INFORMATION:

Encompass Health Corporation (formerly HealthSouth Corporation) claims to be a leading provider of integrated healthcare services, offering both facility-based and home-based patient care through our network of inpatient rehabilitation hospitals, home health agencies, and hospice agencies. As of December 31, 2019, our national footprint spans 37 states and Puerto Rico and includes 133 hospitals and 245 home health and 83 hospice locations. As of December 31, 2019, the company derived 76.3 percent of its hospital revenues from inpatient services. During 2019, it treated and discharged 186,842 patients, and the average length of a patients stay was 12.6 days. If one patient occupying one bed for one day represents a patient-day, then Encompass produced 2,354,209 patient-days of output during 2019 (186,842 12.6 = 2,354,209). During this period, Encompass incurred depreciation and amortization costs of $218,700,000. For the purpose of this problem, assume that all of this is depreciation that is related to the property, plant, and equipment of inpatient hospitals.

QUESTION:

F. Explain the advantage of using the amount calculated in Requirement e to determine the cost of providing one patient-day of service in February and March versus the amounts you computed in Requirement b.