Break-Even Analysis

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Date Submitted: 01/23/2011 07:54 AM

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Break-Even Analysis

The Beach Street office of Getwell Clinics specializes in the treatment of three different types of patients, which are DRG M, DRG J, and DRG P. Newly appointed director of clinics has requested that I determine the breakeven points of each of the DRG. Dr. Barkley would also like to know which of the DRG is the most profitable to promote in growing the practice. This paper will prepare a formal and comprehensive response to Dr. Barkley questions. Along with explaining the relevance of DRG analysis as a tool that drives costs and affects management decisions in health care, I will also propose my recommendations that will answer the following questions, which DRG will receive promotion through an advertising program if the office has excess capacity, which DRG will receive advertising if the office is almost at maximum capacity in terms of available hours, and what rationale will support the use of DRGs as an approach to allocating costs.

Diagnosis-Related Group:

Diagnosis-Related Groups (DRG) is a way that the health care organization can classify their patients by grouping them into separate categories such as demographic, diagnostic, and treatment. This aids the organization in determining the resources needed to treat the patient and what the cost is. “The DRGs form a manageable, clinically coherent set of patient classes that relate a hospital's case mix to the resource demands and associated costs experienced by the hospital. Each discharge in the UHDDB was assigned into a DRG based on the principal diagnosis, secondary diagnoses, surgical procedures, age, sex, and discharge status of the patient” ("Diagnosis related group," 2008). Within the health care industry many of the facilities have a number of different patients, and they require different forms of resources, using DRG as a tool allows the organization to create segments of their patients and gives a breakdown of that grouping of patients. This allows the manager to review...