Calculate patient revenue on accrual basis

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Reference no: EM13535975

Section A Requirements:

1. Calculate patient revenue on accrual basis for the coming year. Subdivide revenue by program, and within each program subdivide it by type of payer.

2. Calculate endowment revenue on an accrual basis for the coming year.

3. Prepare a revenue budget on an accrual basis, including all sources of revenue discussed previously. The revenue budget does not have to show all of the detail from requirements 1 and 2, but should show each major source of revenue, such as patient services and endowment.

Section B Requirements:

1. Calculate expected bad debt expense on an accrual basis for the coming year.
2. Calculate an expense budget on an accrual basis for the coming year. The expense budget does not require detailed information by program or department, but should show each type of expense such as salaries and supplies. Be sure to consider the impact of capital acquisitions on the expense budget.
3. Combine the revenue (Section A) and expense budgets to present an operating budget for the coming year.

Section C Requirements:

1. In Part I, Section B, number 2, you prepared a line-item expense budget on an accrual basis. Prepare the expense budget again as a responsibility center budget, showing the projected costs for each department (Radiology, Nursing, and Administration).
2. Prepare an expense budget with expense shown by program (Oncology, Cardiac, Rhinoplasty). For simplicity, assume that bad debts are not assigned to specific programs.

Section D Requirements:

1. Prepare a flexible budget assuming patient volumes are 10 percent and 20 percent higher and 10 percent and 20 percent lower than expected. Also include the expected patient volume level in the flexible budget. Prepare the flexible budget before doing the cash flow budget in Section E.

Section E Requirements:

1. Prepare a cash budget for the coming year. It will help if you prepare it in the following order:

a) Determine patient revenues by quarter by type of payer for the coming year. That is, determine private insurance revenues for each quarter, Medicare/Medicaid revenues by quarter, etc.

b) Determines patient revenues by quarter for the current year. Since many payers pay with a lag, some of the coming year's cash receipts some from current year's revenues.

c) Determine patient cash collections by quarter for the coming year, using revenue information from parts a and b, and payment lag information provided in the narrative of the problem.

d) Develop the cash budget by quarter.

Start with the beginning cash, add cash receipts shown by source (e.g., patient revenue by payer, endowment). Calculate the available cash. (Note that it will be necessary to determine other cash receipts and payments by quarter. For example, determine how much is received from endowment each quarter and how much is paid for supplies.)

Deduct cash payments by line-item (e.g., salaries). Be sure to include interest payments. Assume Dension does not owe any money at the beginning of the year. Subtract cash payments (called disbursements) from available amount to get a subtotal.

Based on the subtotal calculate the amount to be borrowed or repaid. Combine the amount borrowed or repaid with the subtotal to get ending cash balance for quarter.

Show loan payable amount on cash budget below the ending cash balance.

It is easier to develop a correct cash budget if you work one quarter at a time.

2. Based on your cash budget, prepare a revised operating budget. That is, take the operating budget Part I, Section B, number 3, and incorporate the interest expense from the cash budget. Do not prepare a revised flexible budget.

3. As an advisor to the Denison Hospital, you are certain of one thing: the Board of Trustees of the hospital will not approve a budget that projects an operating deficit. If the operating budget projects a deficit, what do you suggest that Denison do about it?

Reference no: EM13535975

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