In a hospital or physician clinic setting, what is typically classified as a variable direct cost?

In a hospital or physician clinic setting, medications and supplies used are classified as variable direct costs because their costs fluctuate directly with the volume of services provided. For instance, as more patients are treated, more medications and supplies will be consumed, resulting in changes to the total cost incurred by the organization. This direct relationship with patient volume makes these expenses variable and directly attributable to specific services or procedures.

In contrast, salaries of exempt staff tend to be fixed costs, as they do not vary with patient volumes in the short term. Insurance and liability expenses are generally fixed costs associated with the organization's operations, remaining relatively constant regardless of patient numbers. Marketing research costs are also typically considered fixed or overhead costs because they do not fluctuate directly based on the level of patient care or services provided but rather depend on strategic business initiatives independent of service volume.