Hospital runs an eye clinic with 5 employed ophthalmologists that perform general and special surgical procedures in the hospitals operating suite. Since the physicians are employees and salaried, the hospital is able to bill for both the technical and professional component of their services. The average age of the existing ophthalmologists is 56 years old. Decision support data revealed the following for the existing practice:

	Avg Direct Cost/ Case (1)	Avg Reimburse/ Case	Cases/ 2015	Cases/ MD	Total cost (1)	Margin	Overhead	Profit (Loss)
Hosp. Eye Clinic	$110	$125	7800	1560	$858,000	$117,000	$30,000	$87,000
Gen. Eye Surgery	$1,700	$1,850	3600	720	$6,120,000	$540,000	$75,000	$465,000
Special Eye Surgery	$3,400	$3,200	1440	288	$4,896,000	($288,000)	$90,000	($378,000)
Total			12,840	2,568	$11,874,000	$369,000	$195,000	$174,000

The hospital has become aware of a recently trained 29 year old ophthalmologist who is interested in joining the clinic as an employee. The clinic has the capacity and demand for an additional physician and the hospital OR director has confirmed that the OR has capacity for the caseload of an additional ophthalmologist. The concern is that the new surgeon would use a $500/ case implant for all of his special eye surgery cases in addition to the other special surgery implant costs and a new yearly fixed cost of $10,000. The decision support system in conjunction with the medical records coder has determined that there is no additional reimbursement for these new cases.

Assumptions:

No change in caseload, cost per service or reimbursement for the existing ophthalmologists. Their clinic visit and OR caseload are virtually identical to each other.

Assume the new physician would have the same volume as the existing physicians in both the eye clinic and OR cases, both general surgery and special surgery.

The only change is that the new physicians special surgical cases will have a direct cost of $500 per case more than for the existing physicians.

The equipment for the new physician will add $10,000 a year in fixed costs (overhead allocation) due to depreciation, equipment, maintenance and training.

Even though the new special surgical cases are more expensive, there is no additional reimbursement.

QUESTIONS

1. Revise the existing spreadsheet to capture the proposed six ophthalmologist practice using the assumptions in the case study.