4. Review the income statement provided in Table 7.2 and address the following questions: a. From your analysis, you understand that the net margin for the organization has shown strong growth over the past year. What factor/s is/are driving this improved performance? b. What concerns do you have regarding current financial performance of this organization? As an executive leader within this organization, what priority issues should this organiza- tion address? c. Is your impression of the reported financial performance generally favorable or unfavor- able? Why? EXHIBIT 7.2 Sample Medicare DRG Reimbursement Net Revenue and Profit Calculation/Medicare Acute Admission Base Calculation DRG 127 Heart Failure and Shock $30,758.65 Gross Charge: (Total Charges incurred and Billed to Medicare) Reimbursement Federal standard labor $3,022.18 calculation: Wage index X 0.9793 Wage adj. std amt $2,959.62 Nonlabor fed std amt 1,852.31 Adjusted base rate $4,811.03 Oper. dispropr. share $1,654.34 Operating IME 548.44 Federal capital rate 427.03 Large urban factor X 1.03 Geograph. adj. factor X 0.9858 Adj. capital rate $ 433.60 Capital disprop. share 50.82 Capital IME 61.74 Total base payment $7,989.91 $7,899.91 DRG weight (intensity) 1.0 1.049 Total Reimbursement DRG Payment $ 7,989.91 $8,381.41 (amount hospital was paid) Contractual adjustment(gross charges less $22,377.24 reimbursement) (amount hospital wrote off) Wage index is a value associated with the Office of Management and Budget's CBSA-based geographi- cal designations, by which the base rate may be adjusted. CBSA, core-based statistical areas; DRG, diagnosis-related group; IME, independent medical examination. 4. Review the income statement provided in Table 7.2 and address the following questions: a. From your analysis, you understand that the net margin for the organization has shown strong growth over the past year. What factor/s is/are driving this improved performance? b. What concerns do you have regarding current financial performance of this organization? As an executive leader within this organization, what priority issues should this organiza- tion address? c. Is your impression of the reported financial performance generally favorable or unfavor- able? Why? EXHIBIT 7.2 Sample Medicare DRG Reimbursement Net Revenue and Profit Calculation/Medicare Acute Admission Base Calculation DRG 127 Heart Failure and Shock $30,758.65 Gross Charge: (Total Charges incurred and Billed to Medicare) Reimbursement Federal standard labor $3,022.18 calculation: Wage index X 0.9793 Wage adj. std amt $2,959.62 Nonlabor fed std amt 1,852.31 Adjusted base rate $4,811.03 Oper. dispropr. share $1,654.34 Operating IME 548.44 Federal capital rate 427.03 Large urban factor X 1.03 Geograph. adj. factor X 0.9858 Adj. capital rate $ 433.60 Capital disprop. share 50.82 Capital IME 61.74 Total base payment $7,989.91 $7,899.91 DRG weight (intensity) 1.0 1.049 Total Reimbursement DRG Payment $ 7,989.91 $8,381.41 (amount hospital was paid) Contractual adjustment(gross charges less $22,377.24 reimbursement) (amount hospital wrote off) Wage index is a value associated with the Office of Management and Budget's CBSA-based geographi- cal designations, by which the base rate may be adjusted. CBSA, core-based statistical areas; DRG, diagnosis-related group; IME, independent medical examination