Cost Allocation
Posted on July 29, 2009 - Filed Under Finance | 1 Comment
Learning Objectives
After studying this chapter, readers will be able to:
• Explain why proper cost allocation is important to health services organizations.
• Define a cost driver and explain the characteristics of a good driver as opposed to a poor one.
• Describe the three primary methods used to allocate overhead costs among revenue producing departments.
• Apply cost-allocation […]
Evaluating the Alternative Strategies
Posted on July 26, 2009 - Filed Under Finance | 1 Comment
What should Atlanta’s managers do? If Peachtree’s proposal is accepted, the clinic is expected to lose $580,962 rather than make a profit of $419,038 when no discount was demanded. The difference is a swing of $1 million in profit in the wrong direction, hardly an enticing prospect. What happened to
the “missing” $1 million? It is […]
The Impact of Accepting the Proposal
Posted on July 23, 2009 - Filed Under Finance | Leave a Comment
An alternative strategy for the clinic’s managers would be to accept Peachtree’s proposal. The resulting projected P&L statement is contained in Table 5.8. The average per visit revenue of serving these two different payer groups is (2/3 × $100) + (1/3 × $60) = $86.67. Total revenues based on this average
revenue per visit would be […]
The Impact of Rejecting the Proposal
Posted on July 20, 2009 - Filed Under Finance | Leave a Comment
If Atlanta’s managers reject the proposal, the clinic would lose market share— an estimated 25,000 visits. The projected P&L statement that would result, which is based on 50,000 undiscounted visits, is shown in Table 5.7. At the lower volume, the clinic’s total revenues, total variable costs, and total contribution margin decrease proportionately (i.e., by one […]
Read More..>>Profit Analysis in a Discounted Fee-for-Service Environment
Posted on July 17, 2009 - Filed Under Finance | Leave a Comment
As noted in the previous discussion, CVP analysis is quite valuable to managers in that it provides information about expected costs and profitability under alternative estimates of volume. To learn more about its usefulness, suppose that one third (25,000) of Atlanta Clinic’s expected 75,000 visits would come from Peachtree HMO, which has proposed that their […]
Read More..>>Easiest Way to Shop Truck Rims Tires
Posted on July 16, 2009 - Filed Under Finance | Leave a Comment
In this age, where everything has been made to be simple, you ought to be simpler as well, including in truck rims hunting. To help you on it, Truckrims.com been designed.
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Wedding Favors
Posted on July 15, 2009 - Filed Under Finance | Leave a Comment
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The Impact of Cost Structure on Financial Risk
Posted on July 14, 2009 - Filed Under Finance | Leave a Comment
The financial risk of a healthcare provider, at least in theory, is minimized by having a cost structure that “matches” its revenue structure. To illustrate, consider a clinic with all revenues (reimbursement) tied to volume. For this clinic, each visit adds to the business’s revenues. If the clinic’s cost structure consisted of all variable costs […]
Read More..>>Save Your Money with Zenni Optical
Posted on July 11, 2009 - Filed Under Finance | Leave a Comment
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The Importance of the Number of Members
Posted on July 8, 2009 - Filed Under Finance | 2 Comments
Table 5.10 contains the projected P&L statements under capitation, recast to focus on the number of members. Assuming a per member utilization of four visits per year, a 10 percent membership increase to 20,625 members increases the projected profit by about 128 percent. However, if membership declines
to 17,291, the clinic just breaks even.
