# For this week’s homework, you need to respond to the questions and problems outlined below.

1. For this week’s homework, you need to respond to the questions and problems outlined below.

Respond to the following three problems. Show your work for any calculations performed. Each accurate and complete response is worth 20 points.

Problem 1. David Jones, the new administrator for a surgical clinic, was trying to determine how to allocate his indirect expenses. His staff was complaining that the current method of taking a percentage of revenues was unfair. He decided to try to allocate utilities based on square footage of each department, administration based on direct costs, and laboratory based on tests. Use the information in the chart below to answer the question.

Square Footage                     Direct Expenses                           Lab Tests

Utilities                                                                           200,000

Administration                2,000                                    500,000

Laboratory                      2,000                                     625,000

Day-op Suite                  3,000                                    1,400,000                                        4,000

Cystoscopy                    1,500                                    350,000                                            500

Endoscopy                     1,500                                    300,000                                            500

Total                               10,000                                 3,625,000                                         5,000

Based on the scenario above, what are the Endoscopy Department’s total expenses?

Problem 2. 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

Routine Charge           \$3,600            Cost/Charge                Variable Cost

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        4,524                      0.50                                  90

Pharmacy                     1,230                      0.50                                  90

Other Ancillary             1,316                      0.80                                  60

Total Ancillary           \$11,400                    0.75                                 50

In the above data set, assume that the hospital’s cost to charge ratio is 0.80 for routine services and 0.75 for all other ancillary services. Using this information, what would the average cost of MS-DRG 470 be?

Problem 3. A free-standing ambulatory care center averages \$70 in charges per patient. Variable costs are approximately \$12 per patient, and fixed costs are about \$1.5 million per year. Using these data, how many patients must be seen each day, assuming a 365-day operation, to reach the break-even point?

Don’t forget to submit your homework.

## Rubric

HSM 340 Homework with CalculationsHSM 340 Homework with CalculationsCriteriaRatingsPtsThis criterion is linked to a Learning OutcomeCorrect Answer20 ptsFull Marks0 ptsNo Marks20 pts
This criterion is linked to a Learning OutcomeCalculation of Answer Shown40 ptsFull Marks0 ptsNo Marks40 pts
Total Points: 60

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