Your hospital has been approached by a major HMO to perform all their MS-DRG 470 cases (major joint procedures). They have offered a flat price of $10,000 per case. You have reviewed your charges for MS-DRG 470 during the last year and found the following profile: Average charge: $15,000 Average LOS: 5 Days Cost/Charge Variable Cost % Routine charge $3,600 0.80 60 Operating room 2,657 0.80 80 Anesthesiology 293 0.80 80 Lab 1,035 0.70 30 Radiology 345 0.75 50 Medical supplies Pharmacy 4,524 0.50 90 1,230 0.50 90 Other ancillary 1,316 0.80 Total ancillary $11,400 0.75 60 50 The HMO in the preceding example has indicated that their doctors use less expensive joint implants. If this less expensive implant is used, your medical supply charges would be reduced by $2,000. What is the estimated reduction in variable cost?
Your hospital has been approached by a major HMO to perform all their MS-DRG 470 cases (major joint procedures). They have offered a flat price of $10,000 per case. You have reviewed your charges for MS-DRG 470 during the last year and found the following profile: Average charge: $15,000 Average LOS: 5 Days Cost/Charge Variable Cost % Routine charge $3,600 0.80 60 Operating room 2,657 0.80 80 Anesthesiology 293 0.80 80 Lab 1,035 0.70 30 Radiology 345 0.75 50 Medical supplies Pharmacy 4,524 0.50 90 1,230 0.50 90 Other ancillary 1,316 0.80 Total ancillary $11,400 0.75 60 50 The HMO in the preceding example has indicated that their doctors use less expensive joint implants. If this less expensive implant is used, your medical supply charges would be reduced by $2,000. What is the estimated reduction in variable cost?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Your hospital has been approached by a major HMO to perform all their MS-DRG 470 cases (major joint procedures). They have offered a flat price of $10,000 per case. You have reviewed your charges for MS-DRG 470 during
the last year and found the following profile:
Average charge: $15,000
Average LOS: 5 Days
Cost/Charge
Variable Cost %
Routine charge
$3,600
0.80
60
Operating room
2,657
0.80
80
Anesthesiology
293
0.80
80
Lab
1,035
0.70
30
Radiology
345
0.75
50
Medical supplies
Pharmacy
4,524
0.50
90
1,230
0.50
90
Other ancillary
1,316
0.80
Total ancillary
$11,400
0.75
60
50
The HMO in the preceding example has indicated that their doctors use less expensive joint implants. If this less expensive implant is used, your medical supply charges would be reduced by $2,000. What is the estimated
reduction in variable cost?
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