Healthcare Finance Management /Case Study of Physician Practice Management and Relative Value Unit Analysis (15%)

In this assessment, you will evaluate the physicians’ practice financial condition based on the following Relative Value Unit (RVU) calculations and analysis:

1. Average and Marginal Costs per RVU,
2. Total Average Cost,
3. Total Marginal Cost per CPT code, and
4. Analyzing the information to assist the physicians in using these costs appropriately and making informed decisions.

You will be graded based on your understanding of the calculations, the accuracy of your calculations, the validity of your conclusions and your ability to clearly communicate your analysis. To complete this assignment, follow these steps:

1. Review the article How Managerial Accountants Make Physician’s Practices More Profitable-

   How management accountants make physicians’ practices more profitable; the key to profitability is to use cost analysis by determining a practice’s cost structure and using those costs to evaluate contracts, allocate bonuses equitably, and make strategic decisions about the financial future of the practice group. – Free Online Library (thefreelibrary.com)

2. From this financial information, calculate the three RVU calculations:

1. Average and Marginal Costs per RVU,
2. Total Average Cost, and 
3. Total Marginal cost per CPT code.  

1. In proper APA format, write a 3-5 page paper (include a cover and reference page not included in page count). For each RVU calculation, in a paragraph:

1. 1. Calculate the costs,
   2. Show your calculations, and
   3. Write a conclusion about the physician practice’s financial condition and discuss how you can assist the physicians in using these costs in making informed decisions.

*Please use headings for each paragraph and category to decipher the discussion and organize the paragraphs.

Use the following assumptions:

Assume that during the FY2016 year, Lovely Life LLC historical costs were $750,000 when 11,000 RVUs were produced and $950,000 when 14,000 RVUs were produced.  The contract specifies that the number of RVUs per service CPT code are five (5).