Use the information presented in Table 3 to expand the ABC model for WYNK to include the direct costs. Determine the doctors' compensation and the malpractice costs per unit for each cost object. Compute the total unit cost for each cost object before doctors' compensation is included by adding the malpractice unit costs and the indirect unit costs from Table 2. In order to do that, you will need to determine a methodology for assigning doctors' compensation cost to the cost objects, and a methodology for assigning malpractice insurance cost to the cost objects. Make sure your response fully describes each of these methodologies and supports your reasons for choosing them. For example, should malpractice costs be assigned to each and every cost object? Why or why not? Should malpractice costs be assigned equally to each relevant cost object or should they be assigned in proportion to some cost driver? Why? Which cost driver did you use to assign doctors' compensation to the cost objects and why? Also compute a total unit cost for each cost object that includes doctors' compensation. Discuss these results in your write-up, and include comments as to why the cost objects are different for this question than they were in the model that only assigned indirect costs to four cost objects. Table 2 Process Costs and Practice Information from STS Cost Study Total Cost of Processes WYNK Service Patients in the Office $39,970 Service Patients in the Hospital $94,018 Obtain Insurance Authorization (a) $94,743 Billing (a) $20,487 Collect Payments (a) $17,979 Resolve Collection Disputes (a) $13,799 Maintain Medical Records $43,342 Schedule & Coordinate Surgeries $121,783 Provide Information to 3rd Parties $23,805 Teaching & Research $0 Maintain Professional Education $51,411 Total $521,337 CRMG $347,045 $186,764 $45,930 $64,950 $54,199 $58,333 $69,705 $30,915 $16,989 $0 $31,118 $905,948 Database $212,046 $173,192 $28,991 $45,352 $26,234 $32,792 $57,133 $36,415 $17,230 $297 $37,163 $666,845 Process SPO SPH Auth Bill Collect Disputes MMR Sched 3rd pties T&R MPE 4 288 (a) Total Reimbursement Processes $147,008 $223,412 $133,369 Reimb Sustain & Manage Business $191,547 $153,906 $170,211 Sust Bus Maintain Facility $59,429 $223,180 $121,203 Facility Number of MDs 3 4.1 Number of no-charge office visits 1,424 1,188 1,038 Number of charge office visits 1,975 422 Number of charge hospital visits 530 779 97 Number of surgeries /procedures 1,312 639 727 Indirect cost/ unit: No-charge office visit $41 $139 $190 Charge office visit $82 $169 Charge hospital visit $26 $45 $66 Surgery $324 $581 $505 Note: Of the total practice expense for WYNK, $24,000 is for rental fees for examination rooms, 594,000 is for automobile leases and expenses, and $44,000 was for rent expense for the administrative offices. The $24,000 was assigned to Service Patients in the Office, the $94,000 was assigned to Service Patients in the Hospital, and the $44,000 was assigned to Maintain Facility. $227 Table 3 WYNK' Direct Costs and Direct Cost Drivers Direct Costs: Malpractice insurance Doctors' compensation Total direct costs $329,976 $2,020,775 $2,350,751 Information about Cost Objects: No-Charge office visit Avg MD 20 Minutes Count 1424 Tot MD Min 28,480 18 7 14 45 270 175 420 1,800 7,020 6.960 16,645 117 87 288 Chargeable office visits: 99213_Office/ outpatient visit, est level 1 15 99214_Office/ outpatient visit, est level 2 25 99242_Office consultation, level 1 30 99243_Office consultation, level 2 40 99244_Office consultation, level 3 60 99245_Office consultation, level 4 80 Total chargeable office visits Chargeable hospital visits: 99251_Initial inpatient consult, level 1 20 99252_Initial inpatient consult, level 2 32 99253_Initial inpatient consult, level 3 45 99254_Initial inpatient consult, level 4 65 99255_Initial inpatient consult, level 5 88 99262_Follow-up inpatient consult, level 2 20 99263_Follow-up inpatient consult, level 3 30 5 20 99 184 217 4 1 530 100 640 4,455 11,960 19,096 80 30 36,361 Surgeries /procedures: Coronary Artery Bypass Graft (CABG) Renal Access Vascular Bronch/Mediastinoscopy Thoracotomy Trach Pacemaker /AICD Debridement Other cardiac surgery Valve repair / replacement Other surgery 320 243 163 125 132 75 128 54 220 248 200 421 18 68 82 223 60 53 134,720 4,374 11,084 10,250 29,436 4,500 6,784 1,080 33,220 33,232 16,400 285,080 20 151 134 82 1312 Total MD minutes for all services rendered 366,566 Use the information presented in Table 3 to expand the ABC model for WYNK to include the direct costs. Determine the doctors' compensation and the malpractice costs per unit for each cost object. Compute the total unit cost for each cost object before doctors' compensation is included by adding the malpractice unit costs and the indirect unit costs from Table 2. In order to do that, you will need to determine a methodology for assigning doctors' compensation cost to the cost objects, and a methodology for assigning malpractice insurance cost to the cost objects. Make sure your response fully describes each of these methodologies and supports your reasons for choosing them. For example, should malpractice costs be assigned to each and every cost object? Why or why not? Should malpractice costs be assigned equally to each relevant cost object or should they be assigned in proportion to some cost driver? Why? Which cost driver did you use to assign doctors' compensation to the cost objects and why? Also compute a total unit cost for each cost object that includes doctors' compensation. Discuss these results in your write-up, and include comments as to why the cost objects are different for this question than they were in the model that only assigned indirect costs to four cost objects. Table 2 Process Costs and Practice Information from STS Cost Study Total Cost of Processes WYNK Service Patients in the Office $39,970 Service Patients in the Hospital $94,018 Obtain Insurance Authorization (a) $94,743 Billing (a) $20,487 Collect Payments (a) $17,979 Resolve Collection Disputes (a) $13,799 Maintain Medical Records $43,342 Schedule & Coordinate Surgeries $121,783 Provide Information to 3rd Parties $23,805 Teaching & Research $0 Maintain Professional Education $51,411 Total $521,337 CRMG $347,045 $186,764 $45,930 $64,950 $54,199 $58,333 $69,705 $30,915 $16,989 $0 $31,118 $905,948 Database $212,046 $173,192 $28,991 $45,352 $26,234 $32,792 $57,133 $36,415 $17,230 $297 $37,163 $666,845 Process SPO SPH Auth Bill Collect Disputes MMR Sched 3rd pties T&R MPE 4 288 (a) Total Reimbursement Processes $147,008 $223,412 $133,369 Reimb Sustain & Manage Business $191,547 $153,906 $170,211 Sust Bus Maintain Facility $59,429 $223,180 $121,203 Facility Number of MDs 3 4.1 Number of no-charge office visits 1,424 1,188 1,038 Number of charge office visits 1,975 422 Number of charge hospital visits 530 779 97 Number of surgeries /procedures 1,312 639 727 Indirect cost/ unit: No-charge office visit $41 $139 $190 Charge office visit $82 $169 Charge hospital visit $26 $45 $66 Surgery $324 $581 $505 Note: Of the total practice expense for WYNK, $24,000 is for rental fees for examination rooms, 594,000 is for automobile leases and expenses, and $44,000 was for rent expense for the administrative offices. The $24,000 was assigned to Service Patients in the Office, the $94,000 was assigned to Service Patients in the Hospital, and the $44,000 was assigned to Maintain Facility. $227 Table 3 WYNK' Direct Costs and Direct Cost Drivers Direct Costs: Malpractice insurance Doctors' compensation Total direct costs $329,976 $2,020,775 $2,350,751 Information about Cost Objects: No-Charge office visit Avg MD 20 Minutes Count 1424 Tot MD Min 28,480 18 7 14 45 270 175 420 1,800 7,020 6.960 16,645 117 87 288 Chargeable office visits: 99213_Office/ outpatient visit, est level 1 15 99214_Office/ outpatient visit, est level 2 25 99242_Office consultation, level 1 30 99243_Office consultation, level 2 40 99244_Office consultation, level 3 60 99245_Office consultation, level 4 80 Total chargeable office visits Chargeable hospital visits: 99251_Initial inpatient consult, level 1 20 99252_Initial inpatient consult, level 2 32 99253_Initial inpatient consult, level 3 45 99254_Initial inpatient consult, level 4 65 99255_Initial inpatient consult, level 5 88 99262_Follow-up inpatient consult, level 2 20 99263_Follow-up inpatient consult, level 3 30 5 20 99 184 217 4 1 530 100 640 4,455 11,960 19,096 80 30 36,361 Surgeries /procedures: Coronary Artery Bypass Graft (CABG) Renal Access Vascular Bronch/Mediastinoscopy Thoracotomy Trach Pacemaker /AICD Debridement Other cardiac surgery Valve repair / replacement Other surgery 320 243 163 125 132 75 128 54 220 248 200 421 18 68 82 223 60 53 134,720 4,374 11,084 10,250 29,436 4,500 6,784 1,080 33,220 33,232 16,400 285,080 20 151 134 82 1312 Total MD minutes for all services rendered 366,566
