Case 13.4: Westside Hospital Key concept: Preparing a departmental budget when given volume cotimates he Westside Hospital radiology department is preparing a budget for the following year. A major budget category is hand, foot, and forearm imaging. Currentyear admissions for these imaging categories totaled 2,000 , which 1 reaks down as follows: The radiology department head thinks there will be 210 percent increase in volume for next year. This additional volume is expected to have the same procedure mix 25 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: 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. Assume time required per procedure is an appropriate RVU proxy, and calculate cost per RVU. Then use cost per RVU to calculate cost per procedure, compare this number to rate per procedure, and then comment on areas of the budget that might be of most concern to management