Reference no: EM132241982

 Financial Management of Health Systems

Case 1

Brookside Hospital: preparing a departmental budget from the given data

Brookside Hospital's imaging for hand, foot and forearm is a sub-unit of the Radiology department.  They project ending the current year (2017) with 2,000 total procedures broken down as follows:

Procedure	Time Required	Volume proportion	Rate (Charge)
Hand imaging	10 minutes	60%	$100
Foot imaging	20 minutes	30%	$300
Forearm imaging	30 minutes	10%	$400

This sub-unit accounts for 20% of the Radiology department's current expenses of $1,225,000 broken down as follows:

Expense	Amount
Labor	$425,000
Imaging Materials	$300,000
Overhead	$500,000
Total	$1,225,000

Payer	Volume proportion	Reimbursement
Medicare	50%	70% of charges
Medicaid	20%	50% of charges
Managed care	20%	80% of charges
Self Pay	10%	100% of charges *
* 20% of the self pay result in charity care

Payer Mix and Reimbursement is as follows:

Budget Assumptions for 2018:

• Volume increase is expected to be 10% with the same procedure mix
• Due to volume increase, all three expenses are expected to increase 10%, in addition:
• Labor rates are expected to increase 5% due to merit increases
• The cost of Imaging materials are expected to increase 6%
• Overhead rate is expected to stay the same

Required:

Prepare a professional document to present to the VP of Radiology which will include separate tables for each of the following:

1. Prepare a statistics budget summary by procedure and payer

2. Prepare a gross and net revenue worksheet by procedure and payer.  Hint: prepare a table for each procedure and then one for the total of all procedures.

3. Prepare an expense worksheet based on the volume increases and the rate increases for each of the three types of expenses.  Do not separate the expenses by procedure only by type of expense.

4. Prepare a summary income statement for overall revenues and expenses.  Include appropriate header.