Ruger Clinic: graduate-level writing quality and assessment

Ruger Clinic

The Housekeeping Service department of Ruger Clinic is a multispecialty practice in Toledo, Ohio. Direct costs in 2007 aggregated to $100,000. These costs must be allocated to Ruger's three revenue-producing patient services departments using the direct method. Two cost drivers are under consideration: patient services revenue and hours of housekeeping services used. The patient services departments generated $5 million in total revenues in 2007, and to support these clinical activities, they used 5,000 hours of housekeeping services.

Ruger's Clinic over a 12-month operating cycle accumulated direct and variable costs. The value of the cost pool us $100,000 and is a function of two cost drivers, patient services revenue and hours of housekeeping services. Patient services and housekeeping equally contributed to the cost pool at a monthly cost of $4,167.67.

The cost allocation rate is ratio of revenue or cost into the number of labour hours. When patient services revenue is the driver, the cost allocation rate is 2% or .02. When the hours of housekeeping are the cost driver, the cost allocation rate is 5% or .05.

The cost-volume-profit (CVP) analysis examines the aggregate cost needed to produce a given level of volume, which produces a given income, or return on expenses. The cost-volume-profit in this case is .02. The cost-volume profit is important to health service manager because it tells them how well they are turning expenses into revenues. For every penny of expenses incurred, Ruger Clinic produces .02 cents of revenue. Health managers are also able to compare this information from a base year and determine the level of improvement or inefficiency in certain years and attempt to isolate the causes to enhance the potential indicator in the future.

Capitation rates determine how much or to what percentage the insurant will pay for their care from the whole. There are different methods as either a percentage, a deductable, or a fixed cost is paid as a capitation payment. The fee-for-service approach is an optimal choice for health care consumers when the amount of service needed or the frequency of use is not expected to be excessive.

The fee-for-service enables an insurant to pay for health services on a per case basis, however, a larger percentage of the yearly cost of health care may be shifted onto the consumer in the form of higher fees. Fee-for-service is not the best choice when the expected cost of health care services are anticipated to be low

. Additionally, this form of capitation is optimal for conditions that are difficult to diagnose or considered rare and exotic, there can be considerable savings by paying only a fee-for-service when the cost of care is extremely high and generally cost prohibitive.

The cost approach identifies the DRG or the diagnostic related group of the diagnosis, which corresponds to a code, which is then submitted to Medicare/Medicaid for reimbursement. When insurance companies are involved, the approach change to that of total billable cost to what the insurance is willing to pay. The cost approach seeks to find common ground between the cost of care and the amount of insurance reimbursement.

The demographic approach to capitation involves the employer forecast of health benefits populations based on the socio-economic status and racial makeup of the population in question. A company will have an employees that are insured through the company. These employees are part of what is called a risk-group, which collectively represents a certain level of risk against the given income stream of insurance income.