Compensation linked with profitability, waiting time, and quality measures. Family First Healthcare operates two medical groups, one in Philadelphia and one in Baltimore. The semiannual bonus plan for each medical group's president has three components: a. Profitability performance. Add 0.75% of operating income. b. Average patient waiting time. Add $40,000 if the average waiting time for a patient to see a doctor after the scheduled appointment time is less than 10 minutes. If average patient waiting time is more than 10 minutes, add nothing. c. Patient satisfaction performance. Deduct $45,000 if patient satisfaction (measured using a survey ask- ing patients about their satisfaction with their doctor and their overall satisfaction with Family First Healthcare) falls below 70 on a scale from 0 (lowest) to 100 (highest). No additional bonus is awarded for satisfaction scores of 70 or more. Semiannual data for 2017 for the Philadelphia and Baltimore groups are as follows: January-June July-December Philadelphia Operating income Average waiting time $10,250,000 $10,600,000 8 minutes 12 minutes Patient satisfaction 77 71 Baltimore Operating income Average waiting time Patient satisfaction $9,000,000 $7,500,000 15 minutes 8 minutes 64 73
Compensation linked with profitability, waiting time, and quality measures. Family First Healthcare operates two medical groups, one in Philadelphia and one in Baltimore. The semiannual bonus plan for each medical group's president has three components: a. Profitability performance. Add 0.75% of operating income. b. Average patient waiting time. Add $40,000 if the average waiting time for a patient to see a doctor after the scheduled appointment time is less than 10 minutes. If average patient waiting time is more than 10 minutes, add nothing. c. Patient satisfaction performance. Deduct $45,000 if patient satisfaction (measured using a survey ask- ing patients about their satisfaction with their doctor and their overall satisfaction with Family First Healthcare) falls below 70 on a scale from 0 (lowest) to 100 (highest). No additional bonus is awarded for satisfaction scores of 70 or more. Semiannual data for 2017 for the Philadelphia and Baltimore groups are as follows: January-June July-December Philadelphia Operating income Average waiting time $10,250,000 $10,600,000 8 minutes 12 minutes Patient satisfaction 77 71 Baltimore Operating income Average waiting time Patient satisfaction $9,000,000 $7,500,000 15 minutes 8 minutes 64 73
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Discuss the validity of the components of the bonus plan as measures of profitability, waiting time performance, and patient satisfaction. Suggest one shortcoming of each measure and how it might be overcome (by redesign of the plan or by another measure).
Transcribed Image Text:Compensation linked with profitability, waiting time, and quality measures. Family First
Healthcare operates two medical groups, one in Philadelphia and one in Baltimore. The semiannual bonus
plan for each medical group's president has three components:
a. Profitability performance. Add 0.75% of operating income.
b. Average patient waiting time. Add $40,000 if the average waiting time for a patient to see a doctor
after the scheduled appointment time is less than 10 minutes. If average patient waiting time is more
than 10 minutes, add nothing.
c. Patient satisfaction performance. Deduct $45,000 if patient satisfaction (measured using a survey ask-
ing patients about their satisfaction with their doctor and their overall satisfaction with Family First
Healthcare) falls below 70 on a scale from 0 (lowest) to 100 (highest). No additional bonus is awarded
for satisfaction scores of 70 or more.
Semiannual data for 2017 for the Philadelphia and Baltimore groups are as follows:
January-June
July-December
Philadelphia
Operating income
Average waiting time
$10,250,000
$10,600,000
8 minutes
12 minutes
Patient satisfaction
77
71
Baltimore
Operating income
Average waiting time
Patient satisfaction
$9,000,000
$7,500,000
15 minutes
8 minutes
64
73
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