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Question: Multiple-doctor medical practices are often


Multiple-doctor medical practices are often structured with each doctor acting as a profit center.
a. Discuss why such an organizational structure would be useful.
b. Go to the Web and find some software packages that could be used to account for such an organizational structure.
c. List some costs of a medical practice that would be directly traceable to each physician.
d. List some costs of a medical practice that might not be directly traceable to each physician. Provide possible allocation bases for such costs.

Answer

Important considerations follow.

a. In multiple doctor medical practices, setting up the recordkeeping system to reflect each doctor as his/her own profit center will give insight into the expenses each doctor is absorbing against revenue directly generated by him/her. The data generated from this exercise gives management another tool in evaluating performance for salary adjustments, bonuses and promotions.

b. The typical software accounting packages used by medical practices are Peachtree, QuickBooks and Creative Solutions.

c. Some directly traceable costs include salary, malpractice insurance, fringe benefits, conferences and seminars, vehicle expense, meals and entertainment, patient refunds, insurance refunds, travel and lodging, licenses, supplies and vaccines that are used by a specialist, and dues and fees.

d. Indirect expenses include building rent, depreciation, equipment lease payments, interest expense, legal and accounting fees, office supplies, medical waste disposal, pension expense, utilities, and staff salaries, taxes and fringe benefits. Allocations bases would include gross revenues generated by doctor, percent of cash receipts generated by doctor, percent of patients seen by doctor, percent of occupancy space used by doctor, or equal allocation among all doctors.



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