Consideration of costs is an important factor in medical decisions, including budgeting and planning, pricing for healthcare products or services, operational control, and selection of therapeutic options. Costs may be viewed in different ways. One approach to describe costs is a cost behavior pattern in which a cost is analyzed by its reactions to different levels of activity. Understanding the cost behavior patterns will facilitate medical decision making.

Two common types of cost behavior patterns are fixed and variable costs. Fixed costs remain constant over different levels of activity (e.g., volume, workload). Variable costs vary with changed levels of activity, such as costs for medications and medical supplies, which represent a major part in healthcare. In some cases, neither fixed costs nor variable costs alone can ...