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
- Determine the full cost of the Pediatrics Department and all other clinical departments.
What is the cost per pediatric patient for a typical month?
- 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?