Case 4 Assignment Example | Topics and Well Written Essays - 250 words

Case 4 - Assignment Example The idea here is to see whether the clinic can "inflate" its way to profitability even if volume remains at its current level.) 4. Suppose you just found out that the $3,215 monthly malpractice insurance charge is based on an accounting allocation scheme that divides the hospital’s total annual malpractice insurance costs by the total annual number of inpatient days and outpatient visits to obtain a per-episode charge. Then, the per-episode value is multiplied by each departments projected number of patient days or outpatient visits to obtain each departments malpractice cost allocation. What impact does this allocation scheme have on the clinic’s true (cash) profitability? (No calculations are necessary.) If the malpractice insurance charge is based on the hospital’s numbers of patient, then the clinic is paying too much. The clinic has fewer patients, so the insurance needs to be reduced to reflect the number of actual patient visits the clinic sees daily. 5. Does the clinic have any value to the hospital beyond that considered by the numerical analysis just conducted? Do the actions by Baptist Hospital have any bearing on the final decision regarding the clinic? The clinic does impact the hospital. If the hospital doctors see patients at the clinic, then patients from the hospital go to the clinic. It would also be a bad practice if the hospital is discharging patients to doctors in the Baptist Hospital clinic. The clinic is an extension of the hospital. Whatever the clinic loses, the hospital makes up in volume, procedures, and other means. Baptist Hospital should not have any bearing on the decision. When the other clinics were opened, this clinic had the same volume. Only if the volume of patients drop drastically should the clinic be close. I would recommend that the clinic raise their costs to $1 per patient. That would have the clinic breaking even. It is not cost