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Item 2

Problem 16-49 Partial Operational and Financial Productivity; Medical Practice [LO 16-2]

Family Medical Care (FMC) is a family medical practice with 5 physicians, a nursing staff of 7 to 9 nurses, and an administrative staff that varies from 3 to 6 personnel. Rajat Patel, the chief physician at FMC, is interested in studying the efficiency of the practice as a basis to set some benchmarks for further improvement, for rewarding his staff, and for comparing the efficiency of the FMC practice to other family medical practices. He is able to get comparable data for other practices from industry sources. So that the data are consistent with the industry sources, Patel has asked Marin & Associates, his accounting firm, to develop a set of productivity measures that would satisfy this requirement. Upon investigation, Joseph Marin finds that the measures to be used are the partial financial and operational productivity measures as defined in the chapter. The following information is for the last 2 years for the FMC practice:

	Current Year				Prior Year
Patient visits		33,400				29,000
Nursing hours used		20,700				19,800
Administrative hours used		13,825				13,825
Cost of nursing support per hour	$	43.00			$	42.00
Cost of administration per hour	$	28.60			$	28.00
Industry average financial productivity
Nursing		0.030				0.029
Administrative		1.160				1.180

Required:

1. Compute the partial financial productivity ratios for nursing and administrative support for the current and prior year.

2. Separate the change in the partial financial productivity ratio from the prior year to the current year into productivity changes, input price changes, and output changes.

(For all requirements, round your answers to 4 decimal places. Negative values should be indicated by a minus sign.)

Required: 1. Compute the partial financial productivity ratios for nursing and administrative support for the current and prior year. 2. Separate the change in the partial financial productivity ratio from the prior year to the current year into productivity changes, input price changes, and output changes. (For all requirements, round your answers to 4 decimal places. Negative values should be indicated by a minus sign.) Nursing Administrative 1. Financial partial productivity (Current year) Financial partial productivity (Prior year) Productivity change Input price change 2. Output change