Physicians practicing in Eastern University’s hospital have the following compensation agreement. Each doctor bills the patient (or Blue Cross Blue Shield) for his or her services. The doctor pays for all direct expenses incurred in the clinic, including nurses, medical malpractice insurance, secretaries, supplies, and equipment. Each doctor has a stated salary target (e.g., $100,000). For patient fees collected over the salary target, less expenses, the doctor retains 30 percent of the additional net fees. For example, if $150,000 is billed and collected from patients and expenses of $40,000 are paid, then the doctor retains $3,000 of the excess net fees [30 percent of ($150.000 - $40,000 - $100,000)] and Eastern University receives $7,000. If $120,000 of fees are collected and $40,000 of expenses are incurred, the physician’s net cash flow is $80,000 and Eastern University receives none of the fees

Question

Physicians practicing in Eastern University’s hospital have the following compensation agreement.  Each doctor bills the patient (or Blue Cross Blue Shield) for his or her services.  The doctor pays for all direct expenses incurred in the clinic, including nurses, medical malpractice insurance, secretaries, supplies, and equipment.  Each doctor has a stated salary target (e.g., $100,000).  For patient fees collected over the salary target, less expenses, the doctor retains 30 percent of the additional net fees.  For example, if $150,000 is billed and collected from patients and expenses of $40,000 are paid, then the doctor retains $3,000 of the excess net fees [30 percent of ($150.000 - $40,000 - $100,000)] and Eastern University receives $7,000.  If $120,000 of fees are collected and $40,000 of expenses are incurred, the physician’s net cash flow is $80,000 and Eastern University receives none of the fees

mrs.bieber · Answer

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Explain Bot · Answer

The compensation agreement for physicians practicing at Eastern University's hospital works as follows: 1. Each doctor bills the patient or Blue Cross Blue Shield for the services provided. 2. The doctor is responsible for paying all direct expenses incurred in the clinic. This includes costs like salaries for nurses, medical malpractice insurance, secretaries, supplies, and equipment. 3. Each doctor has a stated salary target. For example, let's say the salary target is $100,000. 4. If the total fees collected from patients, minus the expenses incurred, exceed the salary target, the doctor is entitled to retain 30 percent of the additional net fees. 5. The remaining amount from the excess net fees goes to Eastern University. Let's look at two examples to understand the calculations: Example 1: - $150,000 is billed and collected from patients. - $40,000 is paid for expenses. - The salary target is $100,000. Calculations: - Net fees collected: $150,000 - $40,000 = $110,000 - Excess net fees: $110,000 - $100,000 = $10,000 - Doctor's share of excess net fees: 30% of $10,000 = $3,000 - Eastern University's share: $10,000 - $3,000 = $7,000 Example 2: - $120,000 of fees are collected. - $40,000 of expenses are incurred. - The salary target is $100,000. Calculations: - Net fees collected: $120,000 - $40,000 = $80,000 - The net cash flow for the physician: $80,000 (no excess net fees in this case) - Eastern University does not receive any fees in this scenario. In summary, if the fees collected minus expenses exceed the salary target, the doctor retains 30% of the excess net fees, while Eastern University receives the remaining amount. If the fees collected are below the salary target or equal to it, the doctor retains the entire amount as their net cash flow.