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    Activity-based costing in a health care organization

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    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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    Solution Summary

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