Healthcare Finance and Accounting Assignment | Online Assignment

HE420 Healthcare Finance and Accounting
Directions: Be sure to save an electronic copy of your answer before submitting it for grading. Unless otherwise stated, answer in complete sentences, and be sure to use correct English, spelling, and grammar. Sources must be cited in APA format. Refer to the “Format Requirementsʺ page for specific format requirements.

Hospital Costs to Implement

Refer to the Scenario for a Midwest Community Hospital, located in Appendix 26-A

Part 1 of the assignment: Within this scenario the productivity loss for the six-month learning period is calculated to be $1,233. Beginning with month #1 at $353 ($1.41 times 250 equals $353), compute the cost of productivity loss for the remaining five months as explained in the scenario, to total an overall amount of $1,233. Be prepared to show and explain your computations.

Part 2 of the assignment: Later in the scenario CMS states that the hospital’s total cost amounts to $303,990. Study the explanation and summarize the totals of each type of cost discussed. When you are finished your total should amount to $303,990. Be prepared to show and explain how you arrived at

this totalAPPENDIX 26-A ICD-10 Conversion Costs
for a Midwestern Community Hospital
AUTHORS’ NOTE
This CMS example illustrates the computation of hospital training
costs and productivity loss costs and estimates a cost for system
changes and upgrades in order to arrive at a total hospital ICD-10
conversion cost. We have numbered the paragraphs for easy
reference. (And FYI, when the scenario below says “we” it means
CMS, not the authors.)
Introduction
To further illustrate the computation of hospital ICD-10 conversion
costs, CMS staff developed a scenario for a typical community
hospital in the Midwest. The material presented in the appendix was
published in the proposed rule as an example of costs that might be
incurred by a hospital. The data were drawn from the American
Hospital Directory, available at www.AHD.com. While based on an
actual hospital in a midwestern state, the data have been altered to
make calculations simpler.
The Scenario
• 1. The hospital has 100 beds, 4,000 discharges annually,
and gross revenues of $200 million. Using the factors presented
in the impact analysis, we estimated training costs (including the
cost of the actual training as well as lost time away from the job),
productivity loss for the first six months resulting from becoming
familiar with the diagnostic and procedure codes, and the cost of
system changes.
• 2. For our scenario, we assumed that the hospital employs
three full-time coders who will require eight hours of training at
$500 per coder for $1,500 ($500 times 3). While they are in
training, the hospital will have to substitute other staff, either by
hiring temporary coders if possible, or by shifting staff. The
estimated cost at $50 per hour is $1,200 (8 hours times 3 staff
times $50 per hour).
• 3. In estimating the productivity loss, we are only looking at
the initial six months after implementation. Therefore, we divided
the annual number of discharges of 4,000 by 2 to equal 2,000.
We assume that three-quarters of the discharges are surgical,
giving us 1,500 discharges requiring use of PCS codes. Dividing
this by six months yields an average monthly discharge rate of
250.
• 4. We performed a similar calculation for outpatient claims.
Of the 13,000 outpatient claims, the monthly average is 1,083
(we do not distinguish between medical and surgical outpatient
claims).
• 5. Applying the 1.7 extra minutes per discharge, we
estimated it would take an extra 425 minutes (1.7 times 250) to
code the discharges in the first month. At $50 per hour, the cost
per minute is $0.83 ($50 divided by 60 minutes) and the cost per
claim is $1.41 ($0.83 times 1.7). For the first month, the
productivity loss for inpatient coding is $353 ($1.41 times 250).
Assuming for simplicity’s sake that the resumption of productivity
over the six-month period would increase in a straight line, we
divide the $353 by six to come up with $59. We reduce the
productivity loss by this amount each month through the sixth
month. The total loss for the six-month period is $1,233.
• 6. We apply the same method to determine the outpatient
productivity loss. Based on our assumption that outpatient claims
will require one-hundredth of the time for hospital inpatient
claims, when applying the 0.17 extra minutes per claim, we
estimate it would take an extra 18.41 minutes (0.017 times
1,083) to code the discharges in the first month. At $50 per hour,
the cost per minute is $0.83 ($50 divided by 60 minutes) and the
cost per claim is $0.14 ($0.83 times 0.017). For the first month,
the productivity loss for outpatient coding is $15.28 ($0.014 times
1,083). Assuming for simplicity sake that the resumption of
productivity over the six-month period would increase in a
straight line, we divide the $15.28 by six, coming up with $2.55.
We reduce the productivity loss by this amount each month
through the sixth month. Thus the total loss for the first six
months will equal $53.
• 7. In estimating the cost of system changes and software
upgrades, we deliberately chose a value that we think overstates
the cost. We assumed that the hospital will have to spend
$300,000 on its data infrastructure to accommodate the new
codes. Summing the training costs, productivity losses, and
system upgrades, we estimate the total cost to the hospital will
equal approximately $303,990. Finally, in order to determine the
percentage of the hospital’s revenue that would be diverted to
funding the conversion to the ICD-10, we compared the
estimated cost associated with the conversion to ICD-10 to the
total hospital revenue of $200 million. The costs amount to
0.15% of the hospital’s annual revenues.
• 8. We note that although the impact in our scenario of
0.15% is significantly larger than the estimated impact of 0.03%
for inpatient facilities (set out in the rule), it is still significantly
below the threshold the Department considers a significant
economic impact. We are of the opinion that, for most providers
and suppliers, payers, and computer firms involved in facilitating
the transition, the costs will be relatively small.
Source: 73 Federal Register 49830 (August 22, 2008).