3-52 Government Health Cost Behavior Dr. Stephanie White, the chief administrator of Uptown Clinic, a community mental health agency, is concerned about the dilemma of coping with reduced budgets in the next year and into the foreseeable future, despite increasing demand for services. In order to plan for reduced budgets, she first must identify where costs can be cut or reduced and still keep the agency functioning. The following are some data about fixed costs from the past year: Program Area Costs Administrative salaries Administrator Assistant $60,000 35,000 Two secretaries 42,000 Supplies 35,000 Advertising and promotion 9,000 Professional meetings, dues, and literature 14,000 Purchased services Accounting and billing Custodial and maintenance 15,000 13,000 Security 12,000 Consulting 10,000 Community mental health services Salaries (two social workers) 46,000 Transportation 10,000 Outpatient mental health treatment Salaries Psychiatrist Two social workers 86,000 70,000 1. Identify which costs you think are likely to be discretionary costs and which are committed costs. 2. One possibility is to eliminate all discretionary costs. How much would be saved? What do you think of this recommendation? 3. How would you advise Dr. White to prepare for reduced budgets?