Scenario You work in health administration in a hospital system in Phoenix, Arizona. The board of directors and CEO of the system have a goal to better address the health care needs of the community that can be addressed through physician outpatient services. Collaborative Assignment- Costing an Outpatient Clinic Collaborative Assignment- Costing an Outpatient Clinic Task With your group, you are to prepare a proposal to establish an outpatient clinic treating a medical condition. The clinic will consist of one or two physicians and the appropriate ratio of clinical (nurses) and support staff per physician. Conduct your own research to establish the appropriate numbers of clinical and support staff and cite your sources. Background Information and Assumptions As the clinic is run by a large healthcare organization, many costs will be paid, and the clinic will be charged as provided. Indirect costs will be charged to the clinic at 40% of the total salary expense. Indirect expenses i

The Completed Cost Worksheet For A Diabetes Management Clinic:

Cost Worksheet

Table 1. Staffing and Salaries

Complete Table 1 by adding the staff positions including physician specialty, nurses and support staff, and the number of positions in your clinic. Multiply the number of positions by the average salary for those positions to obtain total salaries.

Staff Position	Number of Positions	Average Salary	Total Salaries
Primary Care Physician	2	$200,000	$400,000
Nurse	2	$100,000	$200,000
Support Staff	2	$50,000	$100,000

Total Salary: $700,000

Table 2. Fringe Benefits Expense and Total Salary Expense

These expenses have been established by the hospital system at 25% of salaries and added to salaries for Total Salary Expense.  

Cost Factors	Dollar Amount
Total Salaries	$700,000
Fringe Benefit Expense 25% of Salaries	$175,000

Total Salary Expense w/ Fringe Benefits: $875,000

Table 3. Overhead (Indirect) Costs and Total Fixed Practice Costs

Begin with total salaries including fringe benefits. Multiply that amount by 40% (0.40) and combine the 2 numbers for total fixed practice costs. These costs do not vary based on the number of patients.

Cost Factors	Dollar Amount
Total Salary Expense w/ Fringe Benefits	$875,000
Overhead Costs 40% of Total Salary Expense	$350,000

Total Overhead and Fixed Costs: $1,225,000

Table 4. Equipment Costs

These items will be used by the clinic for 5 years so the costs will be divided equally over 5 years (depreciation).

Cost Factors	Dollar Amount
Total Equipment Cost	$100,000
Depreciated Equipment Cost (cost for year one)	$20,000

Total Clinic Costs (for year one including salaries, overhead, and equipment costs): $1,205,000

Table 5. RVU and Reimbursement Calculation

The cost of physician care varies in different locations, as do the cost of operating a practice and the rates of physician malpractice claims. In addition, each year Medicare adjusts the conversion rate either up or down.

Category	RVU	GCI	Total RVU
Work RVU	1.5	1.12	1.68
Practice Expense RVU	0.5	1.12	0.56
Malpractice RVU	0.25	1.12	0.28
TOTALS	2.25	3.36	2.52

Totals:

RVU:2.25

GCI:3.36

Total RVU:2.52

Table 6. Variable Costs and Net Reimbursement

To complete Table 5, multiply reimbursement per visit by 10% (0.10) and subtract this number from reimbursement to obtain net reimbursement per patient.

Cost Factors	Dollar Amount
Reimbursement per visit	$100
Variable cost per patient 10%	$10

Net Reimbursement per patient: $90

Table 7. Breakeven Analysis

To calculate the number of patients needed to break even, divide total practice costs by net reimbursement. To calculate the number of pat