Question

You are the office manager, and the provider asks you to report back on whether the use of the contracted diabetic educator is cost effective to house in the office. The educator has been teaching patients for one month in a small office space rented by the provider and, during that month, has taught 20 patients. The educator bills the doctor $30.00 per patient. Additional details: The rental of the office space is $100 per month; electricity and Internet service for the space is $50; office supplies are $15. What ratio formula will you use to calculate this loss or gain and why?

Answer 1

The ratio formula that can be used to calculate the cost effectiveness of housing the contracted diabetic educator in the office is the cost-to-revenue ratio.

Step-by-step explanation:

To determine whether the use of the contracted diabetic educator is cost effective to house in the office, the ratio formula that can be used is the cost-to-revenue ratio. This formula compares the total costs associated with providing the service to the total revenue generated by the educator.

In this case, the total costs include the rental of the office space ($100), electricity and internet service ($50), and office supplies ($15). The revenue generated is the $30 per patient fee charged by the educator.

The formula to calculate the cost-to-revenue ratio is: (Total Costs / Total Revenue) x 100. By calculating this ratio, you can determine if the revenue generated by the educator covers the costs of housing them in the office.

Answer 2

To determine if the use of the contracted diabetic educator is cost effective in the office, we can calculate the loss/gain ratio using the expenses and revenue. The formula is (Total Expenses - Total Revenue) / Total Revenue. In this case, the loss/gain ratio is -0.725, indicating a loss of 72.5%. Therefore, the use of the educator is not cost-effective.

Step-by-step explanation:

To calculate loss or gain in this situation, we can use the ratio formula of expenses to revenue. The formula is:

Loss/Gain Ratio = (Total Expenses - Total Revenue) / Total Revenue

In this case, the total expenses include the rental cost of the office space ($100), electricity and internet service ($50), and office supplies ($15), which amounts to $165. The total revenue is the number of patients taught by the educator (20) multiplied by the billing rate per patient ($30), which is $600. Using the formula, the loss/gain ratio would be:

(165 - 600) / 600 = -435/600 = -0.725

The negative value of the ratio indicates a loss, in this case, a loss of 72.5%. This means that the use of the contracted diabetic educator in the office is not cost-effective, resulting in a significant loss.