Cost Shifting/ Cost-Cutting Problem

After reading Ch. 4, please complete the following cost-shift and cost-cutting problems. Please email me your solutions by Saturday @midnight.

Cost-shifting Problem

Assume your organization has 100 patients analyzed in the following manner:

• 15 Medicare patients, who pay $2,000 per diagnosis
• 25 Medicaid patients, who pay $1,800 per diagnosis
• 20 managed care patients, who pay charges minus a 20% discount
• 10 managed care patients, who pay charges minus a 25% discount
• 10 private pay insurance patients, who pay charges
• 10 charity care patients, who pay nothing
• 10 bad debt patients, who pay nothing

Your organization's average cost per patient is $2,000. Calculate the charge necessary to recover your cost.

(step 1) Calculate the total projected loss by assuming the charge per patient equals the cost per patient.

Financial Class	No.	Cost	Charges	Collections	Profit
Medicare	15	30,000	30,000	30,000	0
Medicaid	25	50,000	50,000	45,000	-5,000
Managed Care #1	20	40,000	40,000	32,000	-8,000
Managed Care #2	10	20,000	20,000	15,000	-5,000
Private	10	20,000	20,000	20,000	0
Charity	10	20,000	20,000	0	-20,000
Bad Debt	10	20,000	20,000	0	-20,000
Total:	100	200,000	200,000	142,000	-58,000

(step 2) Calculate the charge necessary to recover your cost.

Cost-cutting Problem

Using the data from the above problem on cost-shifting, assume those who pay charges will allow a maximum charge of $2,100. Calculate the charge necessary to recover your cost.