Case (adapted from Fundamentals of Managerial Accounting Concepts, 7 The dialysis clinic provides two types of treatments for its patients. requires patients to visit the clinic three times each week. Peritoneal d administ Is of Managerial Accounting Concepts, 7th edition, Edmonds, Tsay and Olds). pes of treatments for its patients. Hemodialysis (HD), an in-house treatment er their treatments at home on a daily basis. The clinic serves a number of HMO patients under a co of ialysis (PD) permits patients to se lf- ntract that limits collections from the HMO insurer to a fixed amount per pat at limits collections from the HMO insurer to a fixed amount per patient. As a result, the clinic's profitability is directly related to its ability to control costs. To illustrate, assume that the clinic is paid a fixed annual fee $15,000 per HMO patient serv per patient, resulting in an average profitability of $1,000 per patie base is fixed, the only way the clinic can increase profitability is to lower its average cost of providing services. the clinic fails to control costs and the average cost of patient care increases, profitability will study suggests that the cost service. The clinic is profitable because PD services generate enough profit to more than make up for losses o ed. Also assume that the current cost to provide health are averages $14,000 a year nt ($15,000-$14,000). Because the revenue is to lower its average cost of providing services. If decline. A recent to provide HD service exceeds the amount of revenue generated from providing that n HD services