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Transcript of Copy of Case Number Three.

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Transcript of Copy of Case number three.
Case 3: Big Bend Medical Center
What are the advantages and disadvantages of the new methodology?
Advantages
Makes cost allocation more fair
Recognizes it’s true quality
Could give a break because they are using the Same equipment and staff
Dialysis Center is already using the same equipment and personnel

Is there a better way?
In order to offset the large facility costs; the Dialysis center should be able to claim revenues on direct utilization of pharmaceutical supplies; increasing their bottom line and potentially allowing them to remain financially stable through the facility transition.
Is it “fair” for the Dialysis Center to suffer in profitability, and hence for the department head to possibly lose his bonus, just because the Outpatient Clinic needs additional space?

Incentives
Performance improvements
Performance measures

Disadvantages

Costs more per square foot for the dialysis center
For the Dialysis Center to bear the true costs, they forfeit the chance of generating true net profit.
There will be more incentive to focus on outpatient services than Dialysis patients
Other departments will find it less appealing to relocate if they know their profitability or contributions to the Hospital will decline severely when incurring true facility costs.

How is pharmacy revenue handled?
Pharmacy supplies used for dialysis cost the pharmacy $400,000
They profit $400,000 on drugs used
Dialysis center books $800,000 in annual revenue
They are charged $800,000 for the drugs they use

Do you support the new allocation scheme?
We agree with the new methodology because it incurs the true cost. The old allocation scheme disregarded new or old space.
By: Samantha Fiskum, Marissa Aasgaard, Alec Fischer, and Ben Johnson
PROBLEM:
dialysis center doesn’t have the ability to cover the costs

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