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HSM 340 Quiz Week 3 DeVry
(TCO 3) The breakeven point occurs where:
Total fixed costs and total revenue intersect
Total costs and total revenue intersect
Total profit margin and total costs intersect
Total variable costs and total revenue intersect
Total revenue outpaces total avoidable fixed costs
(TCO 3) Increasing marginal volume for cost payers makes economic sense if:
Cost payers account for 100 percent of your present volume and fixed costs are high.
Bad debts are low.
Fixed costs are high and present cost payer volume is small.
All of the above.
(TCO 3) You increased rates by 10 percent across all services and profits decreased by 5 percent. Cost per unit remained constant. What could account for this change?
Positive price elasticity
Negative price elasticity
High proportion of fixed price payers
High proportion of cost payers
TCO 3) Estimate the total variable cost (i.e., including both routine and ancillary) per MSDRG 505 using the departmental cost/charge ratios and variable cost percentages. (Your answer might be slightly different due to rounding. Pick the closest.)
Your hospital has been approached by a major HMO to perform all their MSDRG 505 cases (foot surgeries). They have offered a flat payment of $8,000 per case. You have reviewed your charges for MSDRG 505 during the last year and found the following profile:
Average Charge: $11,300
Average LOS: 4.5 Days
| Cost/Charge | Variable Cost % | ||
| Routine Charge | $3,200 | 0.75 | 65 |
| Operating Room | 1,850 | 0.70 | 80 |
| Anesthesiology | 210 | 0.70 | 75 |
| Lab | 575 | 0.65 | 40 |
| Radiology | 275 | 0.65 | 50 |
| Medical Supplies | 3,220 | 0.60 | 85 |
| Pharmacy | 955 | 0.55 | 85 |
| Other Ancillary | 1,015 | 0.75 | 55 |
| Total Ancillary | $8,100 | 0.70 | 75 |
$5,213
$3,892
$7,613
$5,452
$8,070
TCO 3) David Jones, the new administrator for a surgical clinic, was trying to determine how to allocate his indirect expenses. His staff was complaining that the current method of taking a percentage of revenues was unfair. He decided to try to allocate utilities based on square footage of each department, administration based on direct costs, and laboratory based on tests. Use the information in the chart below to answer the question.
| Square Footage | Direct Expenses | Lab Tests | |
| Utilities | 200,000 | ||
| Administration | 2,000 | 500,000 | |
| Laboratory | 2,000 | 625,000 | |
| Day-op Suite | 3,000 | 1,400,000 | 4,000 |
| Cystoscopy | 1,500 | 350,000 | 500 |
| Endoscopy | 1,500 | 300,000 | 500 |
| Total | 10,000 | 3,375,000 | 5,000 |
Based on the scenario above, what are the Day Op Suite’s total expenses?
What are the Day Op Suite’s total expenses?
What are the Cystoscopy Department’s total expenses?
What are the Endoscopy Department’s total expenses?
(TCO 3) Your hospital has been approached by a major HMO to perform all their MS-DRG 470 cases (major joint procedures). They have offered a flat price of $10,000 per case. You have reviewed your charges for MS-DRG 470 during the last year and found the following profile:
| Average Charge | $15,000 | ||
| Average LOS | 5 Days | ||
| Routine Charge | $3,600 | Cost/Charge 0.80 | Variable Cost % 60 |
| Operating Room | 2,657 | 0.80 | 80 |
| Anesthesiology | 293 | 0.80 | 80 |
| Lab | 1,035 | 0.70 | 30 |
| Radiology | 345 | 0.75 | 50 |
| Medical Supplies | 4,524 | 0.50 | 90 |
| Pharmacy | 1,230 | 0.50 | 90 |
| Other Ancillary | 1,316 | 0.80 | 60 |
| Total Ancillary | $11,400 | 0.75 | 50 |
In the above data set, assume that the hospital’s cost to charge ratio is 0.80 for routine services and 0.75 for all other ancillary services. Using this information, what would the average cost of MS-DRG 470 be?
(TCO 3) Describe and explain the difference between fixed costs and variable costs?
Fixed costs are costs, which do not vary in total but vary…
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HSM 340 Quiz Week 3 DeVry
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