HM6020 Accounting and Finance for Healthcare Managers SMH Cost Behavior SMH‘s survival is at stake. Healthcare has become a business where only those who control and understand costs survive. Any decrease in expenses drops to the bottom line as additional income or a reduction in net losses. However, before we can control costs we must understand cost behaviors. Let’s apply this to our case. It is essential that SMH analyze and understand the costs associated with its activities. The facility needs to examine specific product lines and ascertain which product line is the most profitable, both by dollar amounts and by gross profit percentage. Then, it needs to use this information to forecast the impact of potential changes in costs and revenue. This Module Hospitals generate an enormous amount of costing data. Much of this data becomes a part of the Medicare cost report that must be completed annually. The financial ratios calculated for this exercise can be used to predict the success or failure of a facility. In this module, you will take your analysis of SMH to the next level and determine where cost savings can be gained. You will calculate a breakdown of expenses that will allow you to calculate a breakeven point on gross profit. Using the breakeven point calculations, you will compare the impact of various potential changes in costs and revenue. Page 1 of 1 Module 4: SMH Cost Behavior © 2009 Argosy University