Understanding Period Costs in Healthcare Facilities: Examples

Initial Post (Due Day 3 Thursday)  In your initial response, explain the cost assigned to you (based on your last name) and give an example of that type of cost as it relates to a healthcare facility (i.e., physician practice, hospital, long-term care facility, urgent care, specialty group practice, or surgery center). Period Costs are not part of the inventory, and the cost is expensed when incurred, such as commissions, marketing, and travel expenses. The important thing is that direct costs can be traced. Indirect costs, on the other hand, cannot be specifically associated with a particular cost object (Baker et al., 2017). In healthcare, period costs are not part of or are associated with service delivery. Period costs are costs necessary to support the existence of the organization itself (Baker et al., 2017). Several examples of the type of costs as it related to a healthcare facility such as the laboratory are, marketing or advertising, travel expenses for phlebotomists, and lease of retail space to serve as a collection site. These examples listed are unavoidable expenses that are considered period costs.  Include in your response why it is important for the healthcare manager to know the differences between all the costs listed when determining financial status. A healthcare manager needs to know the difference between all cost classifications because it helps in determining where the organization has spent money to run its services as well as where it will need to go to deliver its services. It helps the manager understand what shows on the financial statement of the organization for the accounting period in which the expenses were incurred. It allows the manager to control processes and cut costs where necessary. Reference: Baker, J. J., Baker, R. W., & Dworkin, N. R. (2017).Health care finance: Basic tools for nonfinancial managers(5th ed.). Jones & Bartlett Learning.