Assignment Exercise 5—I: Grouping Expenses by Cost Center

ASSIGNMENT 1 /Cost Centers

Complete the Assignment Exercise 5-1   Answer the questions in the text, and  Your paper should be one to two double-spaced pages in length.

QUESTIONS

1.Decide how many cost centers should be used for the above expenses at the Center.

2.Set up a worksheet with individual columns across the top for the cost centers you have chosen.

3.For each of the expenses listed above, indicate to which of your cost centers it should be assigned. (Baker 360-361)

References

Assignment Exercise 5—I: Grouping Expenses by Cost Center

The Metropolis Health System’s Rehabilitation and Wellness Center offers outpatient therapy and return-to-work services plus cardiac and pulmonary rehabilitation to get people back to a normal way of living. The Rehabilitation and Wellness Center expenses include the following:

•          Nursing Salaries

•          Physical Therapist Salaries

•          Occupational Therapist Salaries

•          Cardiac Rehab Salaries

•          Pulmonary Rehab Salaries

•          Patient Education Coordinator Salary

•          Nursing Supplies

•          Physical Therapist Supplies

•          Occupational Therapist Supplies

•          Cardiac Rehab Supplies

•          Pulmonary Rehab Supplies

•          Training Supplies

•          Clerical Office Supplies

•          Employee Education

Table 5–1        Example of Radiology Department Costs Classified by Procedure Code (Baker 46)

Programs

A program can be defined as a project that has its own objectives and its own program indicators. Within management’s functions of planning, controlling, and decision making, the program must stand on its own. A program is often funded separately and for finite periods of time. For example, funds from a grant might fund a specific project for—as an example—three years. Often programs—especially those funded separately from the revenue stream of the main organization—have to arrange their expenses in a special format that is specified by the entity that provides the grant funds.

Program expenses should be grouped in such a way that they are distinguishable. Also, if such programs have been specially funded, the reporting of their expenses should not be commingled. An example of a program cost center is given in Exhibit 5-6. This cost center example has received special funds and must be reported separately, as shown.

COST REPORTS AS INFLUENCERS OF EXPENSE FORMATS

Cost reports are required by both the Medicare program (Title XVIII) and the Medicaid program (Title XIX). Every provider participating in the program is required to file an annual cost report. An array of providers who must file cost reports is illustrated in Table 5-2. The arrangement of expense headings on the cost reports has been consistent since the advent of such reports in 1966. Therefore, this standard and traditional arrangement has strongly influenced the arrangement of expenses in many healthcare information systems. (Baker 46-47)