Family Medical Care (FMC) is a family medical practice with 8 physicians, a nurs
ID: 2342486 • Letter: F
Question
Family Medical Care (FMC) is a family medical practice with 8 physicians, a nursing staff of 10 to 12 nurses, and an administrative staff that varies from 6 to 9 personnel. Rajat Patel, the chief physician at FMC, is interested in studying the efficiency of the practice as a basis to set some benchmarks for further improvement, for rewarding his staff, and for comparing the efficiency of the FMC practice to other family medical practices. He is able to get comparable data for other practices from industry sources. So that the data are consistent with the industry sources, Patel has asked Marin & Associates, his accounting firm, to develop a set of productivity measures that would satisfy this requirement. Upon investigation, Joseph Marin finds that the measures to be used are the partial financial and operational productivity measures as defined in the chapter. The following information is for the last 2 years for the FMC practice:
Required:
1. Compute the partial financial productivity ratios for nursing and administrative support for the current and prior year.
2. Separate the change in the partial financial productivity ratio from the prior year to the current year into productivity changes, input price changes, and output changes.
(For all requirements, round your answers to 4 decimal places. Negative values should be indicated by a minus sign.)
Current Year PriorYear Patient visits 34,300 29,700 Nursing hours used 21,600 20,700 Administrative hours used 14,725 14,725 Cost of nursing support per hour $ 52.00 $ 51.00 Cost of administration per hour $ 37.60 $ 37.00 Industry average financial productivity Nursing 0.027 0.026 Administrative 1.250 1.270
Explanation / Answer
Requirement 1: Partial Financial Productivity: Particulars Current Year Prior Year Nursing Number of visits 34,300 29,700 ÷ Total nursing cost $1,123,200 $1,055,700 Partial financial productivity of nursing 0.0305 0.0281 Note: Total nursing cost: Number of nursing hours used 21,600 20,700 × Cost of nursing support per hour $52.00 $51.00 Total nursing cost $1,123,200 $1,055,700 Total administrative cost: Number of visits 34,300 29,700 ÷ Total administrative cost $553,660 $544,825 Partial financial productivity of admin 0.0620 0.0545 Note: Total administrative cost: Number of administrative hours used 14,725 14,725 × Cost of administration per hour $37.60 $37.00 Total nursing cost $553,660 $544,825 Partial Operational Productivity: Particulars Current Year Prior Year Nursing Number of visits 34,300 29,700 ÷ Total nursing hours used 21,600 20,700 Partial operational productivity of nursing 1.5880 1.4348 Administration: Number of visits 34,300 29,700 ÷ Total administrative hours used 14,725 14,725 Partial operational productivity of admin 2.3294 2.0170 Current output at prior year productivity Particulars Output Nursing Number of visits 34,300 ÷ Prior year productivity 1.4348 Partial operational productivity of nursing 23,905.7708 Administration: Number of visits 34,300 ÷ Prior year productivity 2.0170 Partial operational productivity of admin 17,005.4536 Requirement 2: A B C D Particulars Current output ÷ Producvity Change Current output ÷ Input price Change Current output ÷ Output Change Prior output ÷ Total Change Current input. × Cur Output at Prior Prod. × Cur Output at Prior Prod. × Prior input × Current input Cost Current input cost Prior input cost Prior input cost Output (Number of patient visits) 34,300 34,300 34,300 29,700 Input Nursing hours used 21,600 23,905.7708 23,905.7708 20,700 Administrative hours used 14,725 17,005.4536 17,005.4536 14,725 Cost per unit of input Cost of nursing support per hour $52.00 $52.00 $51.00 $51.00 Cost of administration per hour $37.60 $37.60 $37.00 $37.00 Nursing 0.0305 0.0029 0.0276 -0.0005 0.0281 0.0000 0.0281 0.0024 Administration 0.0620 0.0083 0.0536 -0.0009 0.0545 0.0000 0.0545 0.0074
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