Running Head: FROM THE FRONT LINES1 From the Front Lines Lisa M. Buentello HCA 311: Health Care Financing & Information Systems Professor Kathleen Martocci May 29, 2015 - 1 - [no notes on this page] Future Direction of Health Care 2 From the Front Lines The break even analysis figures can be used to establish the impacts of various reimbursements such as Medicare, Medicaid, and Private and self-pay contributions. Notably, from the break even analysis of the “From the Front lines” facility, increase in Medicare and Medicaid benefits have an effect of increasing sales volume. Eventually, the value of the gross margin increases leading to an upsurge of the value of the contribution per unit. This leads to a reduction in the number of the break-even procedures. Private or self-pays have an effect of increasing the volume of sales in addition to the increment made by Medicaid and Medicare benefits. As a result, the break even procedures will become even smaller causing a corresponding increase in profit margins. Break even analysis is essentially important in developing my upcoming capital investment proposal. It will be applicable in clarifying the extent of the viability of my planned objectives. Specifically, this tool will be of great significance in evaluating expansion opportunities, new providers, new services or new capital purchases (Cafferky, 2012). Break even analysis is basically used in establishing whether the planned activity is viable enough to cover the expected costs that are principally divided into variable and fixed expenses. Also, I will utilize break analysis values to ascertain whether the capital proposal will be financially viable. Specifically, it will be applicable in determining the activity level that will - 2 - [no notes on this page] Future Direction of Health Care 3 cover the projected fixed and variable costs of the venture satisfactorily. It is at this point that a break even analysis will be used to evaluate the critical components of my budget plan. Typically, break even analysis and the budget plan are used interchangeably while making financial analysis that concerns various capital investment plan proposals (Cafferky, 2012). Break Even Analysis Break Even Analysis Sales payment per procedure $885 numbe of procedures in year 1 500 numbe of procedures in year 2-5 850 Total Sales amount 1, 194, 750 Variable costs Cost of each Procedure $175 Total number of procedures 1350 Total Variable costs $236, 250 Contribution Per Unit 710 Gross Margin=sales-variable costs $958, 500 Fixed Costs Purchasing costs $ 11, 000 Rennovation Costs $9,000 $20,000 Employees Salaries $ 336, 000 Total fixed costs .

1. Running Head: FROM THE FRONT LINES1
From the Front Lines
Lisa M. Buentello
HCA 311: Health Care Financing & Information Systems
Professor Kathleen Martocci
May 29, 2015
- 1 -
[no notes on this page]
Future Direction of Health Care 2
From the Front Lines
The break even analysis figures can be used to establish the
impacts of various
reimbursements such as Medicare, Medicaid, and Private and
self-pay contributions. Notably,
from the break even analysis of the “From the Front lines”
facility, increase in Medicare and

2. Medicaid benefits have an effect of increasing sales volume.
Eventually, the value of the gross
margin increases leading to an upsurge of the value of the
contribution per unit. This leads to a
reduction in the number of the break-even procedures. Private
or self-pays have an effect of
increasing the volume of sales in addition to the increment
made by Medicaid and Medicare
benefits. As a result, the break even procedures will become
even smaller causing a
corresponding increase in profit margins.
Break even analysis is essentially important in developing my
upcoming capital
investment proposal. It will be applicable in clarifying the
extent of the viability of my planned
objectives. Specifically, this tool will be of great significance in
evaluating expansion
opportunities, new providers, new services or new capital
purchases (Cafferky, 2012). Break
even analysis is basically used in establishing whether the
planned activity is viable enough to
cover the expected costs that are principally divided into
variable and fixed expenses.
Also, I will utilize break analysis values to ascertain whether

3. the capital proposal will be
financially viable. Specifically, it will be applicable in
determining the activity level that will
- 2 -
[no notes on this page]
Future Direction of Health Care 3
cover the projected fixed and variable costs of the venture
satisfactorily. It is at this point that a
break even analysis will be used to evaluate the critical
components of my budget plan.
Typically, break even analysis and the budget plan are used
interchangeably while
making financial analysis that concerns various capital
investment plan proposals (Cafferky,
2012).
Break Even Analysis
Break Even
Analysis
Sales payment per procedure $885
numbe of procedures in year 1 500
numbe of procedures in year 2-5 850
Total Sales amount

4. 1, 194,
750
Variable costs Cost of each Procedure $175
Total number of procedures 1350
Total Variable costs $236, 250
Contribution Per Unit 710
Gross Margin=sales-variable costs
$958,
500
Fixed Costs Purchasing costs
$ 11,
000
Rennovation Costs $9,000
$20,000
Employees Salaries
$ 336,
000
Total fixed costs
$ 356,
000
Net Loss= Gross Margin- Total
costs
$ 602,
500

5. Break Even
(procedures) Fixed costs/contribution per unit
501. 408
units
- 3 -
[no notes on this page]
Future Direction of Health Care 4
References
Cafferky, M., & Wentworth, J. (2012). Breakeven analysis the
definitive guide to cost-volume-
profit analysis (7th ed., Vol. 107, pp. 188-190). New York:
Business Expert Press
- 4 -
[no notes on this page]
Running Head: COMMON COST ALLOCATION
1
Common Cost Allocation
2
Common Cost Allocation
Lisa M. BuentelloHCA311: Health Care Financing &
Information SystemsProfessor Kathleen Martocci

6. May 25, 2015
Common Cost Allocation
Cost allocation is a method that is used to determine the total
cost of services that are provided to the users of that kind of
service. This method does not determine the total price of the
service provided, but it rather determines the cost of providing
that service. It is always important to determine the cost
allocation of any service, in order to be able to determine
justifiable charge or tax for those services. There are several
cost allocation methods that are used such as direct or separable
method, indirect or common cost methods and incremental cost
method. Direct cost are related to only one single service that is
delivered to only one type of output or user for example, sector
to sector hand-off. Incremental cost they usually change with
the changes in the level of output produced (Peter, 1999).
Common cost allocation method is used to determine the total
cost of different services that are provided; an example of
common cost is physical enroute facility. Common costs are the
cost insured in the supply one several products, these cost
cannot be attributed to one product because they are not directly
affected by the changes in the output of any single product.
There are two common methods used by healthcare
organizations that allocate indirect costs: the direct method and
the step-down method (Smith, 2014).
Direct method of cost allocation is known to be the most
popular method used in cost allocation. Direct method is used to
allocate total cost in the service department to the production
department, this method does not take into account the services
offered by the service department to other departments. Direct
method of cost allocation it fails to consider the fact that
service departments they usually offer services to one another.
For example, in an organization, the HR departments is
responsible for recruiting staffs for the maintenance department
and at the same time maintenance departments maintains the HR
department facilities.

7. The step down method takes into account the fact that there are
different service department offering services to another
department. The method considers the costs that are incurred by
both HR and maintenance department. Step down method of
cost allocation ranks all service departments according to the
importance of service and then uses several steps to allocate
cost of different products that are involved. This method is of
cost allocation is more complicated as compared to the other
methods but the results of cost allocation are always correct.
The common cost allocation methods for patient-level costs,
including relative value units, ratio of cost to charges, and
activity-based costing. Under this method each service
department, costs are normally allocated only among the direct
patient care departments that use or consume service
department’s output. This method fails to consider the fact that
there are some service departments that provide service to some
other service departments. In health care center, clinic’s
personnel department offers service to other service
departments and none of these costs which are allocated under
this method.
Direct-patient-care departments using services
orthopedics
Internal medicine
Service provider
Allocated cost
proportion
Amount
proportion

8. Amount
Patient records
$100000
4/10
40000
6/10
60000
personnel
60000
50/75
40000
25/75
20000
Accounting and administration
200000
35/40
175000
5/40
25000
total
360000
255000
105000
Grand total=360000
Proportion of the cost for each department is allocated to each
direct care patient department which is determined by
proportion by the total output consumed by every direct-patient
care department. For example, in the above illustration it shows
that administration and accounting department provides 35% of

9. its services to orthopedics and 5% to internal medicine.
Summation of these two percents yields 40%, this means 35/40
is the proportion of accounting and administration cost which is
allocated to orthopedics and 5/40 is the proportion that is
allocated to internal medicine.
References
Peter, D. &. (1999). Activity Costing and Input -Output
Accounting. New York: Harper Business.
Smith, D. G. (2014). Introduction to healthcare financial
management. San Diego, CA:
Bridgepoint Education, Inc. Retrieved from:
https://content.ashford. edu.