Overhead Costs in a Healthcare Institute and How to Control Them?

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Overhead Costs in a Healthcare Institute and How to Control Them?

Accounting firm for Healthcare accounting needs


If you work in the healthcare industry, a question you will often be faced with is “how to control overhead costs in the healthcare industry?”. Before we go into strategies for healthcare accounting and overhead costs, we are first going to define and understand what it is many healthcare businesses are trying to solve.

Overhead costs can be explained as expenses that are not directly linkable to a patient’s medical care. Examples of this could include the cost of disposable medical supplies, equipment maintenance, and even things in the background, so to speak, such as technology costs.

Overhead costs are not to be underestimated either because, according to the Health Management Organization, the United States spends almost 200 billion dollars a year on unnecessary admin costs.

While there is no cure-all to reduce costs in the healthcare business, there is a good deal of strategies that you can put in place to help lower your costs. The unfortunate truth is that overhead costs are unavoidable up to a certain level.

Healthcare accounting and medical accounting

One distinction we want to put in the forefront of your mind as we break down some ways to compensate for overhead costs in the healthcare industry is that there is a slight difference between Healthcare accounting and Medical accounting. When we look at healthcare, we’re typically referring to doctors’ offices and dentists.

Healthcare could even include speech therapists in this category because healthcare usually refers more to day-to-day things like life improvement. Whereas later on, we’re going to talk about medical accounting, and when we talk about medical accounting, the things that we want you to think of revolving around medications, insurance, and healthcare-related costs.

We provide the distinction because it makes it easier to separate your books as a business owner to have someone like us at interactive accountants look over it with you to help create effective strategies. 

Taking a turn towards practical applications of how to lower overhead costs, the first step, regardless of your business, is to get a feel for the environment. In the healthcare industry, the environment you are dealing with is where the costs of materials and insurance have both gone up, meaning that medical care, in general, is more expensive on the patient’s end.

This means they will be relying on their insurance companies to try and compensate for more of their expenses. Meaning that overhead costs will become increasingly more difficult to prove and verify without doing some creative analysis of your finances to make the numbers work in your favor.

One thing you want to make sure to do as you begin to look at your overhead costs is to allocate your overhead costs correctly. Essentially, you want to have your books in order when looking at overhead costs and how to eliminate them.

Regardless of the type of business, the most crucial step you’ll take in removing overhead expenses is to define what they are and understand them entirely. Not all overhead costs will be a burden as some improve daily operations on one level or another. Sometimes we just need to do a little research and see if another vendor is offering the same product at a different price.

Too often, healthcare providers don’t take the time to research new vendors. Another saving we have seen become a tremendous help to businesses in the healthcare industry is to increase the use of electronic transactions.

This creates a more streamlined and optimized operation for healthcare business, such as electronic note taking and not having a staff dictate these notes. We need to look at the existing situation and see where changes can be made, choose and create even more significant, long-lasting effects in the long run. 

What’s next?

We have many more ideas and services to help you and your business thrive. Here at Interactive Accountants, assisting businesses to grow and succeed financially and compliantly is our number one goal. We are here to help! If you’re still not convinced yet to give us a call, feel free to look at our other blogs regarding the help we offer medical services and businesses.

If you are a professional in any of the healthcare fields, you will need a CPA firm that understands what your business does and what it needs. So please consider giving us a call or scheduling a free consultation here with our owner Matthew Shiebler, CPA.

He’s been practicing accounting for over 25 years and is a business owner, just like you, who understands what’s good for a business.