Susquehanna Medical Center Case Study

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Susquehanna Medical Center operates a general hospital in northeastern Pennsylvania. The medical center also rents space and beds to separately owned entities rendering specialized services, such as Pediatrics and Psychiatric Care. Susquehanna charges each separate entity for common services, such as patients’ meals and laundry, and for administrative services, such as billings and collections. Space and bed rentals are fixed charges for the year, based on bed capacity rented to each entity. Susquehanna Medical Center charged the following costs to Pediatrics for the year ended June 30, 20x5: During the year ended June 30, 20x5, Pediatrics charged each patient an average of $360 per day, had a capacity of 60 beds, and had revenue of $7.2…show more content…
Assume that patient demand, revenue per patient day, cost per patient day, cost per bed, and salary rates for the year ending June 30, 20x6, remain the same as for the year ended June 30, 20x5. Prepare a schedule of Pediatrics’ increase in revenue and increase in costs for the year ending June 30, 20x6. Determine the net increase or decrease in Pediatrics’ earnings from the additional 20 beds if Pediatrics rents this extra capacity from Susquehanna Medical Center.
 Assumptions: Variable cost per patient day: $120 Fixed cost per bed capacity(annual): $58,000 Demanded Patient days: 21,800 (20,000 +20 beds per day*90 days) Salaries: $576,000 Revenue per patient day: $360,000 Fixed costs, 20x6: Janitorial: $ 112,000 Repairs and Maintenance: $ 48,000 General and Administrative: $2,080,000 Rent: $2,400,000 Total: $4,640,000 Variable costs: Dietary: $ 784,800 Laundry: $

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