323 Case 13.4: Westside Hospital Key concept: Preparing a departmental budget when given volume estimates The Westside Hospital radiology department is preparing a budget for the following year. A major budget category is hand, foot, and forearm imaging. Current-year admissions for these imaging categories totaled 2,000, which breaks down as follows: Procedure Time Required Volume Proportion Rate Hand imaging 10 minutes 60% $100 Foot imaging 20 minutes 30% $300 Forearm imaging 30 minutes 10% $400 The radiology department head thinks there will be a 10 percent increase in volume for next year. This additional volume is expected to have the same procedure mix as the current year. Rates are not expected to change. The controller projects the payer analysis to be 50 percent Medicare (reimbursement rate = 70 percent of charges), 20 percent Medicaid (reimbursement rate = 60 percent of charges), 20 percent managed care (reimbursement = 70 percent of charges), and 10 percent self-pay (full charges, but 20 percent of self-pay results in charity care). These three procedures account for 20 percent of the radiology department's current $1,225,000 labor, imaging materials, and overhead expenses, which can be broken down in the following manner: Labor $425,000 Imaging materials $300,000 Overhead Total $500,000 $1,225,000 The department's labor expenses are expected to increase 5 percent next year due to an anticipated across-the-board pay raise. Imaging materials expenses are expected to increase 6 percent, primarily due to increases in precious metals costs. The department's overhead expenses are forecasted to remain constant for the next year. In addition to their individual cost increases, all three expenses are expected to increase by 10 percent due to the overall volume increase. Assignments 1. Prepare a budget for the next year by completing the following steps: a. Calculate the current volume for each imaging procedure by multiplying the total volume of 2,000 by the proportion for each procedure. 1000