Question

ABC, Resource Drivers, Service Industry

Glencoe Medical Clinic operates a cardiology care unit and a maternity care unit. Colby Hepworth, the clinic’s administrator, is investigating the charges assigned to cardiology patients. Currently, all cardiology patients are charged the same rate per patient day for daily care services. Daily care services are broadly defined as occupancy, feeding, and nursing care. A recent study, however, revealed several interesting outcomes. First, the demands patients place on daily care services vary with the severity of the case being treated. SOLVE PLEASE

ABC, Resource Drivers, Service Industry Glencoe Medical Clinic operates a cardiology care unit and a maternity care unit. Colby Hepworth, the clinic's administrator, is investigating the charges assigned to cardiology patients. Currently, all cardiology patients are charged the same rate per patient day for daily care services. Daily care services are broadly defined as occupancy, feeding, and nursing care. A recent study, however, revealed several interesting outcomes. First, the demands patients place on daily care services vary with the severity of the case being treated. Second, the occupancy activity is a combination of two activities: lodging and use of monitoring equipment. Since some patients require more monitoring than others, these activities should be separated. Third, the daily rate should reflect the difference in demands resulting from differences in patient type. Separating the occupancy activity into two separate activities also required the determination of the cost of each activity. Determining the costs of the monitoring activity was fairly easy because its costs were directly traceable. Lodging costs, however, are shared by two activities: lodging cardiology patients and lodging maternity care patients. The total lodging costs for the two activities were $5,789,000 per year and consisted of such items as building depreciation, building maintenance, and building utilities. The cardiology floor and the maternity floor each occupy 18,900 square feet. Hepworth determined that lodging costs would be assigned to each unit based on square feet. To compute a daily rate that reflected the difference in demands, patients were placed in three categories according to illness severity, and the following annual data were collected: Activity Cost of Activity Activity Driver Quantity Lodging $ 555,620 Patient days 21,370 Monitoring 2,058,270 Monitoring hours used 29,830 Feeding 448,770 Patient days 21,370 Nursing care 4,980,800 Nursing hours 226,400 Total 8,043,460

Answer 1

1.
Daily rate using only patient days = $8043460/21370 = $376.39 per patient day

2.
Rate 1 = $47 per patient day i.e. ($555620+448770)/21370
Rate 2 = $69 per monitoring hour i.e. $2058270/29830
Rate 3 = $22 per hours of nursing care i.e. $4980800/226400

3.
High Severity = $568.44 per patient day i.e. (7640x47+14980x69+134100x22)/7640
Medium Severity = $284.72 per patient day i.e. (10430x47+11830x69+75600x22)/10430
Low Severity = $221.48 per patient day i.e. (3300x47+3020x69+16700x22)/3300