BUMCH_Scenario_Analysis Bundled Payments Module: Differential Cost Accounting Parts A and B - Instructions Step 1. Please enter your name below. Step 2. Read the Boston University Medical Center...

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Answer To: BUMCH_Scenario_Analysis Bundled Payments Module: Differential Cost Accounting Parts A and B -...

Khushboo answered on Jul 10 2022
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BUMCH_Scenario_Analysis
        Bundled Payments
        Module: Differential Cost Accounting
        Parts A and B - Instructions
        Step 1. Please enter your name below.
        Step 2. Read the Boston University Medical Center Hospital case
        Step 3. You have been asked to review the bundled rate agreement between BUMCH and Health Source and make a recommendation as to what BUMCH should have done in their negotiations. Your task is to develop a spreadsheet analysis identifying the bundled rate and profit or loss under the current Health Source contract and three additional rates that you feel BUMCH should have used at the time of its initial negotiations with Health Source. The three rates are the first offer, eminently fair rate, and lowest acceptable rate (walk away rate). Each rate you propose is to be a single number inclusive of all DRGs for the physicians and the hospital (see Z in Table D below), in other words the weighted average bundled rate, for only the population covered under this contract. (You may want to reread the previous sentence!).
        Step 4. So that you don’t have to build your own model from scratch, use the model given below (from Mom & Pop) as a starting point, and make modifications as necessary, such as accommodating the 7 DRGs and changing title headings as appropriate (i.e. change “service” to “DRG”).
        Step 5. While all of the information for the givens is available in the case, assumptions must be made about the percentage of variable for both direct and indirect costs as well as any physician fee discounts in Table B. Use information from the case to find the number of patients covered under this contract. You may want to do a little outside research, to justify these assumptions. Cite your sources and explain your justifications for your assumptions.
        Step 6. When you have completed all of the parts below, submit your assignment on Canvas.
        Step 7. Proceed to the questions for Parts A and B below.
        Where we go from here:
        Case Presenters (BUMCH Managed Care analyst) and Respondents (BUMCH Managed Care VP): After preparing your analysis of bundled payment offers, you will record a presentation with your recommendation of how to approach the bundled payment negotiations with Health Source.
Presenters: You are presenting your analysis of bundled payment arrangement and advising your supervisor about how to approach the negotiation. Record a 2-4 minute discussion of your presentation and analysis.
Respondents: You are the asking questions or seeking clarification on points discussed in the analyst's presentation. You can respond with some of your own analysis and approach, and you also should pose 2-3 questions in response to the presenter's analysis.
        Givens
        Table A. Service Mix and Financial Data
                A     B     C     D     E     F     G
                Service    Full     Direct     Indirect     Total     Physician    Department
        Service        Mix1    Charge ($)    Costs ($)     Costs ($) 2     Costs ($)     Fees ($)     Margin
                                        [B - E - F]
        104        4%    37,260    21,545    17,354    38,899    10,050    -11,689
        105        7%    24,100    14,807    9,465    24,272    10,050    -10,222
        106        10%    27,442    15,133    13,420    28,553    9,700    -10,811
        107        17%    17,707    9,682    8,025    17,707    8,250    -8,250
        112        35%    10,463    5,194    4,990    10,184    3,500    -3,221
        124        17%    4,500    2,753    2,753    5,506    2,300    -3,306
        125        11%    4,500    1,524    2,105    3,629    2,000    -1,129
        1. Service Mix is an assumption, presented with givens for space purposes for this example.
        2. Assume indirect costs are allocated. Consider them as fixed overhead this service is being asked to cover.
        Table B. Assumptions
        H    Collections %            100%
ealcorn: Professor:
Do not change the Collections %    Justification and Source
        I    Variable Cost % Direct            60%
ealcorn: Professor:
The values in these yellow cells will not turn grreen, since they are your individual assumptions    Comparable health care provider's cost structure
        J    Variable Cost % Indirect            40%    Comparable health care provider's cost structure
        K    Physician Fee Discount            0%
        L    Assumed # Patients:            50    Hint: Look closely at the case
        Part C, Current Contract - Instructions
        Step 1. In Table C, you will be calculating the financial results given the assumptions in the Current Contract from Tables A and B
        Step 2. Enter values for each DRG and formulas in fields M through T.
        Step 3. Proceed to the Parts D and E below.
        Calculations
        Table C. Weighted Average Bundled Margin By Service Considering Incremental and Consultation Fees for Contract 1
                M    N    O    P    Q    R    S    T
                        Weighted    Weighted    Weighted    Weighted    Weighted    Weighted
                Service    Weighted    Incremental     Incremental    Total Incre-    Clinic    Contract    Bundled
                Mix    Collections    Direct Costs     Indirect Costs    mental Costs    Contr....
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