CASE ASSIGNMENT

Boston Children's Hospital

Read the case. An Excel worksheet has been provided with data from Exhibit 10 and Exhibit 14 so you don't have to spend time developing your own worksheet.

1.Use the worksheet to calculate the cost and margins of the three different office visits using:

a)RCC method

b)TDABC

2.What explains the difference in costs using the two methods?

3.Suppose DPOS dedicates the following resources to handle all office visits: 2.5 surgeons, 2 Ambulatory Service Representatives, 2 Registered Nurses, and 1 Clinical Assistant. During the year the office performs 4,400 Plagiocephaly visits, 2,200 Neoplasm visits, and 1,800 Craniosynostosis visits. Calculate the quantities and cost of used and unused capacity for the four types of personnel, and the total cost of unused capacity for the year. How can Dr. Meara reduce the costs of unused capacity?

4.Use the accompanying Excel worksheet to calculate the costs and margins of the different orthopedic casts using the TDABC method?

5.Compare the TDABC costs and margins with those calculated using the hospital's existing RVU system. What differences occur and why?

6.Should the two TDABC pilots be extended throughout the hospital or should senior hospital management just allow such local initiatives to arise spontaneously, based on local physician interest?

\fDPOS Assignment Worksheet Resource Surgeon ASR Weeks per 52 52 Less: Vaca 6 4 Less: Trai 2 ### Available 44 46 Hours per 10 8 Less: Brea 1.2 1.5 Available 8.8 6.5 Less: Est 25% 0% Clinical H 6.6 6.5 Cllinical minutes available per day Clinical minutes available per year RN CA 52 4 2 46 8 1.5 6.5 0% 6.5 52 ### ### ### 8 ### ### 0% ### Annual Co $ 522,720 $89,700 $ 134,550 $71,760 Capacity cost rate ($ per minute) Personnel process times (minutes) Plagioceph 18 8 Neoplasm s 22 55.5 Craniosyno 40 10.5 Medical D Surgeon Plagiocephaly Neoplasm skin excision Craniosynostosis ASR 23 20 23 5 5 10 RN CA RN CA Average reimburseme Total cost Charge nt $ - $ 350 224.00 $ - $ 350 224.00 $ - $ 350 224.00 Plastic Surgery Dept. Charges ### Costs 7,469,700 Reimburs 7,967,680 RCC: Rato of costs-to-charges Average D 64% Capacity Question Surgeon Plagioceph 18 Neoplasm s 22 Craniosyno 40 Number of 2.5 ASR 8 56 11 23 20 23 2 2 Annual Quantity 5 4,400 5 2,200 10 1,800 1 Procedur e Direct Material s Labor Indirect Supplies (Part of Direct Costs) Indirect Hospital Costs (Given Total for case Direct purposes Costs ) Total Costs Charge Long leg cast, cotton padding 44.70 1.60 $ 57.40 $ 523.00 Long leg cast, Gore-Tex padding 156.10 1.60 $122.01 $ 584.00 Petrie long leg cast 94.40 1.60 $107.73 $ 181.00 10.40 1.60 $ 15.66 - 10.40 1.60 $ 18.36 - Clubfoot cast (inital visit) Clubfoot cast (4x replacem ent visits) Clubfoot cast (final visit) - Clubfoot cast (6 total visits, incl. inital & final) $ 52.00 $ Cast Room Data Number of different club foot casts 5 - 8.00 $ 4.32 $ 93.42 $ - $ 1,690.00 Indirect Supplies (cost per procedur e, Alliance calculate s only for billed events) $ 1.60 Indirect hospital costs are given using Alliance System's overhead factor of approxiamately 50% of total non-phys TDABC Profit RCC Cost $ 210.00 $ 210.00 $ 210.00 Average Average Profit/ Reimburseme Procedur nt e $ 366.10 $ 408.80 $ 126.70 - - $ $ - 1,183.00 oxiamately 50% of total non-physician direct costs