After the margin for markups on drugs and medical supplies was compressed, the revenue structure of healthcare institutions underwent a fundamental shift. The profits previously driven by drugs and supplies have been flattened, while adjustments to service fees cannot be implemented overnight. Continuing to rely on a simplistic gross calculation of total revenue minus total costs will mask structural losses as overall marginal profitability.
1. Revenue changes are structural.
With the same outpatient volume, a lower drug revenue ratio means reduced revenue per visit, while costs for staff, facilities, and equipment do not decrease proportionally. Although total revenue appears to be growing, this masks a decline in profitability per visit driven by volume alone.
2. Costs must be allocated to departments.
Departments are the operational and accountability units of a healthcare facility. By tracing personnel, equipment depreciation, space, and energy costs to individual departments and allocating shared resources based on reasonable drivers, you can identify which departments subsidize others. Without this step, resource allocation remains guesswork.
III. Disease-specific cost is the next step.
Department cost analysis answers "which departments are profitable," while disease-specific cost analysis determines "which diseases are worth treating." By aggregating direct costs according to clinical pathways and allocating indirect costs, the resulting per-disease cost supports medical insurance negotiations, performance-based compensation, and strategic discipline development decisions.
4. Implementation Timeline
Recommend a three-step approach: first, standardize revenue and cost collection criteria; second, complete department-level accounting; finally, pilot with three to five high-frequency disease types. Do not aim for full disease coverage initially—poor data quality will undermine result credibility.
Centralized procurement changes prices; cost accounting transforms visibility. Without seeing the structure, you're limited to adding and subtracting totals.