Exam 9: Management and Regulations of Hospital Costs

Managers use capital budgets to anticipate and adjust cash flow needed for short run plant and equipment needs.

Since the hospital is a multiproduct firm, realizing economies of scale should be recognized at the product level.

It is generally more expensive for hospital managers to make adjustments in the existing outlay of costs when they have more time to do so, i.e. in the long run, rather than in the short-run.

Explain why the prospective payment system enacted by the institution of DRG payments was intended to reduce cost escalation in hospitals. What system did it replace?

The conflict between an economist's measurement of cost and an accountant's measurement of cost is that the economist will put a value on the full opportunity cost of an action, while the accountant usually does not count a cost unless money actually changes hands.

Accounting costs are usually lower than economic costs because

Long term planning in building a flexible plant rather than a dedicated plant is more important when

If a certain hospital's list charges for two different surgical procedures are exactly the same, it must be the case that either those two procedures take the same amount of a surgeon's time to perform, or one procedure takes less time but is performed by a surgeon who is paid more per hour.

Hospital costs per patient day over the past fifteen years have increased by a factor of greater than 4.