Kaciuba and Seigel (2009) expand on an ABC system in a medical practice. The bas
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Kaciuba and Seigel (2009) expand on an ABC system in a medical practice. The basic ABC system is transformed to include revenues. Using Table 2, discuss the differences in the process costs for the Fannon and Martens and Thoracic Surgery Medical Group (FMMG) and Drs. Mikos, Cord, Carson, and Smith (MCCS) and the database average. Compare the patient encounters of each business model and the database average per surgeon. How are the different business models used in the two practices apparent in these comparisons?
Activity-Based Management in a Medical Practice 5 5 TABLE 2 Process Costs and Practice Information from the STS Cost Study Database Total Cost of Processes Service Patients in the Office Service Patients in the Hospital Obtain Insurance Authorization (a) Billing (a) Collect Payments (a) Resolve Collection Disputes (a) Maintain Medical Records Schedule &Coordinate; Surgeries Provide Information to 3rd Parties leaching & Research Maintain Professional Education FMMG $347,045 $186,764 $212,046 $173,192 $45,352 $32,792 $36,415 S94,743 S64,950 $17,979 Disputes S43,342 $121,783 S23,805 9 S16,989 Total $521,337 $905,948 (a) Total Reimbursement Processes Sustain & Manage Business Maintain Facility 9 $153,906 $191,547 S59.429 $170,211 S121,203 Number of MDs Number of no-charge office visits Number of charge office visits Number of charge hospital visits Number of surgeries/procedures Charge office visit Charge hospital visit Note: Of the total practice expense for MCCS, $24,000 is for rental fees for examination rooms, $94,000 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 Surgeries and Procedures: Although a surgeon's effort across types of surgeries or procedures varies greatly, there is not a large difference in the administrative resources consumed by a minor surgery or a major surgery. Therefore, the original ABC model grouped all surgeries and procedures together so that the practice expense assigned to each surgery was the same. A distinction is made between chargeable and no-charge office visits because they consume activities differently. No-charge office visits do not require the staff to obtain insurance authorization (because the authorization for the surgery includes the follow-up office visits) or to process the collection of payments. However, a bill for $0 is prepared for a no-charge office visit. Therefore, the CPT codes for chargeable office visits wereExplanation / Answer
MCCS, has more no. of MD as compare to FMMG, they have 3 MD and MCCS has 4. The cost charged by FMMG is way more than MCCS, It seems their cost of service is higher than MCCS. No. of Surgery done by MCCS is much more than FMMG, Per MD perform (1312/4) = 328 surgeries in MCCS, while in FMMG per MD perform surgery of (639/3)= 213 surgeries, as per the avg database, MCCS MD are performing more surgeiries as compare to market standard, hence they are using the economies of scale and hence their cost on Surgery service is much lower as compare to FMMG. MCCS is charging $324 per surgery while FMMG charges $581
for MCCS since they perform more no. of surgeries they incurr more no. of Insurance, hence their incurance cost ois higher than FMMG. MCCS has higher schedule & Coordinate surgeries, since they perform more no. of surgeries. No. of no charge office visits are more for MCCS, since one can easilt interpret they have more no. of cutomers to serve, due to their uniquness in lower cost. Both busineses have divided their processes as per the activity and then allocate the cost hence they are getting right cost to perform the activity. But as compare to MCCs FMMG has way highner charge office visit, that is the nain driver in bringing the revenue, while the main driver for bringing the revenue to MCCS is higher no. of surgery performed.
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