HS440 Unit 7 assignment 2

Question 1, 2, 3 4 and 8 only answered

Unit
7

Assignment
Answer Key

Numeric
Problems (8 @ 6.25 = 50)

Use the
following information for problems 1, 2,
and 3.

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 problems 1, 2, 3

	Square Footage	Direct Expenses	Lab Tests
Utilities		$200,000
Administration	2,000	500,000
Laboratory	2,000	625,000
Day-op Suite	3,000	1,400,000	4,000
Cystoscopy	1,500	300,000	500
Endoscopy	1,500	600,000	500
Total	10,000	$3,375,000	5,000

1.
What are the Day Op Suite’s total expenses?

2.
What are the Cystoscopy Department’s total
expenses?

3.
What are the Endoscopy Department’s total
expenses?

Use
the following information for questions 4, 5, and 6.

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 $10,000 per
case. You have reviewed your charges for MS-DRG 470 during the last year and
found the following profile:

Average Charge $15,000

Average LOS 5 Days

Cost/ChargeVariable Cost %

Routine Charge $3,600 0.80 60

Operating Room 2,657 0.80 80

Anesthesiology 293 0.80 80

Lab 1,035 0.70 30

Radiology 345 0.75 50

Medical Supplies 4,524 0.50 90

Pharmacy 1,230 0.50 90

Other Ancillary 1,316 0.80 60

Total
Ancillary $11,400 0.75 50

4.
In the above data set, assume that the
hospital’s 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?

5. Estimate
the variable cost per MS-DRG 470 using the departmental cost/charge ratios and
variable cost percentages.

6.
The HMO in the above example has indicated
that their doctors use less expensive joint implants. If this less expensive
implant is used, your medical supply charges would be reduced by $2,000. What
is the estimated reduction in variable cost?

7.
Calculate
the number of units needed to break even given the following information:

Revenue per Visit		$55
Variable Cost per Visit		$30
Contribution Margin per Visit		$25
Fixed Cost		$154,000

8.
Calculate the breakeven price from the
following information.

Quantity
of services = 3,000

Fixed
costs = $45,000

Average
cost per unit = $150.00

Required
profit = $30,000

Explanation & Answer

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