Cost-To-Charge Ratio (CCR) Method Essay

Cost-To-Charge Ratio (CCR) Method Essay

7.1 the following methods used to estimate the cost of individual services:

1. Cost-to-charge ratio (CCR) method
2. Relative value unit (RVU) method
3. Activity-based costing (ABC) method

7.4 Explain the essential differences between full cost pricing and marginal cost pricing strategies.

7.5 What would happen financially to a health services organization over time if its prices were set at

1. Full costs?
2. Marginal costs?

7.2 The audiology department at Randall Clinic offers many services to the clinic’s patients. The three most common, along with cost and utilization data, are as follows: remainder of problem on screenshot

7.6 Assume that a primary care physician practice performs only physical examinations. However, there are three levels of examination—I, II, and III—that vary in depth and complexity. An RVU analysis indicates that a Level I examination requires 10 RVUs, a Level II exam 20 RVUs, and a Level III exam 30 RVUs. The total costs to run the practice, including a diagnostic laboratory, amount to $500,000 annually, and the numbers of examinations administered annually are 2,400 Level I, 800 Level II, and 400 Level III.

1. Using RVU methodology, what is the estimated cost per type of examination?
2. If the goal of the practice is to earn a 20 percent profit margin on each examination, how should the examinations be priced?

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