Robert Capettini

Reimbursement rate setting for Medicaid prescription drugs based on relative efficiencies

Abstract This paper illustrates a new LP approach, called Data Envelopment Analysis (DEA), which is used to set Medicaid prescription drug dispensing fees for a sample of 68 pharmacies. DEA utilizes Pareto efficiency to gauge the degree of relative technical efficiency achieved by each pharmacy. The approach constructs a peer group of other pharmacies, which are matched on environmental factors, level of services provided, and level of resources consumed. The DEA approach also determines what adjustments in the levels of the resources and outputs would have been needed over the specified period so that an inefficient pharmacy would have been rated as relatively technically efficient. It is these adjusted values that we suggest can be used to help set an equitable reimbursement rate. In particular, a prospective variable dispensing fee with a retrospective adjustment is proffered as an equitable payment mechanism.

On the need and opportunities for improving costing and cost management in healthcare organizations

Explains how activity‐based costing (ABC) can be applied to hospitals and outlines some previous research on its use and benefits. Reports a survey of US health administrators to establish their view of the cost hierarchy and uses the information in a numerical example based on a radiology department to demonstrate the differences between using traditional costing methods and allocations based on the cost hierarchies. Shows that many survey respondents were dissatisfied with their traditional costing systems and argues that the use of ABC could not only improve pricing and product mix decisions but could also enhance profitability by facilitating the management of activities and elimination of waste at all levels of the cost hierarchy, i.e. continuous improvement of processes.

Pareto rate setting strategies: an application to medicaid drug reimbursement

The major problem in reimbursement rate setting has been to develop approaches capable of identifying the inefficient deliverers of service, while recognizing legitimate differences in environmental factors and service orientation. This article suggests several new analytical approaches, based on various types of Pareto comparisons. Pareto efficiency is a relative approach which as a by-product constructs a peer group of other operating units which are matched on environmental factors, level of outputs provided, and level of resources consumed. The analysis utilizes straightforward linear programming formulations or mixed integer LPs. The various approaches are demonstrated using actual data from 68 pharmacies. Medicaid prescription drug dispensing fees are used to illustrate a scheme for encouraging increased efficiency on the part of the pharmacies.

A Note on the Evaluation of Leveraged Leases and Other Investments

One of the more significant trends that the financial community has witnessed over the last several decades has been the development of a complex regulatory and tax structure. This, in turn, has motivated the parallel development of a series of innovative financial instruments that are compatible with this regulatory/tax environment and that seek to provide new services and/or minimize tax obligations. Leveraged leasing, which is one such instrument. has recently been estimated to represent 85 percent of all financial leases (5]. Thus, in addition to the usual lessor and lessee, a third party lender is also a participant in the majority of todays financial leases.I As recently discussed in this journal by Athanasopoulous and Bacon (subsequently AB) [11, the cash flows experienced by the lessor of a leveraged lease are

Forrest gump—Accountant: A study of accounting in the motion picture industry

Abstract This case is designed to be used in a junior/senior level cost/managerial course or an MBA level managerial course. It provides instructors with the ability to address a wide variety of issues while demonstrating the interrelationships in the various sub-areas of financial, managerial and tax accounting. The entertainment industry is used as a backdrop where the instructor may cover any or all of the following topics: cost terminology, cost behavior, C-V-P analysis, compensation, control, overhead allocation, ethics, revenue recognition, tax recognition, matching, and valuation issues. The case can be used for individual assignments, but it is particularly well suited for a group assignment.

Instructional applications of personal computers and spreadsheet software in accounting: A taxonomy of objectives and methods

Abstract Three major classes of instructional objectives that make use of personal computers and spreadsheet software are differentiated and discussed. The three major classes are distinguished by the extent to which they emphasize: (a) specific computer-modelling skills and techniques; (b) strategic, decision-making skills which rely upon computer models; and (c) general, non-computer-related accounting concepts. Instructional strategies, allocations of resources and methods of evaluation are discussed for each class of objectives. Examples are given for the implementation of each objective.

A Survey of Factory Automation Topics in Managerial and Cost Accounting

Abstract There have been many changes in recent years in the way the modern American factory operates. For many firms facing stiff domestic or foreign competition, the changes have been organizational and fall under the heading of “modern factory management” or the “Japanese style of management.” This paper surveys the extent to which accounting-related modern factory management topics are taught in introductory managerial and cost accounting courses at AACSB accredited accounting institutions. Also shown is the extent to which accounting faculty wish to include accounting-related modern factory material in future offerings of these courses. The results indicate a desire to increase the coverage of modern factory accounting concepts in classes. Even with the desired increase in coverage, modern factory topics are expected to represent only 27% of future course content.

Evaluating multiple sign change and mixed projects using the return on invested capital model

Abstract While the NPV and IRR models usually lead to correct and intuitively clear long-term investment decisions, there is a class of ‘mixed’ projects with both investment and financing phases in which the possibility of multiple rates of return and intuitive inconsistencies can arise. Because of the increased frequency of leveraged leases, these issues have taken on added importance. Practitioners are known to prefer a rate of return measure (usually the IRR) to the NPV model. However, the IRR model can result in analytical problems (e.g. multiple IRRs, no IRR, etc.) when used to evaluate the above mentioned types of projects. This paper illustrates the use of the return on invested capital (RIC) model, a generalization of the IRR, for evaluating investment projects. The RIC solves a number of analytical difficulties which can arise when using the IRR model. Seven examples, suitable for classroom use, are presented to illustrate the usefulness of the RIC model.