Questions (3)

Respond to the following three problems. Show your work for any calculations performed. Each accurate and complete response is worth 20 points. Problem 1. David Jones the new administrator for a surgical clinic was trying to determine how to allocate his indirect expenses. His staff was complaining that the current method of taking a percentage of revenues was unfair. He decided to try to allocate utilities based on square footage of each department administration based on direct costs and laboratory based on tests. Use the information in the chart below to answer the question. Square Footage Direct Expenses Lab Tests Utilities 200000 Administration 2000 500000 Laboratory 2000 625000 Day-op Suite 3000 1400000 4000 Cystoscopy 1500 350000 500 Endoscopy 1500 300000 500 Total 10000 3625000 5000 Based on the scenario above what are the Endoscopy Departments total expenses? Problem 2. Your hospital has been approached by a major HMO to perform all their MS-DRG 470 cases (major joint procedures). They have offered a flat price of $10000 per case. You have reviewed your charges for MS-DRG 470 during the last year and found the following profile: Average Charge $15000 Average LOS 5 Days Routine Charge $3600 Cost/Charge 0.80 Variable Cost % 60 Operating Room 2657 0.80 80 Anesthesiology 293 0.80 80 Lab 1035 0.70 30 Radiology 345 0.75 50 Medical Supplies 4524 0.50 90 Pharmacy 1230 0.50 90 Other Ancillary 1316 0.80 60 Total Ancillary $11400 0.75 50 In the above data set assume that the hospitals cost to charge ratio is 0.80 for routine services and 0.75 for all other ancillary services. Using this information what would the average cost of MS-DRG 470 be? Problem 3. A free-standing ambulatory care center averages $70 in charges per patient. Variable costs are approximately $12 per patient and fixed costs are about $1.5 million per year. Using these data how many patients must be seen each day assuming a 365-day operation to reach the break-even point?