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HSA 525 chapter 13 and 14 Health Care Finance

Solution to Assignment Exercise

1

3

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-3

Q: How many procedures are attributed to each payer?

Solution : The unit has performed a total of

2

,000 procedures

.

Of these,

Payer 1 = 30% x

2,000

=

600

procedures

Payer 2 =

4

0% x 2,000 =

800

procedures

Payer 3 = 20% x 2,000 =

400

procedures

Payer 4 = 10% x 2,000 =

200

procedures

____

Proof

Total

= 2,000

Q How much is the net revenue per procedure for each payer, and how much is the contractual allowance per procedure for each payer?

Solution: The computation is as follows:

$100.00

$100.00

$50.00

$100.00

Payer #	Gross Charges	% Paid by Each Payer	Net Revenue per Procedure	Contractual Allowance per Procedure
				1				$100.00	80%		$80.00		$20.00
					2	70%		$70.00		$30.00
					3	5 0%				$50.00
					4	90%		$90.00		$10.00

Q: How much is the total net revenue for each payer, and how much is the total contractual allowance for each payer?

Solution part one: The total net revenue computation for each payer is as follows:

1

$80.00

2

$70.00

3

$50.00

4

$90.00

	Payer #		Number of Procedures	Times Net Revenue per Procedure per Payer	Equals Total Net Revenue per Payer
	600	$48,000
	800	$56,000
	400		$20,000
	200	$18,000
	Total		2,000	$142,000

Solution part two: The total contractual allowance computation for each payer is as follows:

Payer #

Number of Procedures

1

600

$20.00

2

800

$30.00

3

400

$50.00

$20,000

4

200

$10.00

Total

2,000

Times Contractual Allowance per Procedure per Payer	Equals Total Contractual Allowance per Payer
$12,000
$24,000
$ 2,000
$58,000

Solution Proof Total: $142,000 plus $58,000 = $200,000.

Solution to Assignment 13-4.1

There is no specific solution to this assignment.

Remember, all infusions average two hours apiece. Adding another nurse for six hours means you could probably fill chair numbers 1, 2 and 3 each with 3 patients each if the patient arrival times were staggered and all factors worked smoothly. This scenario would amount to a capacity level total of 9 patients in an ideal day, versus 7 patients as shown in Exhibit 13-1, for a net gain of 2 patients. Adding another nurse for four hours, however, means you could probably fill chair number 1 and 2 each with 3 patients and chair number 3 would remain at 2 patients per day. Compared to 7 patients per day in Exhibit 13-1, this is a net gain of 1 patient.

Solution to Assignment 13-4.2

If you have 4 chairs, you have to have the second nurse for at least four hours. The daily capacity level would probably amount to 3 patients in Chairs #1 and 2 and 2 patients in Chairs #3 and 4, for a capacity level total of 10 patients in an ideal day. Compared to 7 patients per day in Exhibit 13-1, this is a net gain of 3 patients. If you have 4 chairs and have the second nurse for six hours, the daily capacity level would probably amount to 3 patients in Chairs #1, 2 and 3 and 2 patients remaining in Chair #4. This capacity level total amounts to 11 patients in an ideal day, for a net gain of 4 patients over the 7 patients assumed in Exhibit 13-1.

Solution to Assignment Exercise 14-2

$27,500,000

$20,000,000

Projected Revenue
Year 1	Year 2	Year 3	Year 4	Year 5
Hospital 1		$20,000,000	$22,500,000		$27,500,000	$30,000,000
Hospital 2	$ 22,050,000	$ 27,550,000	$ 27,744,000	$ 31,616,000

5-Year Projected Revenue Totals:

Hospital 1 = $125,500,000

Hospital 2 = $128,960,000 including inflation adjustment, as shown in solution above

Hospital 2 = $116,000,000 before inflation adjustment, as shown in assignment assumptions above

Inputs for solution:

1

2

3

4

(A)	(B)	(C)	(D)
Year per the Look-Up Table	Dollars before Inflation	Cumulative Inflation Factor*	Nominal Dollars**
21,000,000	(1.05)1 = 1.050	22,050,000
25,000,000	(1.05)2 = 1.102	27,550,000
24,000,000	(1.05)3 = 1.156	27,744,000
26,000,000	(1.05)4 = 1.216	31,616,000

* Assume an annual inflation rate of 5%. Thus 1.00 + 0.05=the 1.05 factor in Column C.

** Column D “Nominal Dollars” equals Column B times Column C.

2

1

3

2

4

3

4

SOURCE OF FACTOR IN COLUMN C ABOVE:
From the Compound Interest Look-Up Table “The Future Amount of $1.00” (Appendix 14-B)
Year per the 5-Year Projected Revenue Table	Year per the Look-Up Table	Factors at 5% as shown in column C above
1.050
1.102
1.156
5	1.216

Solution to Assignment Exercise 14-3:

Provide exchange rates for both pounds and euros and should provide computations for both $500 and $1,000 in each currency. As to the actual computations, for example, assume the Wall Street Journal “Currencies” section shows the euro (shown under “Europe: Euro area) is trading as follows: “in US$” = 1.425 and “per US$” = .7010

Thus at this exchange rate 500 U.S. dollars would be converted into about 350 euros (500 times .7010 equals 350 euros [rounded]), and 1,000 U.S. dollars would be converted into about 700 euros (1,000 times .7010 equals 700 euros [rounded]).

Furthermore, assume the Wall Street Journal “Currencies” section shows the British pound (shown under “Europe: UK [United Kingdom] pound)” is trading as follows:

“in US$” = 1.500 and “per US$” = .6667

At this exchange rate 500 U.S. dollars would be converted into about 333 pounds (500 times .6667 equals 333 pounds [rounded]), and 1,000 U.S. dollars would be converted into about 667 pounds (500 times .6667 equals 667 pounds [rounded]).

Solution to Assignment Exercise 14-4:

While solutions will vary, this should be covered:

· review the information provided within this assignment for all three sites

· refer to Appendix 25-A for additional information

· organize the relevant information provided

· make and document a series of assumptions

· determine costs for each site, based on the information and the assumptions

· prepare a report that presents the cost comparisons for grounds care between and among the three sites

·

prepare an assessment of what the best future course of action should be.

.