Posted: August 1st, 2016
1. The opening paragraph of an accounting textbook says “Managers need accounting information and need to know how to use it” Critically evaluate this statement.
2. Parkview Hospital Case Study
Parkview hospital, a regional hospital, serves a population of 400,00 people. The next closest hospital is 50 miles away. Parkview “s accounting system is adequate for patient billing. The system reports revenues generated per department but does not break down revenues by unit within departments. For example, Parkview knows patient revenue for the entire psychiatric department but does not know revenues in the child and adolescent unit, the chemical dependence unit, or the neuropsychiatric unit.
Parkview receives revenue from three principal sources, the federal govt(Medicare) the state govt(Medicaid), and the private insurance company (blue cross blue shield). Until recently, the private insurance companies continued to pay Parkview increasing cost and assed these on to the firm through higher premiums for their employees health insurance.
Last year Trans Insurance (TI) entered the market and began offering lower cost health insurance to local firms. TI cut benefit offered and told Parkview that it would pay only a fixed dollar amount per patient. A typical firm could cut its health insurance premium by 20% by switching to TI. TI was successful at taking 45% of Blue Cross Blue Shield customers. These firms faced stiff competition and sought to cut their health care costs.
Parkview management estimated that its revenue would fall 6%, or $3.2 million, next year because TI’s lower reimbursement. Struggling with how to cope with lower revenues Parkview began complex process of deciding what programs to cut, how to shift the delivery of services from impatient to outpatient clinics and what programs to open to offset the revenue loss
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