Question

Family Medical Care (FMC) is a family medical practice with 8 physicians, a nursing staff of 10 to 12 nurses, and an administrative staff that varies from 6 to 9 personnel. Rajat Patel, the chief physician at FMC, is interested in studying the efficiency of the practice as a basis to set some benchmarks for further improvement, for rewarding his staff, and for comparing the efficiency of the FMC practice to other family medical practices. He is able to get comparable data for other practices from industry sources. So that the data are consistent with the industry sources, Patel has asked Marin & Associates, his accounting firm, to develop a set of productivity measures that would satisfy this requirement. Upon investigation, Joseph Marin finds that the measures to be used are the partial financial and operational productivity measures as defined in the chapter. The following information is for the last 2 years for the FMC practice:

	Current Year	Prior Year
Patient visits	34,300	29,700
Nursing hours used	21,600	20,700
Administrative hours used	14,725	14,725
Cost of nursing support per hour	52	51
Cost of administration per hour	37.6	37
Industry average financial productivity
Nursing	0.03	0.03
Administrative	1.25	1.27

Required:

1. Compute the partial financial productivity ratios for nursing and administrative support for the current and prior year.

2. Separate the change in the partial financial productivity ratio from the prior year to the current year into productivity changes, input price changes, and output changes.

(For all requirements, round your answers to 4 decimal places. Negative values should be indicated by a minus sign.)

		Nursing	Administrative
1	Financial Partial Productivity for the current year
	Financial Partial Productivity for the prior year
2	Productivity Change
	Input Price change
	Output Change

Answer 1

1
Partial Financial Productivity:
Particulars	Current Year	Prior Year
Nursing
Number of visits	34,300	29,700
÷ Total nursing cost	$ 1,123,200	$ 1,055,700
Partial financial productivity of nursing	0.0305	0.0281
Note:
Total nursing cost:
Number of nursing hours used	21,600	20,700
× Cost of nursing support per hour	$ 52.00	$ 51.00
Total nursing cost	$ 1,123,200	$ 1,055,700
Total administrative cost:
Number of visits	34,300	29,700
÷ Total administrative cost	$ 553,660	$ 544,825
Partial financial productivity of admin	0.062	0.0545
Note:
Total administrative cost:
Number of administrative hours used	14,725	14,725
× Cost of administration per hour	$ 37.60	$ 37.00
Total nursing cost	$ 553,660	$ 544,825
Partial Operational Productivity:
Particulars	Current Year	Prior Year
Nursing
Number of visits	34,300	29,700
÷ Total nursing hours used	21,600	20,700
Partial operational productivity of nursing	1.588	1.4348
Administration:
Number of visits	34,300	29,700
÷ Total administrative hours used	14,725	14,725
Partial operational productivity of admin	2.3294	2.017
Current output at prior year productivity
Particulars	Output
Nursing
Number of visits	34,300
÷ Prior year productivity	1.4348
Partial operational productivity of nursing	23,905.77
Administration:
Number of visits	34,300
÷ Prior year productivity	2.017
Partial operational productivity of admin	17,005.45

2	A		B		C		D
Particulars	Current output / Current input * Current input cost	Producvity Change	Current output / Output at Prior Prod * Current input cost	Input price Change	Current output / Output at Prior Prod * Prior input cost	Output Change	Prior output / Prior input * Prior input cost	Total Change
									Output (Number of patient visits)	34,300		34,300		34,300		29,700
									Input
Nursing hours used	21,600		23,905.77		23,905.77		20,700
Administrative hours used	14,725		17,005.45		17,005.45		14,725
Cost per unit of input
Cost of nursing support per hour	$ 52.00		$ 52.00		$ 51.00		$ 51.00
Cost of administration per hour	$ 37.60		$ 37.60		$ 37.00		$ 37.00
Nursing	0.0305	0.0029	0.0276	-0.0005	0.0281	0	0.0281	0.0024
Administration	0.062	0.0083	0.0536	-0.0009	0.0545	0	0.0545	0.0074