Australia and the US have developed healthcare systems, allowing their citizens to enjoy high standards of care. However, the Australian and US healthcare systems differ in the models used to finance medical services and the costs of healthcare. Australia has a national insurance benefits scheme that caters to the needs of all its citizens, thus facilitating equity. Similarly, the US has a health benefits plan for its citizens, but its system is more inclined toward self-provision (Australian Institute of Health and Welfare, 2019). The US governments work with several players, including public and private organizations that oversee health service provision. As a result, its health financial systems are unregulated, allowing some organizations to take advantage of the public by increasing costs. Thus, the US system is not equitable compared to the Australian system, as some people avoid seeking services due to high independent costs.
Aged care is a critical aspect of public health because it assures a high quality of life for the elderly. The Australian population is gradually aging, with the number of elderly people forecasted to increase in the future (Ergas et al., 2011). As a result, aged-care expenditure is also expected to rise. Currently, the Australian government finances aged care by paying service providers to offer care and facilitating remuneration solutions like supplements, capital grants, and subsidies (Ergas et al., 2011). In addition, residents also contribute to the financing by paying accommodation fees and through their contributions. Although most residents do not use aged-care services, tax-payers should support the system because the high expenses can significantly interfere with a nationâs budget and affect other sectors.
Operational expenses in healthcare refer to the costs incurred to facilitate service delivery. During the 2018-2019 financial years, the top 10 operational expenses, according to the NSW annual report after consolidation, included; medical and surgical supplies at $905,410, followed by expenses on pharmaceutical supplies at $869,197. In addition, visiting medical officers cost $862,108, maintenance expenses $574,442, specialized health services $407,907, and insurance $292,934 (New South Wales Health, 2017). Moreover, operational expenses on information management were $282,835, interstate patient outflows $262,252, outsourced patient cares $258,125, and other management services incurred $221,040 (New South Wales Health, 2017). Operational expenses during the 2018-19 financial year were higher compared to the previous years.
Although the Australian government spends a large portion of its revenue on healthcare, it has dependable revenue resources to ensure sustainability. According to Health Expenditure Australia, the government spent about $185.4 billion from 2017 to 2018 on healthcare services (Australian Institute of Health and Welfare, 2019). The major areas of the governmentâs healthcare expenditure during that financial year included; primary healthcare, hospitals, research, capital, and referred health services. The highest costs were primary healthcare expenditures at $63.4 billion and hospitals at $74.0 billion (Australian Institute of Health and Welfare, 2019). However, Australiaâs healthcare system relies on government and non-government funding resources such as economic resources, government expense tax rebates, and private medical insurance rebates.
Healthcare systems worldwide depend on various measurement, evaluation, and planning tools to ensure that their processes are aligned with initiatives. Activity Based Funding (ABF) refers to a system that allows the government and regulatory bodies to monitor, deliver funds, and manage finances in public hospitals (Love-Koh et al., 2020). ABFs facilitate equal distribution of resources and more efficient funds allocation to medical institutions according to their needs. A resource allocation formula describes a systematic technique for funding medical institutions concerning their unique differences and needs (Alipouri Sakha et al., 2018). A resource allocation formula allows the government to keep track of resource utilization and ensure equity in allocation for improved health outcomes in areas with limited healthcare access.
The three types of accounting principles in health include the accrual principle, the cost principle, and the conservatism principle. The accrual principle requires recording all transactions during the period when they occur, regardless of whether actual cash is received for the transaction (Reiter & Song, 2021). The cost principle demands tabulating liability, assets, and equity investments on financial statements at their initial costs. On the other hand, the conservatism principle advises keeping track of expenditures and liabilities as soon as possible (Yonce & Barnes, 2022). These principles guide health finance managers in ensuring efficiency and high-quality financial accounting.
A healthcare budget is a tool used to plan resource allocation, assess the effectiveness of past expenditures, and inform advocacy (Ross, 2020). Therefore, the team responsible for designing a budget should familiarize themselves with all the institution’s needs and policy issues. First, it is advisable to collect budgetary data and relevant documentation. Then, the healthcare team should draft the major sections of the budget and seek recommendations to make it comprehensive (Ross, 2020). Afterward, the team should send the draft to administrators and shareholders in the organization for review and validation. Finally, the team can disseminate the document to various partners after it has been corrected and updated.
Fixed and variable costs are business terms used to distinguish between fluctuating and static business costs in organizations. Fixed costs remain constant for prolonged periods irrespective of changes in business activities and sales volume (Grossman, 2017). Examples of fixed costs include salaries, rent, loan payments, and property taxes. On the other hand, variable costs change proportionately depending on business activities and sales volume. Variable costs in organizations include direct labor, operational expenses, and taxes (Tortorella et al., 2022). A major difference between variable and fixed costs is that organizations incur fixed costs even if they do not run the business. For example, tenants must pay rent even when they are closed down, thus requiring comprehensive planning.
Medical organizations and health systems incur various types of expenses depending on their needs and operations. Capital expenditures, also known as capital expenses, refer to funds spent on purchasing, maintaining, and improving fixed assets, including vehicles, machinery, land, buildings, and software technologies (KrupiÄka, 2020). Capital expenses consume a significant amount of financial resources in medical institutions because medical equipment, research instruments, and advanced technological solutions are critical in high-quality health service delivery (Morris et al., 2012). Thus, obtaining these resources and ensuring their appropriate functioning allows medical organizations to achieve their goals and objectives.
Capital expenditures and recurrent expenses are organizational costs incurred to oversee the smooth running of operations. However, unlike capital expenses, comprised of one-time or large payments used to obtain fixed assets, recurrent fees constitute regular charges used to run and maintain operations. For example, funds used to purchase land and equipment are classified into capital expenditures. However, finances spent on rent, salaries, staff allowances, labor wages, traveling expenses, loan interest payments, and operational costs such as water bills and accommodation are categorized under recurrent expenditures.
The cost of ambulance services listed in the NSW Health Annual Report of 2016-17 amounts to $15.3 million. The projects completed in Kempsey Ambulance Station cost $3.7 million, while projects completed in Stryker (Powered) Stretcher Funding incurred $10.0 million (New South Wales Health, (2017). In addition, projects completed in asset refurbishment and replacement strategies in various institutions used $1.6 million.
Public hospitals do not prioritize making profits and enhancing their revenue during operations. However, when unable to break even due to excess patients and insufficient operation costs, they rely on Medicare-funded through government levies and resident taxes (Goss, 2022). In addition, medical institutions take advantage of activity-based funding, which allows the government to reimburse them for services provided (Singh et al. 2013). Thus, they can easily manage additional costs by minimizing expenses incurred in medical procedures.
References
Alipouri Sakha, M., Mohtasham, F., & Mostafavi, H. (2018). The effect of resource allocation decisions on efficiency and equity in the health sector: A systematic review. Caspian Journal of Health Research, 3(1), 28-34. Web.
Australian Institute of Health and Welfare (2019). Health expenditure Australia 2017â18. Health and welfare expenditure series no.65. Cat. no. HWE 77. Canberra: AIHW. Web.
Chichirez, C. M., & PurcÄrea, V. L. (2018). Interpersonal communication in healthcare. Journal of medicine and life, 11(2), 119. Web.
Clark, R. C., & Carter, K. F. (2019). Successful grant applications: Follow the 4 F’s. Nursing2021, 49(2), 55-58. Web.
Ergas, H., & Paolucci, F. (2011). Providing and financing aged care in Australia. Risk management and healthcare policy, 4, 67. Web.
Gavi (2022). Australia. Gavi the Vaccine Alliance. Web.
Goss, J. R. (2022). Health Expenditure Data, Analysis and Policy Relevance in Australia, 1967 to 2020. International Journal of Environmental Research and Public Health, 19(4), 2143. Web.
Grossman, M. (2017). On the Concept of Health Capital and the Demand for Health. In Determinants of Health (pp. 6-41). Columbia University Press.
Hahn, C. A., & Gil Lapetra, M. (2019). Development and use of the leadership competencies for healthcare services managers assessment. Frontiers in Public Health, 7, 34.
Hernandez, S. R., O’connor, S. J., & Meese, K. A. (2018). Global efforts to professionalize the healthcare management workforce: the role of competencies. The Journal of health administration education, 35(2), 157. Web.
Joudyian, N., Doshmangir, L., Mahdavi, M., Tabrizi, J. S., & Gordeev, V. S. (2021). Public-private partnerships in primary health care: a scoping review. BMC Health Services Research, 21(1), 1-18.
KrupiÄka, J. (2020). The management accounting practices in healthcare: The case of Czech Republic hospitals. European Financial and Accounting Journal, 15(1), 53-66.
Love-Koh, J., Griffin, S., Kataika, E., Revill, P., Sibandze, S., & Walker, S. (2020). Methods to promote equity in health resource allocation in low-and middle-income countries: an overview. Globalization and health, 16(1), 1-12. Web.
New South Wales Health, (2017). Annual Report 2016-17 NSW Health. NSW Health. Web.
Morris, S., Devlin, N., Parkin, D., & Spencer, A. (2012). Economic analysis in healthcare. John Wiley & Sons.
Mossialos, E., Wenzl, M., Osborn, R., & Sarnak, D. (2016). 2015 international profiles of health care systems. Ottawa, ON, Canada: Canadian Agency for Drugs and Technologies in Health. Web.
Reiter, K. L., & Song, P. H. (2021). Gapenski’s Healthcare Finance: An Introduction to Accounting and Financial Management. Health Administration Press.
Reza, N., Vaikunthan, R., Michael, L., & Bal, B. S. (2017). Applying MBA Knowledge and Skills to Healthcare. CRC Press.
Rosen, M. A., DiazGranados, D., Dietz, A. S., Benishek, L. E., Thompson, D., Pronovost, P. J., & Weaver, S. J. (2018). Teamwork in healthcare: Key discoveries enabling safer, high-quality care. American Psychologist, 73(4), 433.
Ross, T. K. (2020). Practical Budgeting for Health Care: A Concise Guide. Jones & Bartlett Learning.
Singh, M. M., Choudhary, P. K., Patnaik, S. K., & Kaushal, G. (2013). Break-even analysis in healthcare setup. International Journal of Research Foundation of Hospital and Healthcare Administration, 1(1), 29-32. Web.
Shanafelt, T., Goh, J., & Sinsky, C. (2017). The business case for investing in physician well-being. JAMA internal medicine, 177(12), 1826-1832. Web.
Shah, A., & Course, S. (2018). Building the business case for quality improvement: a framework for evaluating return on investment. Future healthcare journal, 5(2), 132.
Tortorella, G. L., Fogliatto, F. S., EspĂ´sto, K. F., Mac Cawley, A. F., Vassolo, R., Tlapa, D., & Narayanamurthy, G. (2022). Healthcare costs reduction through the integration of Healthcare 4.0 technologies in developing economies. Total Quality Management & Business Excellence, 33(3-4), 467-487.
Yonce, S. K., & Barnes, B. G. (2022). Healthcare Accounting Research: An Analysis, Review, and Suggestions for Future Work. Journal of Governmental & Nonprofit Accounting.