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Activity-based costing in a health care organization

4-37. Activity-based costing in a health care organization. In computing the cost of patient stays, Riverside General Hospital assigns physician costs and medication costs directly to each patient. Riverside has examined its support costs for patient stays, resulting in identification of 18 account names, related account expenses, and cost drivers for support costs for the most recent fiscal year:

Account # Account Name Cost Activity Cost Driver

101 Nursing services $2,973,154.00 Nursing hours
102 Nursing administration $1,269,762.00 Nursing hours
103 Pharmacy $469,629.00 Number of patient days
104 Laboratory $312,347.00 Number of tests
105 Medical supplies $482,165.00 Number of patient days
106 Linen and laundry $358,736.00 Pounds of laundry
107 Dietary $813,148.00 Number of meals
108 Employee cafeterial $167,239.00 Number of nurse days
109 Housekeeping $706,308.00 Square feet of space
110 Medical records and library $250,345.00 Number of patients
111 Social services $199,026.00 Number of patients
112 Patient scheduling and administration $60,238.00 Number of patients
113 Billing and collection $112,280.00 Number of patients
114 Plant operations $301,238.00 Square feet of space
115 Plant maintenance $386,622.00 Square feet of space
116 Medical equipment operations $496,275.00 Number of procedures
117 Insurance on hospital property $38,350.00 Value of property
118 Hospital-related depreciation $960,573.00 Value of property
Total operating costs $10,357,435.00

If you use 45.606 patient days as the cost driver activity level for the unit-related activity cost pool, what reimbursement from the insurance company is required to cover at least the unit-related and batch-related costs for a patient who stays in the hospital for 14 days?

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The solution examines activity-based costing in a health care organization.

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