In this assignment, you will analyze the SMH data set to identify costs associated with specific clinical product lines and measure gross profit. This is an extension of the work you did in M3: Assignment 1. You will prepare a report that discusses where cost savings could be realized and what revenue centers within the hospital generate income.

Through this discussion, you will compare the results of your analysis and become familiar with activity-based costing and managed care contracting. The product lines included for this case are cardiology, orthopedic medicine, and other. For your analysis, you can use the SMH data file, which you had downloaded from the Doc Sharing area.

For the case study analysis, you will use the SMH data file to do the following:

• Calculate inpatient gross profit (GP) for each product line. Use the template in the SMH data file for this activity.

• Comment on the results of your inpatient GP calculations. What product line is most profitable by dollar amounts and GP percentage?

• Using your calculations, comment on the following factors. Is there value in separating product lines into more detail? What detail would you recommend? What is the value in separating revenue and expenses by physician? Surgery type? And others?
Write a 1- to 2-page paper in Word. Apply current APA standards for writing style to your work. All written assignments and responses should follow APA rules for attributing sources.

Use the following file naming convention: LastnameFirstInitial_M4_A1.doc.

By Saturday, September 21, 2013, submit your assignment to the M4: Assignment 1 Dropbox. Through Wednesday, September 25, 2013, actively participate in a discussion based on this assignment.

Use the following questions to direct your discussion:

• Does the establishment of various cost and revenue centers add value for a hospital?

• Many hospitals establish a sophisticated data analysis department. Why do hospitals need an understanding of cost behaviors to an ever-increasing degree?