Parkview regional hospital serves 400,000 people. The next closest hospital is 50 miles away. 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. (i.e. Parkview knows patient revenues for the entire psychiatric department but does not know revenues in the child and adolescent unit, the chemical dependence unit or the neuropsychiatric unit.
Parkviewe receives its revenues from three principal sources; medicare, medicaid amd private insurance companies. Until recently the private insurance companies continued to pay Parkview's increasing costs and passed these on to the firms thru highest permiums for theier employees' health insurance.
Last year Trans Insurance began offering lower cost health insurance to local firms. They cut benefits offered and told Parkview that it would pay only a fixed dollar amount per patient. TI was successful at taking 45% of the Blue Cross Blue Shield customers. These firms faced stiff competion and sought to cut their health care costs.
Parkview extimated that its revenues would fall 6 %, or $3.2 million, next year because of TI's lower reimbursements. Struggling with how to cope with lower revenues, Parkview began the complex process of deciding what programs to cut, how to shift the delivery of services from inpatient to outpatient clinics and what programs to open to offset the revenue 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. Was Parkview's accounting system adequte 10 years ago.is it adequate today and what changes should they make it its accounting system?