting the cost of goods sold, before accounting for operating expenses?

Answer: Gross margin

Gross margin represents revenue minus direct costs of services, expressed as a percentage of revenue, before subtracting operating expenses.