Part A: Cost concerns at Dialysis
Dialysis Assistance is a full-service dialysis clinic for patients with kidney problems. Typically these patients cannot be cured, but they can maintain their current quality of life by a dialysis treatment. There are two types of patients, the hemodialysis patients (HD) and the peritoneal dialysis patients (PD). The HD-patients need more intensive monitoring. They visit the hospital three times a week where their blood is cleansed with a specialized dialyzer machine. Alternatively PD-patients are treated at home (once a week) via easier techniques that use standard supplies. This treatment is monitored by staff-visits of ‘Dialysis Assistance Inc.’. The ...view middle of the document...
Case questions part A:
1. Calculate the cost per treatment for HD and PD, using
a) the number of treatments as allocation base
b) the direct costs incurred as allocation bases
2. Calculate the cost per treatment for HD and PD, using the detailed information on overhead. Use full time equivalents as allocation base for nursing services and % estimate of dialyzer machine usage for specialized machining.
3. Comment on your solution? Include a memo on why the cost per treatment differs under the methods in 1) and 2). Relate it to the different costing approaches for product costing discussed in the lecture. Given the information in the case, which approach fits best with the decision management idea?
4. The insurance company pays back HD-treatments at $160 per treatment (fixed fee) and PD treatments via a 25% mark-up rule above the reported unit cost per treatment (This is a revenue for Dialysis Assistance inc.). Under which allocation method is income maximized. Show calculation of income levels using method 1a), 1b) and 2) as allocation method.
5. Suppose you are the minister of health care in the Netherlands. Your goal is to create cost awareness at hospitals. Which payment mechanism (fixed fee or cost plus, see point 4) would you enforce insurance...