Case 3 Report
1. Background Rio Grande Medical Center is a full service not-for-profit acute care hospital with 325 beds. Most of the hospital’s facilities are devoted to inpatient care and emergency services, but a 100,000-square-foot section of the hospital is devoted to outpatient (OP) services. Of the 100,000-square-foot OP section, the OP Clinic uses 80%/80,000-square-feet, and the remaining 20%/20,000-square-feet are used by the Dialysis Center. Increased patient volume at the OP Clinic has created a need for 25% more space than it is currently assigned. Due to its large size and patients’ need to access other departments the decision has been made to move the Dialysis Center to another location, and allow the OP Clinic to
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After receiving the P&L Statement covering expansion, the administrative resident must develop and justify a new indirect cost allocation scheme for outpatient services. The scheme must be perceived as fair and promotes overall cost savings within the Medical Center.
2. Facts a. Current P&L Statement (without expansion)
(1) The Dialysis Center
Under the current indirect cost allocation scheme (Exhibit 1) the Dialysis Center’s Revenues and Direct Costs are as follows: total revenue is $2,700,000, direct expenses are $2,100,000, the contribution margin is $600,000, and their percent of revenues is 22.2%. Their indirect costs are as follows: facilities cost is $300,000, general overhead is $270,000, and total overhead is $570,000. This leaves the Dialysis Center with $30,000 in net profit and 1.1% in percent of revenues. Additionally, square footage is allocated at $15.00 per square foot on an aggregated basis. Lastly, their general overhead costs are set at 10% of their total revenues. (2) The OP Clinic
Under the current indirect cost allocation scheme (Exhibit 1) the OP Clinic’s Revenues and Direct Costs are as follows: $16,000,000 in total revenues, $9,833,155 in direct expenses, $6,166,845 in contribution margin, and 38.5% in percent of revenues. Their indirect costs are as follows: $1,200,000 in facilities costs, $1,600,000 in general overhead, and $2,800,000 in total overhead. This leaves the OP
The building of the new facility is not expected to affect revenue, direct cost and patient volume. The Dialysis Center will provide the same services for its patients, but with different location of the facility. There is no reason for the personnel of the facility to be penalized financially, since the decision for the relocation of the building was taken due to recent growth in volume of the Outpatient Clinic.
The North Texas State Hospital (NTSH) is part of the Department of State Health Services (DSHS) administration. NTSH is a mental healthcare facility that has two campuses: one department is located in Wichita Falls, TX and the other in Vernon, TX. Including both campuses DSHS is the largest mental hospital in the state of Texas, which provides psychiatric services for the mentally ill. NTSH is the only facility in the entire state of Texas that provides forensic psychiatric care. Forensic psychiatric care is a specialized service for prisoners who have mental disorders. NTSH offers a 284-bed maximum security program for adults and a 78-bed adolescent Forensic Program (DSHS Center, 2017). NTSH aims to improve the health, safety, and wellbeing of individuals by providing the right stewardship, reducing health care problems, improving public health awareness, and preventing diseases. In order to improve health and safety, NTSH is accredited by the Joint Commission on Accreditation of Healthcare Organizations. The Joint Commission is an independent, not for profit association that set standards to evaluate
Big Bend Medical Center is a full-service, not-for-profit, acute care hospital with 325 beds located in Big Bend, Texas. The bulk of the hospital’s facilities are devoted to inpatient care and emergency services. (Gapenski, pg. 27) The outpatient services section of the hospital is used by the Outpatient Clinic, as well as the Dialysis Center. The Outpatient Clinic, which makes up about 80 percent of the outpatient services section, has recently grown in volume and has created a need for 25 percent more space than it currently has. Moving the Dialysis Center to a new building was decide to allow expansion of the Outpatient Clinic. A change and focus on the allocation of costs has some department heads angry and claiming of
My strategy will consist of three phases. These phases include: capital shortage, funding options for equipment acquisition and funding options for capital expansion. During these three phases I will observe the necessary financial statements and documents. From this information I will analyze the information and decide the best strategy for improvements. I will not only focus on the goals for the clinic, but long term budget goals as well.
The organization provides the usual array of inpatient services expected in a moderate-sized community hospital. A local nursing home and retirement community is for sale, and the organization is considering the purchase of that agency. There is a regional hospital that is trying to establish a statewide hospital network. There is a local county health department that provides some clinic services, primarily for the uninsured.
On 5/29/17, at approximately 1804 hours, I was calling the last inmate for medication distribution in D-4, A pod. Myself and Nurse Bob were stationed at the entrance of A pod. Inmates began to crowd around the entrance of the bathroom. An unidentified inmate started yelling, "There is a guy on the floor in the bathroom having a seizure." I ordered the inmates to move out of the doorway of the bathroom. I had a partial view of the bathroom from the pod doorway and was able to partially see an inmate lying on the bathroom floor. I directed all inmates to lockdown in A pod and made a radio call to Security Control indicating there was a man down in D-4, A pod.
; 4) group overhead expenses and income must be distributed in a manner that is established before payment is received for the services that create the overhead expense or income; and 5) the amount of time member physicians of the group spend in work dedicated to the group must average
As defined by the OMB (2004), “Indirect costs are those incurred for a common or joint purpose benefitting more than one cost objective, and not readily assignable to the cost objectives specifically benefitted, without effort disproportionate to the results achieved” (p. 11). The costs in question include international conference, employee recreational activities and counseling services, investment counsel, lobbying, depreciation, and insurance. Despite seemingly
Calculations for setting the inpatient capitation rate with-in the hospital system is based on expected usage and charges set by the fee-for service method, rather than underlying
Efficiency in healthcare operations is becoming an increasingly important objective for many decision makers. Efficiency is simply the ratio of
As UC San Diego Medical Center is a large tertiary care hospital that offers the highest quality of specialty care in the region, it would be my honor to be involved in this elite organization. In addition, the Dietetic Internship Program provides experiences in different areas such as clinical nutrition, community nutrition, research, service management, etc. Experiences from different extents are valuable as it will prepare me to be a well-rounded registered dietitian. Furthermore, the core valves of the program, which are Quality, Caring, Integrity, Creativity, and Teamwork are similar to my personal valves. I am willing to contribute my time and efforts in order to provide high quality nutrition care to the community. Another reason that
Current funds allocated to advertising and sales promotion is 3% of net sales ($80,000,000) = $360,000
The total amount of the costs which should be matched with Revenues for 2003 is $71,129. This is done by taking the capitalization amount shown above (217,520), dividing it by the 200,000 unit estimate, and multiplying it by the units that were sold in 2003. The calculation is shown below.
3. Under the new activity-based costing (ABC) system, compute the indirect cost allocation rates for each of the three activities:
No.of employees * 10% of gross sales = Cost of set up & ongoing communication + No. of employees * (Employee Base Salary + 5% of gross sales)