Everymans Hospital relies heavily on cost data to keep its pricing structures in line with those of its competitors. The hospital provides a wide range of services, includ- ing intensive care, intermediate care, and a neonatal nursery. The hospital’s controller is concerned about the profits generated by the 30-bed intensive care unit (ICU)
Unit Costs in a service Business
p9. Everymans Hospital relies heavily on cost data to keep its pricing structures in line with those of its competitors. The hospital provides a wide range of services, includ- ing intensive care, intermediate care, and a neonatal nursery. The hospital’s controller is concerned about the profits generated by the 30-bed intensive care unit (ICU), so
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Chapter Assignments 747
she is reviewing current billing procedures for that unit. The focus of her analysis is the hospital’s billing per ICU patient day. This billing equals the per diem cost of intensive care plus a 40 percent markup to cover other operating costs and generate a profit. ICU patient costs include the following:
Equipment usage $180 per day (average)
Doctors’ care 2 hours per day @ $360 per hour (actual) Special nursing care 4 hours per day @ $85 per hour (actual) Regular nursing care 24 hours per day @ $28 per hour (average) Medications $240 per day (average)
Medical supplies $150 per day (average)
Room rental $350 per day (average)
Food and services $140 per day (average)
The hospital director has asked the controller to compare the current billing proce- dure with one that uses industry averages to determine the billing per patient day.
ReQUIReD
1. Compute the cost per patient per day.
2. Compute the billing per patient day using the hospital’s existing markup rate. (Round to the nearest dollar.)
3. Compute the billing per patient day using the following industry averages for markup rates:
| Equipment | 30% | Medications | 50% |
| Doctors’ care | 50 | Medical supplies | 50 |
| Special nursing care | 40 | Room rental | 30 |
| Regular nursing care | 50 | Food and services | 25 |
LO 7
LO 2
4. aCCounting ConneCtion ▶ Based on your findings in requirements 2 and 3, which billing procedure would you recommend? Why?
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