From the case study provided in the earning material page 177, it is clear that the physician can increase profits easily without having to increase the cost and rate of services. The several approaches are as discussed;
The first approach would be for the physician to closely monitor and regulate the additional costs and expenses that do not add value to the organization. as Nowicki (2017) indicated from exhibit 8.5;
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Profit = Revenues – Expenses
Therefore it is the mandate of the physician to lower the associated expensed such as the variable costs that could only make the cost of running business higher. With the cost of services held constant, it is clear that the increase in variable costs such as extra staff and leisure liabilities s can only add to the expense of business operation ( Jones et al., 2018) . With fixed costs remaining standard, it is up to the physician to lower associated costs to the point that it will expand the room for profit making.
The other ways by which the profits can be increased in the healthcare facility is by increasing the volume of customers. With standard charges and all other factors held constant, increasing volume will reduce the breakeven point ( Datar & Rajan, 2018) . A lower break-even point will fasten the speed and stent of profit making process.
Breakeven point= Total fixed costs
Contribution margin percentage
From the exhibit 8.6, the increased volume of customers will mean a higher margin percentage contribution which also means a smaller breakeven point (Nowicki, 2017). Sourcing for additional customer through referrals and marketing will allow the physician extend the profit and revenue margin without necessarily increasing the charges in the operation. Since the physician is unable to tamper or affect the fixed costs in running the business, it is important that alongside managing the variable costs that he seeks to increase the volume of customers ( Venkataraman, 2015) . This will help to improve the revenue quantity and in the end profit margin.
References
Datar, S. M., & Rajan, M. (2018). Horngren's Cost Accounting: A Managerial Emphasis.
Jones, C., Finkler, S. A., Kovner, C. T., & Mose, J. (2018). Financial Management for Nurse Managers and Executives-E-Book . Elsevier Health Sciences.
Nowicki, M. (2017). Introduction to the Financial Management of Healthcare Organizations, 7 th Ed. Health Administration Press.
Venkataraman, S. (2015). Cost-quality tradeoff in healthcare: does it affect patient experience?. Quality Management Journal , 22 (3), 38-45.
