Alpine Village Clinic Case Study

Alpine Village Clinic is located in a winter resort near the city of Aspen, Colorado. Although open year around, it is mostly a seasonal business since the bulk of patients seen at the clinic walk in during the winter months of December to March, when skiing is in full swing and pertaining injuries are common. The doctors thought about closing the clinic during the summer months, however running the clinic for a portion of the year is inefficient, and in addition, there seems to be a sufficient summer demand for the clinic’s services. The two doctors who run the clinic are Dr. James Peterson, who is an orthopedist and Dr. Amanda Cook, who is an internist. Dr. Cook usually handles all the financial work for the clinic (besides payroll which is taken care of by an outside accountant). However, the clinic hired a part-time MBA student named Doug Washington. In October of 2009, the clinic’s primary lender, the First Bank of Aspen requested from the clinic an estimate of its borrowing requirements for the first half of 2010. For that, Dr. Cook asked Doug to come up with an estimate of the clinic’s line of credit, as well as prepare a cash budget.

On the basis of the clinic’s previous collections experience, Dough was able to convert billings for medical services into actual cash collections. On average, about 20% of the clinic’s patients pay immediately for services rendered. Third-party payers pay the remaining claims, with 20% of the payments made within 30 days and the 60% remainder (of total billings) paid within 60 days. For monthly budgeting purposes, 20% are assumed to be collected one month after the billing month, and 60% are assumed to be collected two months after the billing month.

Variable costs for the clinic are ...

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...and the useful life of the machine should be calculated. Then, depending on the method used, the total cost of the machine is considered as a long term asset and depreciated over the life expectancy of the asset.

Another consideration that the clinic should take into account is the external environment. The seasonal patient volume and the bank agreement may be the main aspects of concentration. Although the relationship between the bank and the clinic is defined in the case, Alpine Clinic should consider alternative solutions or alternative organizations to finance its needs. Also, the clinic should estimate the possible changes in the economic environment in the next years and the impact of them in the serving population of the clinic.

Work Cited

Flinker S., Ward D., Calabrese T., (2013). Accounting Fundamentals for Health Care Management, 2nd edition.