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Each month, Serenity Hospital bills the federal government (Medicare) for approximately $20 million for inpatient services. Medicare rejects 10% of these claims for failure to
Each month, Serenity Hospital bills the federal government (Medicare) for approximately $20 million for inpatient services. Medicare rejects 10% of these claims for failure to follow standard billing procedures, which are very complex. Serenity Hospital must correct and resubmit the rejected claims. This delays payment from Medicare by an average of 3 months. Assume an annual cost of capital of 5%. (a) What is the average cost of rejected claims for Serenity Hospital? (b) Serenity Hospital is planning to outsource correction and resubmission of rejected claims to the service firm Exorbitant Consultant. This will reduce the average delay in payment from Medicare from 3 months down to one month. Exorbitant Consultant will charge $200,000 per month for this service. Should Serenity outsource
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