Solution-M4 Problem Set- Boston Children’s Hospital

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Rochester Institute of Technology *

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413

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Health Science

Date

Apr 3, 2024

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pdf

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2

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1. List the market and competitive forces facing BCH that drive a need for a different understanding of costs. Answer: During the Great Recession in the United States, Boston Children's Hospital (BCH) was faced with several challenges. While the hospital aimed to maintain its independent status and continue to excel in clinical, research, and teaching areas, it was also grappling with numerous logistical issues. For instance, the state and local governments were reducing reimbursements, which posed a risk to low-income patients' access to quality care. Moreover, other private hospitals were offering comparable services at much lower prices. Adding to the challenges, the payors, who constituted 15% of the local market, began excluding BCH from some offerings. Even though BCH was not removed from their tiered network plans, the cost-sharing was increased. Given the evolving economic climate, different private insurance initiatives, Medicaid lapses, and government pressure to cut healthcare costs, it became crucial for BCH to develop a clear strategy for measuring costs and outcomes. With so much at stake, BCH needed to adapt and find new ways to ensure its sustainability and deliver excellent care to its patients. 2. Explain why a clinical department head should be interested in developing more accurate cost measurements. Answer: As healthcare reimbursement systems shift from traditional fee-for-service to fixed or bundled payments, accurate cost measurement becomes increasingly critical. With precise cost data, clinical department leaders can negotiate the new reimbursement method with payors more effectively. Additionally, a deep understanding of cost drivers can help hospitals improve care delivery processes, paving the way for value-based reforms that prioritize quality over quantity. In essence, the ability to accurately measure costs is crucial for healthcare organizations to thrive in today's rapidly changing healthcare landscape. 3. Use the accompanying Excel spreadsheet (Bb) to calculate the costs and margins of the three different office visits using (a) the RCC method and (b) the TDABC method. Answer: Refer excel screenshot below 4. Suppose the department dedicates the following resources to handle all office visits: 2.5 surgeons, 2 ambulatory service representatives, 2 RNs, 1 CA. During the year the office performs 4,400 plagiocephaly visits, 2,200 neoplasm visits, and 1,800 craniosynostosis visits. Calculate the quantities and cost of used and unused capacity for the year. How can you reduce the cost of unused capacity? Answer: One potential approach to reducing the cost of unused capacity could be to decrease the number of surgeons to 2.3. This would help to optimize the utilization of resources and potentially reduce expenses. Refer excel screenshot below
We can reduce the cost of unused capacity by decreasing the number of surgeons from 2.5 to 2.3
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