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Exercise13-3

Q:How many procedures are attributed to each payer?

Solution: The unit has performed a total of 2,000 procedures. Of these,

Payer1 = 30%x 2,000 = 600 procedures

Payer2 = 40%x 2,000 = 800 procedures

Payer3 = 20%x 2,000 = 400 procedures

Payer4 = 10%x 2,000 = 200 procedures

ProofTotal = 2,000

Q:How much is the total net revenue for each payer, and how much is thetotal contractual allowance for each payer?

Solution:First, we get the individual revenues and allowances in table 1. Thenwe compute the total in the second table.

Payer #

Gross Charges

% Paid by Each Payer

Net Revenue per Procedure

Contractual Allowance per Procedure

1

$100.00

80%

$80.00

$20.00

2

$100.00

70%

$70.00

$30.00

3

$100.00

50%

$50.00

$50.00

4

$100.00

90%

$90.00

$10.00

Payer #

Number of Procedures

Times

Net Revenue

per Procedure

per Payer

Equals

Total Net Revenue

per Payer

1

600

$80.00

$48,000

2

800

$70.00

$56,000

3

400

$50.00

$20,000

4

200

$90.00

$18,000

Total

2,000

$142,000

Solutionpart two: The total contractual allowance computation for each payeris as follows:

Payer #

Number of Procedures

Times

Contractual Allowance

per Procedure

per Payer

Equals

Total

Contractual Allowance

per Payer

1

600

$20.00

$12,000

2

800

$30.00

$24,000

3

400

$50.00

$20,000

4

200

$10.00

$ 2,000

Total

2,000

$58,000

Exercise13-4.1

Hypotheticallyall infusions average for two hours a piece (40hours/21 sessions)=1.90= 2 . Adding another nurse for six hours means you couldprobably fill chair numbers 1, 2 and 3 each with 3 patients each ifthe patient arrival times were staggered and this means that they donot arrive at the same time. The extra minutes are left as allowancesfor arrival times. We also assume that all factors worked smoothlyduring infusion. This scenario would amount to a capacity level totalof 9 patients in an ideal day, versus 7 patients as shown in Exhibit13-1, for a net gain of 2 patients

Addinganother nurse for four hours, however, means you could probably fillchair number 1 and 2 each with 3 patients and chair number 3 wouldremain at 2 patients per day. Compared to 7 patients per day inExhibit 13-1, this is a net gain of 1 patient. So adding the extranurse will result to serving 8 patients at day.

Exercise13-4.2

When have 4 chairs, and then we add the second nurse for 4 hours, thedaily capacity level would lead to having 3 patients in Chair 1 and Chair 2. The rest of the chairs from Chair 3 and 4 would have 2patients. This well lead to a capacity level total of 10 patients inan ideal day. Compared to 7 patients per day in Exhibit 13-1, thehospital would be serving an extra 3 patients.

Forthe same scenario with an extra nurse for 6 hours, the daily capacitylevel would probably amount to 3 patients in Chairs number 1, 2 and3. For chair 4 we would have 2 patients. The number of patientsserved in the hospitals will increase to 11 compared to the initial7. This will equal 4 extra sessions in an ideal day.

Exercise14-2

Projected Revenue

Year 1

Year 2

Year 3

Year 4

Year 5

Hospital 1

$20,000,000

$22,500,000

$27,500,000

$27,500,000

$30,000,000

Hospital 2

$20,000,000

$22,050,000

$27,550,000

$27,744,000

$31,616,000

5-YearProjected Revenue Totals:

Hospital1 = $125,500,000

Hospital2 = $128,960,000 this includes the inflation adjustment, as shown insolution above

Hospital2 = $116,000,000 this shows values before inflation adjustment, asshown in assignment assumptions above

Inputsfor solution:

(A)

(B)

(C)

(D)

Year per the

Look-Up Table

Dollars before Inflation

Cumulative

Inflation Factor*

Nominal

Dollars**

1

21,000,000

(1.05)1 = 1.050

22,050,000

2

25,000,000

(1.05)2 = 1.102

27,550,000

3

24,000,000

(1.05)3 = 1.156

27,744,000

4

26,000,000

(1.05)4 = 1.216

31,616,000

SOURCE OF FACTOR IN COLUMN C ABOVE:

From the Compound Interest Look-Up Table

“The Future Amount of $1.00” (Appendix 14-B)

Year per the 5-Year Projected Revenue Table

Year per the

Look-Up Table

Factors at 5% as shown in column C above

2

1

1.050

3

2

1.102

4

3

1.156

5

4

1.216

Exercise14-3:

Provideexchange rates for both pounds and euros and should providecomputations for both $500 and $1,000 in each currency. As to theactual computations, for example, assume the Wall Street Journal“Currencies” section shows the euro (shown under “Europe: Euroarea) is trading as follows: “in US$$” = 1.425and “per US$$” = .7010

Exchangerate for Euros against the dollar

Theexchange rates for I pound = 1.10 US $

And0.91 Euros = 1 US $

Thusat this exchange rate 500 U.S. dollars would be converted into about455 euros (500 times 0.91 equals 455 Euros. In addition, 1,000 U.S.dollars would be converted into about 910 euros (1,000 times 0.910equals 910 euros).

Exchangerate for pounds against the dollar

Theexchange rates for 1 pound = 1.500. US $

And0.65 British pounds = 1 US $

Atthe exchange rate 500 U.S. dollars would be converted into about 325pounds (500 times .65 equals 325 pounds). In addition, 1,000 U.S.dollars would be converted into about 650 pounds (1000 times 0.65equals 650.

Exercise14-4:

Fromthe data that has been retrieved from online sources, we can findthat the average cost of lawn care per week varies from 50$ to 60$.For the three sites, the hospital since it is the larger space wouldcost more since it is the larger space, about 60$. The rest of thespaces would cost 50$ a week. From here we can see that the payingthe Chief of Medical Staff’s son 100$ a week for lawn maintainingwill put the hospital on a tight spot. That is cost can equivalentlycover the two other spaces.

Infuture, hiring Jason would a good idea but the amount of money theyare paying for his services are way to high compared to the averagedcost. Considering that Jason is a son of the hospitals employee, thehospital’s management should consider lowering his salary insteadof paying him the standard price of 65$ for a larger piece and 50$for a smaller piece.