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Riverview Community Health Clinic
Author(s):
Bell, Philip W.
Young, David W.
Functional Area(s):
   Management Accounting
Setting(s):
   Healthcare Management
Difficulty Level: Beginner
Pages: 1
Teaching Note: Available. 
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First Page and the Assignment Questions:

The Riverview Community Health Clinic (RCHC) delivered outpatient care only, i.e. all patients came to the center, were treated by a physician or nurse, and left. RCHC must determine the cost of serving individual patients in order to obtain reimbursement from third-party payers.

The clinic was divided into several patient-care departments, one of which was Pediatrics. In this department, physicians’ were salaried at the rate of $25 per hour, and nurses at $10 per hour.

Direct costs of the Pediatrics Department for a typical month included the salaries of physicians and nurses that were applicable to activities other than direct patient care ($3,000), depreciation on equipment ($4,000) and supplies and medicines ($5,000), for a total of $12,000.

In a typical month the payroll of physicians and nurses applicable to direct patient care in the Pediatrics Department was approximately $9,000. Direct costs of all other clinical departments totaled $80,000. In addition, there were two service centers at RCHC: occupancy and central administration. The information on Exhibit 1 relates to the allocation of costs for a typical month.

Assignment

  1. Determine the full cost of the Pediatrics Department and all other clinical departments.
    What is the cost per pediatric patient for a typical month?
  2. What, in your opinion, should be the cost object of RCHC? Ignoring third-party reimbursement constraints, how should RCHC determine the price for this cost object?