Two medical organizations have recently examined their cost structures. The firs
ID: 463187 • Letter: T
Question
Two medical organizations have recently examined their cost structures. The first group is a radiology practice with a significant investment in diagnostic imaging equipment. The second group is a single-specialty pediatric practice. The cost analysis reveals the following distribution:
Explain the implications of these differing cost structures of each medical group in terms of contracting with MCOs.
MCO-Managed Care Organization
Radiology Group Pediatric Group Fixed Cost 70% 20% Variable Cost 30% 80%Explanation / Answer
In a situation where the fixed cost is higher is advantageous to those kind of organisations where it involves long term projects in a massive production environment . It will result in huge profits in long run.
The other senario of high variable costs suitable for short term orders and less capital incentive markets.