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Cambridge Hospital Community

Network :
The Primary Care Unit

Group 9 - FMBA:
Irene Ladies Menajang
Sari Purnama
Sherrilyn Ariana
Sheila Hilman
Stephanie Berliana
Zorya Narun

The Old Cost and Billing System at Cambridge


Hospital
PURPOSE

FEATURES

To provide the correct financial


picture as a whole

The system provide aggregate cost


information by department or
service cost center.

To comply with the Medicare


cost and billing system which
require the cost charged for a
procedure rather than the real
breakdown cost of the
procedure.

The system allocated overhead to


23 support cost centers and several
services cost centers.
The cost that can be associated to a
service cost will be traced directly
to that service cost center.
The cost of support cost center will
be traced to the service cost centers
using Medicare step-down cost
drivers.

Cambridge Hospital
Undertake The ABC Study?
Cambridge Hospital faced the problem that the revenue is capped while the
cost is rising at 10% rate per year.
Therefore, Cambridge hospital needs to increase its profit margin by reducing
its cost.
The ABC study can be used in reducing the cost and price their service
effectively.

Why ABC study then?


Unlike the old step-down billing system which only provide the global cost
and not the actual cost at the service level, the ABC study will be able to identify
the cost of each product and service.
By adopting the ABC study, Cambridge Hospital can identify and decide
where they can reduce the cost and price their service effectively so that they
can increase profit margin without compromising the quality of their service.

Is PCU The Best Place to Conduct The


Study?

What does the study tell us about


the costs of nurse practitioners,
physicians, intern/residents, and
interpreters to conduct services?
It is calculated based on the time taken by each of them to
provide the service to the patients.
However, the times that are recorded to calculate the cost
are not being used efficiently.
Some of the times are used not to examine the patient, but
for example it was used to wait for interpreter, or used by
the practitioners to assist the nurse or the resident.
Therefore, there are unnecessary cost being included in
the calculations.

The MOST and the LEAST profitable type of


service for the PCU

Recalculate the nurse practitioner exam and translation


wait time activity driver rates

Activity Cost
Pool

Activity Driver

Activity Cost

Number of
Drivers Unit

Activity Driver
Rate

Nurse Practitioner
Time

Nurse Practitioner
Exam Minutes
Spent With
Patient

$94,317

108,000

0,87

NP Translation
Wait TimeInterpretive

Interpretive
Wait/Translation
Minutes

$1,817

4,277

0,42

Product Cost Matrix


Activity

Assume Nurse
Practitioner
spend 45 minutes
of wait time for
each interpreted
visit

Nurse Practitioners Vistis


Routine Visit
New Patient
Complex Interpreted

Activ
ity
Drive
r
Rate,
$

Units

Cost

3,49
3,39
1,53
4,13

$203,40

Basic Language Interp.


Service
On-Call Basic Language
Int. Service
On-Call Spec. Language
Int. Service

0,1

0,12

0,27

1,63

1,65
1,68
14,07
7,03

Total Service Cost per


visit

22,50

1,65

$76,28

60,00

45,00

$12,15

$74,25

45,00
$14,07

Cost

Physician Exam
Nurse Practitioner Exam
Nurse Exam
Intern/Resident Exam

Physician Wait Time Interpretive


NP Wait Time -Interpretive
I/R Wait Time - Interpretive
Clericial Support - Per Visit
Clericial New Patient
Support - Per Visit
Billing - Per Visit

Units

$1,65
$92,00

$14,07
$7,03
$1,65

$324,
97

The steps for cost management

1. Conducting ABC study to collect data about the cost at each service and provider level
2. After the data gathered, the we can know which service and providers has the most and least profit
margin and if there is any unnecessary cost.
3. If it is possible, reduce the service with least profitable margin and increase the service with the most
profit margins. If they are substitutable, substitute as many of the least profitable service with the most
profitable service.
4. Eliminate the unnecessary cost or provide different solutions.

Application at the PCU department cambridge hospital


1. The clerical support has a very high cost and the highest activity drivers rate.
One of the way to increase the performance and reduce the cost is by
implementing new technology and automations to make the clerical job more
effcient.
2. The intern has a very high activity drivers rate and poor efficiency as compared
to those of physician and nurse practitionair. If possible, some of the job of the
I/R that an be performed by NP should be done by NP.
3. The waiting time cost for interpreter is very high. Cambridge hospital should
look for more efficient interpreter service.