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BUSI 523 LU Centralization vs Decentralization Discussion Replies

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Jane Satterfield

In short, a cost center is the department within a company that supervises the costs associated within the company, and the profit center is the department within a company that supervises the profits associated within the company. Profit centers evaluate and address the divisions within a company that are most profitable. They also help in determining if the profits are outweighing the costs of the company. The managers or executives in charge of profit centers have decision-making authority related to product pricing and operating expenses. They also face considerable pressure as they must ensure that their division’s sales from products or services outweigh the costs—that their profit center produces profits year after year, either by increasing revenue, decreasing expenses, or both. They focus on both profits and costs, as the profit is directly impacted by the costs of the facilities. The structure of profit centers tend to be more complex as they involve both sides of revenue, the profit and the spending. Cost centers are responsible solely for costs. Cost centers focus on long term success through cost-saving approaches. They tend to have a simple structure as they have the simple structures in how they function.

We can also evaluate if a healthcare facility is for profit or nonprofit. “For-profits are most likely to offer relatively profitable medical services; government hospitals are most likely to offer relatively unprofitable services; nonprofits often fall in the middle. For-profits are also more responsive to changes in service profitability than the other two types,” (Horwitz, J. 2005). For-profit facilities are often concerned about shareholder returns and how to efficiently run a facility in order for some return. Not-for-profit facilities are considered to be community serving entities that focus on mission and charity rather than shareholder returns. “A for-profit can raise money from private investors, for which it must give equity or dividends to shareholders; ultimately, a return on investment is expected. A nonprofit, on the other hand, can seek donations from individuals, foundations and corporations. Such stakeholders generally expect a ‘social return’ on capital.” (Chen, J., 2013). Generally, for-profit companies seek to provide a product or service to consumers and make a profit by doing so. A nonprofit organization’s purpose is to provide a service or benefit to the community with no intention of earning a profit.

Mark 8:36 says, “For what does it profit a man to gain the whole world and forfeit his soul?” (English Standard Bible, 2001/2016). Christians often make the mistake of judging those who run their businesses to make a profit, however making money is not a sin. How you make a profit and a return is what can be sinful. Making a profit at the detriment of other people is not like Christ. We should be encouraged to be like Christ in every transaction we make, and represent Him in all areas of our lives. 

Camilla Copeland

Discussion Thread: Health Services Evaluation

As with any business, there are costs, and there are profits. A cost center within a business reports the cost that a unit or department incurred, whereas a profit center must consider the costs that are incurred to determine the profits. Cost centers are also responsible for managing costs, while profit centers develop ways to generate profits. Both cost and profit centers are critical in the decision-making process for maintaining the organization and keeping it afloat.

Centralization and decentralization are two opposing approaches that healthcare organizations can adopt in their management structures. In “centralization, the agents simultaneously report to the principal, who subsequently chooses the actions of both divisions” (Liu & Migrow, 2022, p. 4). Centralization in healthcare businesses enables the decision-making authority, administrative functions, and management responsibilities to a single central or corporate entity within a healthcare organization or system, which helps to maintain consistency. On the other hand, decentralization distributes decision-making authority and administrative functions to various units or facilities within the healthcare system, which allows for more flexibility and responsiveness to needs and circumstances. However, it can also lead to duplication of efforts and inconsistency in policies and procedures. “Under decentralization, the agents can exchange messages with each other, after which they make independent decisions over the actions of their own divisions” (Liu & Migrow, 2022, p. 4).

When a health service department or unit moves from a cost center to a profit center, it could affect the people they service who may not have insurance or those who are historically underserved. The primary goal of a profit center is to generate profits, which may conflict with the organization’s mission if that organization’s mission is it to provide affordable and accessible healthcare services. One way to address this challenge might be adopting a hybrid method that balances the need to generate profits with the mission of serving the underserved. For example, some of its profits can be allocated toward providing underserved populations with free or subsidized healthcare services.

The implications of having public health professionals who are not permitted to bill or have reimbursable codes can be significant. Public health professionals play a critical role in promoting and protecting their communities’ health. However, their service delivery ability may be limited if they cannot bill or have reimbursable codes. This can result in a lack of funding and resources for public health programs and services, which can negatively affect the overall health of communities. “Identifying referral and systemic factors contributing to non-reimbursable activity can provide insight into budgeting/negotiating for institutional support for essential clinical and non-clinical functions in providing competent quality patient care” (Bierenbaum, Katsikas, Furr, & Carter, 2013, p. 465).

The Bible teaches us to care for the sick and the needy and to be compassionate towards others. In Luke 10:9, Jesus instructs his disciples to “heal the sick who are there and tell them, ‘The kingdom of God has come near to you (The Message Bible, 2018).’” This verse reminds us of the importance of providing healthcare services to those in need and promoting the well-being of all members of our communities. As healthcare professionals, we must serve others and work towards a healthier, more equitable society. 

BUSI 523 LU Centralization vs Decentralization Discussion Replies
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