Parkview hospital, serves a population pf 400.000 people. The next closestf hospital is 50 milesaway. Parkview's accounting system is adequate for patient billing. The system reports revenues generated per department but does not break down revenues by unit within departments.
Parkview receives its revenues from 3 principal sources: the federal govt.(Medicare), the state gov't (Medicaid) and private insurance companies. Until recently thew private insurance companies continued to pay Parkview's increasing costs and passed these onto the firm's through higher premiums for their employees health insurance.
Last year Trans Insurance (TI) entered the market and began offering lower cst health insurance to local firms. TI cut benefits offered and told Parkview that it would only a fixed dollar amount ptching per patient. A typical firm could cut its health insuranceIpremium 20% by switching to TI. TI was successful at taking 45 percent of the private insurancve customers. These firms faced stiff competition and sought to cut their health care costs.
Parkview management estimated that its revenues would fall 6 percent or $3.2 million next year because of TI's lower reimbursements. Struggling with how to cope dwith lower revenues, Parkview began the complex process pf deciding what programs to cut and what programs to open to offset the revenuews loss. Management can forecast some of the costs of the proposed changes, but many of its costs and revenues have never been tracked to the individual clinical unit.
A) Was Parkview
s accpimtomg suste,adeqiate 10 years agp?
b) Is Parkview's accounting system adquate today?
c) What changes should Parkview make in its accounting systems.