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Lakeside Hospital Case

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DEPARTMENT OF ACCOUNTANCY
UNIVERSITY OF ILLINOIS
MEMORANDUM

TO: Dr. Newell
FROM:
DATE: February 14, 2013
SUBJECT: Lakeside Hospital Renal Dialysis Unit Analysis

Introduction Dr. Peter Lawrence noted that as a result of an alteration in Medicare’s payment policies for hemodialysis treatments, the Renal Dialysis Unit in Lakeside Hospital will be terminated unless he can show that the unit covers its costs in addition to an adequate portion of the overhead costs. In the memorandum, I will explain the pros and cons of retaining the dialysis unit, an assessment of the results of the CVP analysis, and offer you recommendations.
Renal Dialysis Unit Mission The mission of the Renal Dialysis Division is to provide hemodialysis treatment for the increasing number of patients with chronic kidney disease. Because Medicare’s policy has recently changed, the number of patients in the renal dialysis unit has dropped to fifty percent; as a result, the unit has been only providing 3120 treatments to patients with end-stage renal disease. In dialysis, part of the patient’s blood is cleaned as it circulates in an artificial kidney machine.
Advantages And Disadvantages of Retaining The Dialysis Unit Based on the analysis, if the dialysis unit continues to operate as it is currently or even consolidates patients to a single shift, the unit will continue treating its patients with chronic kidney disease. If Lakeside Hospital retains the unit, this is advantageous because the patients with end-stage renal disease are in dire need of this dialysis treatment. Without a unit that is responsible for treating them, the patients’ kidneys will more than likely completely fail. However, if you retain the dialysis unit, your unit will have a major net loss in income each year and it would not be worth the investment in the long run.
CVP Analyses And Assessment Dr. Peter

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