ACCT 313.001 Fall 2013_Aurora Medical Center(AMC)

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Description

ACCT 313.001 Fall 2013

Course Project (Part 3)
3%
of course grade

Please
complete the following problem as required. This assignment is due Wednesday,
December 11 at the beginning of class.

Aurora
Medical Center
(AMC), located outside Phoenix, has an inpatient hospital and
outpatient clinic. Because itis located ina retirementarea,
a substantial fraction of its patients are elderly, and hence their medical insurance
is provided through the Medicare program of the federal government. Medicare
outpatient clinic care is reimbursed by the federal government at cost. Each
clinic with Medicare outpatients submits a reimbursement form to Medicare
reporting the costs of treating these patients. Medicare inpatient
reimbursement is based on predetermined rates depending on the diag­nosis. For
example, all Medicare-paid hip replacements in Phoenix are reimbursed at
$14,800 per patient, regardless of the hospital’s cost.

AMC
has two administrative departments that provide services to both the hospital
and the clinic: accounting and information management (IM). The accompanying
tables summarize the service levels provided by these two departments:

Administrative
Departments

Accounting

IM

Total
cost Allocation base

$3,800,000 $4,800,000

Number of transactions Disk space (gigabytes)

Service
Levels

Transactions

Gigabytes

Accounting

IM

Hospital

Clinic

40,000

1,100,000

600,000

8

7

9

Total

1,740,000

24

Accounting
department costs are distributed to users based on the number of transactions
posted to the general ledger generated by that user. IM costs are distributed
to users based on the gigabytes of storage dedicated to the user. Medicare
guidelines allow these allocation bases to be used/Medicare also provides some
discretion to hospitals in the methods used to allocate costs, as long as they are
reasonable and generally accepted.

Required:

a. Design a report for
assigning the accounting and IM costs to the hospital and clinic. How much of
the costs of accounting and IM should be allocated to inpatients and
outpatients?

b. Justify
your design in (a).Explain why AMC should follow your suggestions.

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