Healthcare Finance Activity Data Service A Service B 7000 15

Healthcare Finance Activity Data Service A Service B 7,000 15,000 Activity Annual Costs Cost Driver Check-in Assessment Diagnosis Treatment Check-out Billing 100,000 Visit volume 250,000 Minutes per service 600,000 Minutes per service 15 20 10 Minutes per service Visit volume Number of bills 1,200,000 7,000 15,000 125,000 250,000 Toral $2525,000 a. Using ABC techniques, determine the allocation rate for each activity b. Determine the costs per visit for each type of service. c. Verify that the total annual costs aggregated from individual visit costs equal the total annual costs of the practice given in the table above.

Solution

Req a. STATEMENT SHOWING ACTIVITY RATE OF ACTIVITY POOL Activity Total Expected Activity ACTIVITY COST POOL Measures Overheads Activity Rate Check in Visit 100000 22000 4.55 Assessment Minutes 250000 225000 1.11 Diagnosis Minutes 600000 290000 2.07 Treatment Minutes 1,200,000 110,000 10.91 Check out Visit 125,000 22,000 5.68 Billing Bills 250,000 4 62500.00 Req b: Cost per visit Service A Service B Activity Rate Activity OH Activity OH Check in 4.55 7000 31850 15000 68250 Assessment 1.11 105000 116550 120000 133200 Diagnosis 2.07 140000 289800 150000 310500 Treatment 10.91 35000 381850 75000 818250 Check out 5.68 7000 39760 15000 85200 Billing 62500 3 187500 1 62500 Total OH 1047310 1477900 Divide: Number of visit 7000 15000 Cost per Visit 149.62 98.53 Req c: Total OH as per table 2525000 Less: OH allocated Service A 1047310 Service B 1477900 2525210 Difference due to rounding off. 210