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Get Help Now!3/25/09 Case 3 Panhandle Medical Practice (Activity-Based Costing) Panhandle Medical Practice is a group practice owned by the area’s leading hospital, Panhandle Regional Medical Center. The practice includes both primary care and specialty physicians, with an emphasis on internal medicine, obstetrics, pediatrics, and surgery. The practice has three different locations, each one staffed with a mix of primary care and specialist physicians. Traditionally, ancillary services have been performed at the hospital. Still, some ancillary services are best performed at the practice locations for one or more of the following reasons: lower costs, increased physician efficiency, and improved patient convenience. For example, one of the practice locations now has a diagnostic imaging capability. When the scanner was moved from the hospital to the practice location, volume increased, costs decreased, and both physician and patient satisfaction improved. The proposal now being considered is to provide ultrasound services at the practice locations. Preliminary analysis indicates that two approaches are most suitable. Alternative 1 involves the purchase of three ultrasound machines, one for each of the practice’s three locations. Patients would schedule appointments, generally at the location that they are using, during preset times on particular days of the week. Then, the full-time ultrasound technician would travel from one location to another to administer the tests as scheduled. In Alternative 2, patient scheduling would be the same, but only one ultrasound machine would be purchased. It would be mounted in a van that the technician would drive to each of the three practice locations. Most of the operating costs of the two alternatives are identical, but Alternative 2 has the added cost of operating the van and setting up the machine after each move. The two alternatives differ substantially in initial costs because Alternative…
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