Case - TDABC, outpatient office Consider three types of office visits to a pediatric plastic surgery office, representin
Posted: Wed Jul 06, 2022 10:15 am
Case - TDABC, outpatient office
Consider three types of office visits to a pediatric plasticsurgery office, representing a range of potential patient careneeds: primary care, simple surgery, and complex surgery.
1. Deformational plagiocephaly is a common disordercharacterized by a flattening of the head or face, typically causedby placing an infant in the same position (e.g., on the infant'sback) for long periods of time.
2. Benign neoplasms of the skin are harmless cutaneous growthsthat include common skin lesions, such as skin cysts, benign skintumors, and congenital nevi (moles).
3. Craniosynostosis is a deformity that arises when one or moresutures (the fibrous connections that separate the bones of aninfant's skull) fuse earlier than normal. This is a seriouscondition that requires surgery to avoid developmental delays andcognitive impairment.
The initial office visit for all three conditions is coded bythe Centers for Medicare and Medicaid Services system as a "level-3visit" and carries an identical charge of $350. The surgeryoffice's practice uses a ratio-of-costs-to-charges (RCC) system toassign costs to individual visits and procedures. The RCC systemworks by dividing total annual departmental costs by the sum of allthe charges billed for patient visits and procedures during theyear. The cost for any procedure is calculated by multiplying theRCC ratio by the charge for that procedure. In 2019, the totalcharges for all plastic surgeon patient encounters were$12,449,500. Because of discounts negotiated with its payers,primarily the patients' private health plans, actual cash receiptsto the practice were $7,967,680. Total clinical and administrativecosts for the department were $7,469,700.
A TDABC project team estimated the time required for the fourtypes of personnel involved in office visits for the threeconditions: surgeon, ambulatory service representative (ASR),registered nurse (RN), and a clinical assistant (CA). For thecosting component, the team estimated each personnel's capacitycost rate by dividing the individual's annual compensation andsupport costs by the total number of minutes per year that theperson was available to work with patients.
The team then interviewed clinical and administrative personnelto estimate their availability (practical capacity) for performingpatient-related work. The team obtained the following data:
1. Surgeons had 4 weeks of vacation, plus 10 holiday days andanother 10 days for professional conferences and training.
2. Surgeons generally worked 5 days per week and 10 hours perday. About 1.2 hours (72 minutes) were taken up with nonclinicalmeetings and breaks.
3. Nonphysician personnel had 2 weeks of vacation, 10 holidaydays, 5 days for sick and personal leave, and 5 training days.
4. Nonphysician personnel worked 5 days per week and 8 hours perday, with an average of 1.5 hours per day used for breaks andtraining.
The team then collected data on office expenses and thecompensation of the department's clinical and administrativepersonnel. The team was now ready to calculate accurate costs andprofit margins for the three types of office visits.
Required
a) Calculate the costs and profits of the three different officevisits using two methods:
1. RCC method
2. TDABC method Why do the two methods produce such differentcost estimates?
b) The office currently has the following full-time equivalents(FTEs): 1.5 surgeons, 2 ASRs, 2RNs, and 1 CA. Suppose that in thefollowing year, the office will have 5,400 plagiocephaly visits,2,000 neoplasm visits, and 800 craniosynostosis visits.
1. How many FTEs of each staff type will the practice need tohandle this volume and mix of patient visits?
2. Using the capacity cost rates you developed in part 2 ofrequirement (a), what is the total TDABC of this new staffinglevel?
3. What is the quantity of the unused capacity with yourstaffing recommendation?
c) Suppose the office implements a process change by using an RNto perform some of the surgeon's work. Specifically, for aplagiocephaly exam, the surgeon's time decreases from 18 to 10minutes, while the RN's time increases from 23 to 35 minutes. Inaddition, for a craniosynostosis exam, the surgeon's time decreasesfrom 40 to 22 minutes, while the RN's time increases from 23 to 40minutes. Assuming only the numbers of surgeons and RNs are adjustedin response to the process changes, how will this change thestaffing levels and total cost for the outpatient office?
Consider three types of office visits to a pediatric plasticsurgery office, representing a range of potential patient careneeds: primary care, simple surgery, and complex surgery.
1. Deformational plagiocephaly is a common disordercharacterized by a flattening of the head or face, typically causedby placing an infant in the same position (e.g., on the infant'sback) for long periods of time.
2. Benign neoplasms of the skin are harmless cutaneous growthsthat include common skin lesions, such as skin cysts, benign skintumors, and congenital nevi (moles).
3. Craniosynostosis is a deformity that arises when one or moresutures (the fibrous connections that separate the bones of aninfant's skull) fuse earlier than normal. This is a seriouscondition that requires surgery to avoid developmental delays andcognitive impairment.
The initial office visit for all three conditions is coded bythe Centers for Medicare and Medicaid Services system as a "level-3visit" and carries an identical charge of $350. The surgeryoffice's practice uses a ratio-of-costs-to-charges (RCC) system toassign costs to individual visits and procedures. The RCC systemworks by dividing total annual departmental costs by the sum of allthe charges billed for patient visits and procedures during theyear. The cost for any procedure is calculated by multiplying theRCC ratio by the charge for that procedure. In 2019, the totalcharges for all plastic surgeon patient encounters were$12,449,500. Because of discounts negotiated with its payers,primarily the patients' private health plans, actual cash receiptsto the practice were $7,967,680. Total clinical and administrativecosts for the department were $7,469,700.
A TDABC project team estimated the time required for the fourtypes of personnel involved in office visits for the threeconditions: surgeon, ambulatory service representative (ASR),registered nurse (RN), and a clinical assistant (CA). For thecosting component, the team estimated each personnel's capacitycost rate by dividing the individual's annual compensation andsupport costs by the total number of minutes per year that theperson was available to work with patients.
The team then interviewed clinical and administrative personnelto estimate their availability (practical capacity) for performingpatient-related work. The team obtained the following data:
1. Surgeons had 4 weeks of vacation, plus 10 holiday days andanother 10 days for professional conferences and training.
2. Surgeons generally worked 5 days per week and 10 hours perday. About 1.2 hours (72 minutes) were taken up with nonclinicalmeetings and breaks.
3. Nonphysician personnel had 2 weeks of vacation, 10 holidaydays, 5 days for sick and personal leave, and 5 training days.
4. Nonphysician personnel worked 5 days per week and 8 hours perday, with an average of 1.5 hours per day used for breaks andtraining.
The team then collected data on office expenses and thecompensation of the department's clinical and administrativepersonnel. The team was now ready to calculate accurate costs andprofit margins for the three types of office visits.
Required
a) Calculate the costs and profits of the three different officevisits using two methods:
1. RCC method
2. TDABC method Why do the two methods produce such differentcost estimates?
b) The office currently has the following full-time equivalents(FTEs): 1.5 surgeons, 2 ASRs, 2RNs, and 1 CA. Suppose that in thefollowing year, the office will have 5,400 plagiocephaly visits,2,000 neoplasm visits, and 800 craniosynostosis visits.
1. How many FTEs of each staff type will the practice need tohandle this volume and mix of patient visits?
2. Using the capacity cost rates you developed in part 2 ofrequirement (a), what is the total TDABC of this new staffinglevel?
3. What is the quantity of the unused capacity with yourstaffing recommendation?
c) Suppose the office implements a process change by using an RNto perform some of the surgeon's work. Specifically, for aplagiocephaly exam, the surgeon's time decreases from 18 to 10minutes, while the RN's time increases from 23 to 35 minutes. Inaddition, for a craniosynostosis exam, the surgeon's time decreasesfrom 40 to 22 minutes, while the RN's time increases from 23 to 40minutes. Assuming only the numbers of surgeons and RNs are adjustedin response to the process changes, how will this change thestaffing levels and total cost for the outpatient office?