Asante Teaching Hospital is a not-for-profit institution in South Africa. Sometime in mid-2015, an intern at the said hospital gathered some cost data on bundle pricing being offered by other hospitals. She planned on forwarding her analysis and recommendations to the hospital's CEO with the hope of getting answers on whether Asante Hospital should offer the same. To come up with a correct analysis, she needs to do activity-based and time-driven activity-based costing techniques.
Melissa Jean and Courtney Young
Harvard Business Review (W16558-PDF-ENG)
September 14, 2016
Case questions answered:
- Perform a strengths, weaknesses, opportunities, and threats (SWOT) analysis for Asante Teaching Hospital. What implications can you draw for the pricing strategy alternatives? What are the implications to the SWOT if the hospital continues with itemized pricing or switches to bundle pricing?
- Calculate the cost per minute for each type of employee.
- Allocate overhead costs to each level of service using the appropriate cost drivers.
- Calculate total costs per patient and price per patient at each level of care.
- If you were Courtney, what pricing recommendation would you make to the CEO?
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Asante Teaching Hospital: Activity-Based Costing Case Answers
This case solution includes an Excel file with calculations.
1. Perform a strengths, weaknesses, opportunities, and threats (SWOT) analysis for Asante Teaching Hospital. What implications can you draw for the pricing strategy alternatives? What are the implications to the SWOT if the hospital continues with itemized pricing or switches to bundle pricing?
The strengths, weaknesses, opportunities, and threats (SWOT) analysis for Asante Teaching Hospital is as follows:
Some of the implications to the SWOT analysis if Asante Teaching Hospital continues with its itemized strategy, are:
- It can start adding a small mark-up percentage to the cost per patient (20%) to gather more business operations funds. These funds can then be used to expand the business, deploy new and more advanced equipment and medical technologies, and beat out the rest of the competition.
- Tapping quickly into the middle-class population of Johannesburg by rolling out new branches. A few specially catering to lower costs to attract more people of the middle-class population.
- Making insurance coverage policy accessible to a larger section of society. This would help them achieve their vision of improving people’s living and health conditions without considering race, religion, or color and attracting people with a 100% coverage offer. The extra amount generated from premiums can be used for other growth and business operations.
2. Calculate the cost per minute for each type of employee.
To calculate the cost per minute of each type of employee
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