This case introduces you to the Cambridge Transplant Center, which is eager to expand its organ transplant services. As the case notes, the largest issue
facing Cambridge is determining reimbursement for Phase 4 of the transplant process with the specialized company that handles these services. Phase 4
costs are either hospital or physician costs, and physician costs are already agreed on. Thus, this case focuses on how Cambridge should attempt to
structure reimbursement for hospital costs associated with Phase 4 of transplant procedures.
Cost savings appeared to involve reducing the length of stay, but costs are not linear. In other words, shorter stays are not uniformly less expensive.
Imagine you are a consultant hired to analyze the situation and you recommend a fixed reimbursement amount for Phase 4 hospital services. The data
provided to you reveals that 60 percent of the costs are fixed and 40 percent are variable. Current payers are reimbursing Cambridge at about $140,000 for
Phase 4 services. Further, Cambridge wants to expand this service and has the capacity to deliver 30 more transplants per year; anything beyond 30
additional transplants would require additional fixed costs of 15–25 percent.
In addition to being asked to structure reimbursement for the Phase 4 of transplant procedures, you are also asked to come up with a method for handling
outliers—those patients that consume extraordinarily more resources than other patients. Other hospitals charge additional per diems after some length of
stay threshold is passed, while others charge some percentage of costs above the threshold.
Work through the case study and take notes based on the questions found in the Assignments section of this module.
View the 7.1 Activity: Cambridge Transplant Center Case Study next.
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