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Health Care Services Reimbursement In 2013, the Gastroenterology Clinic of Pearland Medical Center had revenue totaling $14,550,400. The Gastroenterology Clinic costs data for a 12-month period from...

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Health Care Services Reimbursement

In 2013, the Gastroenterology Clinic of Pearland Medical Center had revenue totaling $14,550,400. The Gastroenterology Clinic costs data for a 12-month period from January 2013 through December 2013 were reported as follows:

Month, 2013

Number of

Patient Visits

Gastroenterology Clinic Costs, $

January

6,755

945,700

February

6,620

946,660

March

5,834

880,934

April

6,228

927,972

May

7,554

944,250

June

7,620

914,400

July

7,136

949,088

August

7,440

959,760

September

6,453

942,138

October

5,325

825,375

November

5,588

854,964

December

7,020

961,740

  1. Find the fixed and variable portion of costs using the high-low method.
  2. Calculate the contribution margin, the contribution margin ratio, and the per-visit revenue, costs, and operating income.
  3. Discuss the importance of computation of the contribution margin in evaluating the relationship of cost, volume, and profit.
  4. In deciding to continue (or to discontinue) a service, which revenues currently do not cover total cost. Which is more important in the short run, variable cost or fixed cost? In the long run (with more service volume)? Why?

Length: 3–4 pages, excluding title page and references.

I need 4 pages, APA, 4-5 in-text citations, 4-5 references

Answered Same Day Jun 28, 2020

Solution

Aarti J answered on Jun 30 2020
150 Votes
Health care Reimbursement
Course Name
Course Date
Student’s Name
HEALTH CARE REIMBURSEMENT        7
Health Care Service Reimbursement
Find the fixed and variable portion of costs using the high-low method
In the high low method, the cost with the highest number of patient’s visits is subtracted by the lowest number of patients visits to calculate the variable cost as well as fixed costs. The high low method is used for the missed costs to calculate the proportion of variable cost and the fixed cost in the mixed cost.
    
    Number of patients visits
    Clinic costs
    June
    7620
    914400
    Oct
    5325
    825375
    Difference
    2295
    89025
To calculate the variable cost:
(Total cost under high activity – Total cost under low activity) / (High activity – Low activity)
= (914400 – 825375) / (7620 – 5325)
= 89025 / 2295
= $38.79
Fixed cost = Total cost – (Number of visits * variable cost)
= 914400 – (7620*38.79)
= 618813.73
Calculate the contribution margin, the contribution margin ratio, and the per-visit revenue, costs, and operating income.
Contribution margin = Total revenue – variable cost
= 14550400 – (38.79*79573)
= 14550400 – 3086704
= 11463696
Contribution margin ratio = Contribution margin / Total revenue
= 11463696 / 14550400
= 78.79%
Per visit revenue = Total revenue / Total visits
=14550400 / 79573
= 182.86
Per visit cost = Total cost / Total visits
= 11052981 / 79573
= 138.90
Per visit operating income = (Total revenue – Total cost) / Number of visits
= (14550400 – 11052981) / 79573
= 3497419 / 79573
= 43.95
Discuss the importance of computation of the contribution margin in evaluating the relationship of cost, volume, and profit.
Contribution margin can be said as the revenue of the product deducting the variable cost. As per Knight, Contribution margin is the leftover revenue after deducting the variable cost of the product from the revenue of the product. This is the cost that is used to cover the fixed cost of the...
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