Newport Medical Associates, a physician group practice, is part of Alston Health System, an integrated delivery system. Newport has been designated as a profit center. Its physician-manager is responsible for devising a marketing strategy to bring in new patients, and hence earn revenue. He also must control the group’s expenses and make sure they do not exceed revenue. Each month approximately 20 percent of the administrative expenses of the health system are allocated to Newport. These expenses are allocated using bases of allocation that all those in the health system, including the physician-manager of Newport, agree are appropriate. Some bases use square footage, others use salary dollars, and others use work orders (for work by the building and grounds staff, for example). What problems do you think might arise with this arrangement?
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