Cases in Healthcare Finance 5th edition

Case Study II

Big Bend Medical Center Cases in Healthcare Finance, Fifth Edition 5th Edition

Case Study 3 (pg.27)

Answer all four questions in one or more full paragraphs.

1. Is it fair for the Dialysis Center to suffer in profitability, and hence for the department head to possibly lose his bonus, just because the Outpatient Clinic needs additional space?

2. In the past, the medical center has aggregated all facilities costs, and then allocated the total amount on the basis of square footage. This methodology assigns an average cost rate to each patient service department regardless of whether its space is new or old, or prime or poor. The proposed allocation for the Dialysis Center, on the other hand, requires it to bear the true facilities costs of its new space. What are the advantages and disadvantages of the new methodology? Do you support the new allocation scheme?

3. If the new allocation method for facilities costs is implemented, what should be the facilities allocation to the Dialysis Center in 20 years, when the loan (which is the basis for the higher cost allocation) has been paid off and there are no longer any actual facilities costs?

4. In your opinion, what are two or three key learning points from this case?