EMERGENCY DEPARTMENT COSTS: FIXED AND VARIABLE COSTS 1
Case 5.3: Costs of Care in the Emergency Department
What is an example of a fixed cost in an emergency department? A variable cost?
Fixed costs are costs that do not change with changes in output levels (Smith, 2013). In the emergency department, fixed costs would remain constant regardless of the number of patients. An example of fixed costs in the emergency department would be the monthly salary of permanent staff such as emergency nurse practitioners and physicians. The salary is a constant amount agreed upon at the start of the contract period and would be a standard amount regardless of the number of patients one treats in a given period. The facility incurs the cost even when no patients visit.
Conversely, variable costs are costs that change with changes in output or activity levels (Smith, 2013). They increase with increases in activity levels and vice versa. An example...
The cost of
medication is influenced by the number of patients in a given period. The cost increases when patient numbers rise and decreases when numbers decline. If there are no...
…in lower average variable costs.
Thus, a fall in emergency department volumes would increase average fixed costs while decreasing average variable costs. The net effect on average total costs would depend on the extent of the increase in fixed costs and how fast variable costs fall as a result of the change in volume (Lee, 2019). If the increase in fixed costs is substantial, then a fall in volume will increase average costs unless variable costs can fall quickly enough to offset the increase in fixed costs (Lee, 2019). If variable costs do not fall quickly, then the increase in fixed costs will…
