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Healthcare Finance and Accounting

Healthcare Finance and Accounting

The management of Midwestern Community Hospital gives an illustration highlighting financial numbers in order to reach the total cost the hospital incurred over a specific time. The financial model of estimating cost indicates the financial framework of the organization. Moreover, the management has also described how CMS can decrease the production loss in regard to its training costs of coders [Jig19]. To develop a concrete understanding in this regard, an illustrative table has been outlined below, which shows computations of costs.

Table 1.1




Cost per Claim


Number of discharges each month


Productive loss

1 1.41 250 (353-0)     $353
2 1.17 250 (353-59) $294
3 0.94 250 (294-59) $235
4 0.70 250 (235-59)    $176
5 0.46 250 (176-59)    $117
6 0.23 250 (117-59)     $58
Total Cost $1233

Table 1.1 shows the financial numbers of Midwestern Community Hospital. The data presented in the said table explains various expenditures incurred by the hospital. First, there is a need to look into the scenario on the basis of which the calculation can be simplified. The scenario sheds light on the productive loss of the hospital throughout six months. There has been a productive loss showing surgical inpatient claims. The hospital is all set to discharge 250 surgical inpatients on an average basis of each month. Furthermore, the total number of surgical inpatient discharges reaches 1500 [Jig19]. Since the estimation is targeted for the period of six months, therefore, the number has been divided by 6 to obtain an average discharge rate for each month. In short, it is implicit to state that the hospital discharged 250 surgical inpatients, on which an extra amount of 1.41 per minute was incurred due to a production loss in the first month. To decrease the productive loss, the hospital resolved to diminish the loss by the straight-line method. Thus, each month, the hospital would decrease its productive loss by $59 through six months period.

At serial number one, it can be observed that an additional cost per claim (surgical inpatient discharge) of $1.41 the hospital incurred on 250 discharges in the first month, which collectively brought a productive loss of $353. In the next month, the productive loss was diminished by $59, reaching a total loss of $294. Likewise, the third month also brought a decrease in the productive loss by $59 and hence estimated at $235 [Jig19]. Additionally, the straight-line diminishing method kept on decreasing the productive loss by the end of last month. And in the sixth month, the total productive loss was calculated as $1233. If the hospital had not used the straight line diminishing productive loss method, the loss must have reached a total additional cost of $2118 (353 times 6). However, the productive loss was brought down to $1233 from $2118.

Part 2

As per the financial statistics of the Midwestern Community Hospital, the organization suffered a total cost of 303,990. Regarding the information given in the scenario, it is explicated that the total cost includes training cost, lost time away from the job cost, system changes and software upgrades cost, and productivity losses in the wake of training programs.

Table 1.2

Heads of Accounts Incurring Cost
System changes and software upgrades 300,000
Training costs 1504
Cost of substituting staff 1200
Inpatient productivity loss (Surgical inpatient


Outpatient productivity loss (Medical inpatient


Total cost 303,990

 In light of the data incorporated in the above table, it provides the reader with the exact amount of total cost the Midwestern Community Hospital incurred during the said period. It may be explained that the total incurred cost is proportioned with system changes and software upgrades cost, training cost, substituting staff cost, inpatient productivity loss cost, and outpatient productivity loss cost. In other words, the total cost amounted to $303990 by encompassing all heads of accounts. As far as these heads of accounts costs are concerned, they all are already given in the scenario. On the other hand, the percentage of the total cost was reckoned as 0.15% of the revenue of Midwestern Community Hospital [Jig19]. Since the revenue of the hospital was estimated at $200 million, therefore, the amount of total cost of $303990 is 0.15% of the total revenue. Apart from this, the cost of productive inpatient loss has been calculated as 0.03% of the total revenue of the hospital, which shows a relatively low amount as compared to the overall cost the hospital incurred.

By keeping in view the above specific financial analysis of healthcare organizations, it is pertinent to state that the conversion cost of ICD-10 (International Classification of Diseases) to the total revenue of the hospital is comparatively low. Thus, ICD-10 codes must be adopted to increase the performance of healthcare organizations as they are being used by governmental agencies, health insurance organizations, and doctors in rural areas so as to diagnose the disease [Ver18].


Jigsaw. (2019). APPENDIX 26-A ICD-10 Conversion Costs for a Midwestern Community Hospital. Retrieved from Jigsaw:

Very well. (2018). Understanding the Insurance Codes and Medical Billing Codes. Retrieved from Very well Health: work-1738471


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HE420 Healthcare Finance and Accounting
Directions: Be sure to save an electronic copy of your answer before submitting it to Ashworth College 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.

Healthcare Finance and Accounting

Healthcare Finance and Accounting

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 total.

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